All Forum Posts by: Marty Johnston

Sounds like a fun one! Do you know your numbers on it?

Purchase Price:
Rehab Budget:
After Repair Value:
Property Type: (SFH, Duplex, etc)

Then some likely (not always) qualifying items:

What do you have for available assets? (Down payment + closing costs + reserves for rehab)
Credit Score:

This is most of the info for us to help you :)

 @Marques Brown sounds like you're a shoe-in for non-bank construction lenders given your experience. These lenders won't care about personal income, it will be solely based on experience and credit (which helps with leverage and terms). It's true we're in a market where rates are at a high since 2007, but it sounds like you're seeing such greater margins that you'd be at a bigger loss for waiting than using the capital readily accessible to you. Depending on the number of projects you've exited in the last 36 months, and how strong your as completed value is, you may even have 100% LTC financing options available to you. Without knowing more details, its sounds like you'd have a number of high leverage financing options available to you! Now it's a matter of figuring out what you're most comfortable with.

Following this thread, very interested as well. I too utilize HELOC's to invest passively, one with a trusted investor (developer) in FL, another avenue is through lending platforms such as Groundfloor, or other local options like Milwaukee Hard Money (local to me), etc. Justin Donald refers to a similar method in his book "The Lifestyle Investor" where he invests in life insurance, takes a loan against it, and reinvests it elsewhere, earning twice on his money. The net effect is a small return with the life insurance company while also re-leveraging those funds in another asset. I feel like the principal is similar here, and of course this is a real estate investing forum, but it would be interested to see what others suggest in response to your #2!

Thanks for the great post.

Quote from @Marcus Geiser:

I have purchased a house. Filed the deed in Allegheny County. I own it out right, no mortgage. 

3/1 in Quaker Valley School District. ARV$120K or conservatively speaking $100K is a no brainer and where I have run my numbers from. Rehab under $45K

I would like solutions for the flip. I have no credit, score is low, with no W2 income, I have read about creative strategies and what not but need to see how it would work in the real world to accelerate my process. I can self fund and slow grind. Just don't want to follow that route. 

HML does not seem to fit cause of credit, do not understand private lending, please give some direction to research.

 Hey Marcus, congrats on the first steps on this one! There are HMLs with "No minimum credit required", and who don't look at your personal income. The harder part honestly is the amount of funding requested - it's very low. Because of that, and the lack of scores (which take out unsecured gap funding / business lines), you really are subject to finding a partner wiling to make this one happen with you IMO. You may find a great one here on BP! 

Best wishes on this one!

 @Jasmine Wilkes there are a few options ,but is this for a rehab/new construction/value add deal or rental? Gap funding at eat away at cashflow quickly depending the deal if being used to acquire a rental (no value add). Gap Funding is very well suited for rehabs and new construction as you can exit/payoff the gap loan without carrying the higher interest cost (ranges from 7-15% depending on a number of factors).

Awesome! Sounds good, Timothy and good luck!

Just a courtesy notice, you're obviously helping yourself out by obtaining your own appraisal, but note that when you go to refinance any lender will want to obtain their own appraisal as well, most cannot use existing appraisals. So if you wanted to obtain that all at once in the mortgage process, it might save you some money on a second appraisal 👍

Hey @Timothy Allen, its a common pickle we find ourselves in, it's also frustrating when once appraiser/BPO comes in so drastically different than another (had one credit union come in $50k different on their BPOs, which seems drastic, I digress). On any 1-4 unit investment property, its very uncommon for a lender to consider an income-approach for as-is value vs a sales comparable. While DSCR loans obtain market rents through a 1007 Rent Schedule, it doesn't dictate the value of the property, but it does still provide income insight for the lender to determine LTV so that it cash flows at their minimum requirements (1.0, 1.1, 1.2+ etc, whatever that lender requires). If you dont have immediate built it equity, its tough.

Because of the above, turnkey properties are hard to BRRRR. Its likely you're buying at market, so if you can't 'force appreciation', you'll have a hard time getting you money out quickly, and will need to wait for appreciation, or eventually force appreciation with renovations. This is the big BRRRR in this strategy.

I'll be interested if others have different insight, but commercial would evaluate the same sales-approach in their appraisals most likely.

Jeet, the above posts cover the points for the LOC route, but have you considered a 2nd lien bridge/mezz loan? The beauty and purpose of these loans is exactly what you stated - keep you current mortgages is place, and obtain a 2nd mortgage up to 75% CLTV (1st + 2nd mortgages combined). Yes, rates are high, double digits high (10-14%, 12% on average), so evaluate your numbers, and if the use of proceeds will allow you to invest in a higher return, or allow you to payoff the 2nd position note within the next 12-24 months, it may still be very profitable for you to keep scaling.

Example:
$7.5M Value x 0.75 (75% LTV) = $5,625,000 CLTV 'tappable' equity
-$2.5M 1st Mortgage
$3,125,000 potential 2nd position mezz loan to invest elsewhere, all without paying fees on refinancing the 1st mortgage or increasing your monthly there. 

Now a 12% mezz interest only payment on $3,125,000 is $31,250 /mo. $375,000 /yr - in INTEREST payments, with no principal pay down. Of course only you know with your intended use of proceeds if that $3,1250,000 invested elsewhere will yield higher returns and make it worth it.

Hope this helps!

 I've always had great luck with local credit unions. Of the quotes I've received for my own, or others I know, they're very low (or no) closing costs, and promo rates I've seen for 12-mos are anywhere from 1.49% - 2.99% and then convert to Prime + 1 starting month 13. Rates are on the rise of course, so these are starting to increase, but still a no-brainer product to scale if you have equity in your home!

Good luck out there

 I'll echo what the others have said, but let me also add a few comments:

1. Are you basing your 703 mid-score based on which Credit Provider? There are almost a dozen scoring models out there, which is why many people check their Credit Karma, Credit Sesame, etc, and are quite frustrated when the lenders looks at credit and sees score 20-30 pts less (or greater), its because a consumer report often utilizes a different FICO scoring model. FICO 8 is currently at popular one, and I've found it to be one of the closest scoring models to a conventional lenders scoring (some of the big lender credit-providers are CBC Innovis, now joined with Factual Data, or Factual Data by CBC). A few service providers that use FICO8 scoring:
   1. MySCOREiq or identityIQ [same parent companies] - my personal favorite, and also offers a "what-if" simulator to see how certain 'moves' will affect your scores >> 
   2. myFICO - very similar
   3. Credit Check Total - I believe now also using FICO8
   4. There are others

2. There are also DSCR / Commercial lenders who only conduct a soft pull. If you're on the brink, and are worried about the credit inquiries, go with one of these lenders! It will help avoid the issue.

Sent you a DM in case you'd like to chat further, hope this helps!