All Forum Posts by: Kathleen DeNault-Ridge

I'm considering the purchase of a foreclosed commercial property.  The property continues to cash-flow under the management of a court-appointed operator.  The bank's asking price is 65% of appraised value as they want it off their books.  They are also offering financing with reasonable terms.  There's definitely value to add (and to realize) with this property.  

My question: can private money or hard money be used to supplement the capital I have to deploy for the down payment?  I understand the terms are less attractive terms with these lenders, however: the current cash flow will cover all debt service.  I have found a few direct commercial lenders which will do second position loans.  My concerns are the logistics...

Do direct lenders lends on properties under contract or does the property need to be owned?

How is POF handled for the bank financing when the capital is being supplemented by hard money?

Is this a typical use of private/hard money?

Thanks,

Kathleen

I second Alberto...I'm very interested in learning about non-traditional approaches and also creative financing strategies suitable for multifamily investing (such as...how to structure seller financing). Also Brandon, if you could go over any particulars that may crop up when trying to get conventional financing for multifamily investments (DTI and when rents can be used to reduce DTI, is conventional financing concerned with NOI, etc.)

Thanks,

Kathleen

Curt...thank you for clarifying that Dodd Frank applies to owner-occupied properties only.  

I will not be owner occupying my future investment properties. My RE intentions are solely as a NOO investor. As a general guide, what range of DTI requirements have NOO investors been seeing lately?

With the recent mortgage reforms (Dodd Frank), what is the "standard" for DTI that lenders are looking for now? I'm exploring the financing of small multi's (4 or less units) for a long-term buy and hold investment strategy through conventional financing and i'm concerned about the impact of my DTI on the financing possibilities.

TIA,

Kathleen

I've been researching potential markets in which to invest in multifamily properties.  I've come across a market which has quite a few properties with CMX zoning.  The properties I'm interested in are small...having 4 or less units.  Usually, these properties have a small business entity on the ground floor with 1, 2, or 3 seperate residential rental units above the ground floor.  I know that 4-plexes (and under) use residential financing.  And, of course, commercial real estate (and 5+ multifamily units) requires commercial financing.  As small commercial mixed-use properties seem like a hybrid blend of the two (commercial and under-5 unit rentals) what type of financing is typically utilized for small CMX properties?  

Kathleen

I am considering the purchase of a small commercial mixed-use property.  It is a building with two current multi-year leases (post office, yoga studio...no history of lengthy vacancies), and a very small owner-occupied launderette (coin-op).  The long time owners want to retire.  The property cash flows.  The owners are willing to seller finance.  I'm not sure how to structure the deal.  I spoke with a local commercial banker and he recommends:

bank financing the purchase price for 20 years (5 years fixed and floating after that)

20% down

because sellers are motivated and have agreed to seller finance: he recommended having the sellers carry back a second mortgage which used to supplement our equity to come up with the down payment.

I have read that when seller financing the goal is get the seller to finance between 40-60% of the price.  In previous discussions with the seller, they agreed to seller-finance almost 70% of the deal (they just want their existing small mortgage satisfied so they can retire). Should the deal have a higher percentage of seller financing or is the seller financing a portion of the down payment a reasonable approach (the bank seemed to like that approach more)?   What kind of terms should be used with the seller financing portion?  How does this all work at closing (a double closing??) and how is that coordinated?

Thanks,

Kathleen

I am trying to determine how much mortgage I can afford on a buy and hold property investment. I have a mortgage on my primary residence. My current overall DTI is OK (below 36%) but my front-end (house expense ratio) is a bit high (although still below 28%). Knowing that the potential rental income from the property will not factor into my income until, I think, it's 2 years of returns...I'm trying to determine the price range I should be looking at. I would probably go for conventional financing (no other mortgages except my primary residence and fulltime w2 employment)...what are lenders weighing more heavily, front-end or back-end DTI? If front-end DTI is the most important number, I will need to watch the amount of mortgage I take on as I close in on the 28%. What kind of DTI ratios are necessary in pursuing conventional financing for a rental property (maybe multi-family) in today's economy? Is 36/28 still the Fannie Mae "standard" with 20% down and good credit?

I would like to get involved in RE as a retirement strategy. I am more interested in long-term investing rather than cash-flow. With my full time job, my young family, and limited available time, I have been recommended to explore passive investing options at least for the time being. The creative part of me would live to buy low, rehab, and flip, but I just don't have the availability at this point in my life. Brandon's "no-toilet" investing certainly interested me! What I do have is a good job (unfortunately with no retirement planning or tax sheltering options) with the option of taking on some contract work to raise monies for RE investing (maybe setting up a Solo 401k from the 1099'ed contract work). Right now, I've got about 5k saved for investing. I do have equity in my home but don't want to touch it....to risk-averse at this point.
I have read about raw land investing, tax liens, mobile homes, becoming a very small-scale private lender, notes, etc. I don't know enough about any of these to have any comfort level with them. Would anyone have insight into passive investing strategies that are newbie-friendly?

Oh, such a noob question: how to research rental viability in a particular market?
I was thinking about investing in mother Philly rental student market....9+ major universities. But with our desire to use our "sweat equity" to get into a property that needs some help and our location being 1.25 hours away from Philly, plus the city taxes and other regulations, we have been considering rental properties in more "local" areas (Bethlehem,Allentown, Hellertown, Perkasie, Sellersville). I'm just sure of the rental potential in these areas.
Any thoughts?
Kathleen

BUMP : )
I am curious myself....good question!