All Forum Posts by: Louis Jeffries

@Brayden Schiff Hi Brayden, Good luck. I am a commercial and hard money lender, but you want to connect with a conventional or FHA lender if you plan to live in the home. Now is a great time, both for you as a recent college grad looking to house hack and also rates are at an all time low and values may be down, depending on where you are looking to buy.

@Nicole (Dunlap) Pendergrass Congratulations!!!!! I love your story of persistence, perseverance,  commitment and sacrifice to reach your goal. This is just the beginning. Stay Strong!!!!

@Henry Clark SBA does not fund residential real estate. SBA will fund the development of commercial real estate to house your business and real estate investing is not an acceptable business for SBA funding.

@Nate Elting How are you Nate. Good luck in your Real Estate investing career. By far the best option is the BRRR strategy especially if you are focused on 2-4 unit properties. You may even qualify for 100% financing if the project numbers are good otherwise you would need 15% to 20% down payment, plus reserves and funds to start the renovation. It is very important to get your numbers right and stick closely to the 70% rule. Purchase plus rehab costs should not exceed 70% of ARV. That is the max you should spend not the suggested amount.

By the way I graduated from Bradley!!!!

@Stephen Jones The BRRR method also works on multifamily. You will hear multifamily investors speak more of Value Add versus Rehab. The reason being is the value of commercial multifamily property (5+ units) is more based on income than any other factor. Therefore, if you find underperforming properties based on poor management, low occupancy, lower than market rents etc., you increase the value. The same scenario will then work for multifamily. Buy - Rehab (Value Add) - Rent (Value Add) - Refinance - (Cash out) - Repeat. In these options you will find lower down payments than purchasing market properties that have little Value Add potential. There are even 100% financing options. This will greatly help you increase your unit count.

@Indya E. Allen

Hi Indya, good luck. To purchase a home with seller financing is good. I would mention 2 things per this situation. First you asked if buy from the seller with no down payment was possible and it is but the seller must have incentive. If you find a rare seller or situation were that is not the case you ar lucky.

Secondly and more importantly is the HOA.

Why are they foreclosing on him? Is he behind in payments. If so can you catch them up? The same is true with the mortgage, if it is behind can you catch it up. Also the HOA has to accept you as an owner. Just because you strike an agreement with the seller does not mean you are in.

I personally don't like condominiums as investments for a few reasons, but they can be good with the right numbers.

Just make sure the HOA is in good shape , the property does not have too many renters and you would qualify for financing as a warrantable condo.

@Greg Snell

I know you have probably received much advise on this topic, and I am sorry I just sow it I would have commented earlier. Yes, commercial lenders lend to LLC's they prefer to as this is a business loan and when you seek to purchase residential property in the personal name most banks will not do that. I have a couple of questions about your purchase if you don't mind. First, will the properties need to be renovated? Secondly, what are your objectives with the properties? Are you looking to flip them or hold them or what?

Financing is different depending on your goals. Commercial lenders do lend on portfolio's, they lend bridge or short term money, they lend long term, they do rehab as well. I can comment on types of loans available when you tell me what you are looking to do.

@Bao residential investment property can be financed in a business as a commercial / business loan.

The terms are different than a conventional loan.

There is a difference between pre approval and prequalification.

In a pre approval you are fully underwritten and approved for funding 

subject to the conditions in the letter.

In prequalification your loan has not been underwritten and therefore is not approved.

This is for conventional loans. For commercial loans there usually is no income verification and therefore

no need to send income documentation. You will need to submit credit and assets.

Pulling comps before you take on a project is vitally important. Even so many people do not understand what is actually comparable. Please confirm, square footage, room count and proximity to the property. As a lender, by far the number one reason a loan does not close is the appraisal. This is not to say a lot of deals do not close, but if the borrower is prequalified the appraisal is the only thing that has not been fully confirmed before hand. When a borrower comes in with a contract and the realtor confirms the anticipated ARV we proceed with the loan process.

The last deal that I had where the appraisal was too low the the first thing is to contest the appraisal. The realtor and borrower sent me comps I I reviewed them to submit for appraisal review and each comp they gave me was twice the size of the property they were buying. In that case the appraisal would not be overturned and it would not make sense for the borrower to pay for another appraisal.

Sometimes the appraiser is wrong and we can overturn low appraisals showing superior comps to what the appraiser used. In your scenario, a property next door that is similar in size square footage and design would be a superior comparable. That is if the property sold recently. In addition you need at least 3 good comps to overturn the appraisal.

It may sound like I am saying the appraiser was right. Many times they are, but it is up to us to do our homework in advance to know what the true ARV is. In some rare cases the market values are decreasing as well. When you start a project and you have done a great job in accessing the ARV yet at the time you are looking to refinance the properties you were able to use as comps are now to old or other properties sold that are more comparable that are of lower value.

This was a long answer to the question what should I do. The first step is get comps to know what the value is.

@John Irvin Please consider what the new ARV will be. By adding a bedroom and bathroom, it will not only increase the rent but more importantly increase the market value. The question is will it increase the market value enough to recoup your costs. The key behind the BRRRR method is that when you refinance you will get most if not all the cast you invested back so you can repeat the process with the same money.

The added rooms my increase the value dramatically or not increase it enough to cover your expenses. Check with the realtor on your team to confirm the ARV and the lender on your team to confirm how much you can get as a cash out refinance based on the new ARV.