All Forum Posts by: Mathew Wray

Great...thanks for the info Jon!

I'm curious about something I've heard repeated a few times. When a short sale goes to closing is the owner expected to come up with the difference between the sale price and the mortgage price? I've been told that one of the difficulties in dealing with short sales is that often the sellers don't know, or don't want to know, that they have to pony up the difference in the sale price and the mortgage price so when they find that out at closing they often end up walking away and just letting their property get foreclosed on.

Is this common or just a risk or am I way off base?

Thanks!

Mathew

Dell and Chris,

Thanks for the replies. Obviously a good banking relationship is developed over time and having good numbers is a function of finding a poor performing property and fixing it up, scoring new tenants, and turning it around into a no longer poor performing property. Do you know what constitutes "good numbers"? I'm sure it varies from lender to lender but surely there are some standard guidelines they use?

Thanks!

I'll echo the majority of the other posters. If you have a qualified tenant who needs a month to be ready get a non-refundable deposit to hold the unit (you can even credit this to the first months rent or security deposit depending on your state's laws). If they aren't willing to pony up some money to hold the unit then you just move on and increase your marketing with extra flyers, craigslist, hotpads, calling realtors, etc. Better to eat an extra months mortgage than rent to the wrong people!

Although, I do like what Jeff said about not waiting in his case because of the high volume of traffic and leads. I'll keep that in mind when I move into the big leagues!

Mathew

Ann,

Thanks for the inside information! Even if it's not what I wanted to hear :) So at this point the question might be a bit redundant but you have way more experience than I do so I'd love to pick your brain while I can. Do you know if the same deal could be structured in reverse where a bank takes a second? That seems unlikely since a HML wouldn't take it. Which I guess sends me back to the original plan of letting my existing property season and then 1031 it into a larger property.

Thanks!

Mathew

Bill,

Thanks for the clarification on the differences. So that explains why you normally hear about HMLs in conjunction with fix and flips and it's rarer in buy and hold.

Would it be more reasonable to use the HML to finance the smaller 30% of the deal and then use that 30% to get the 70% from the bank? That sounds more reasonable and like a figure I could conceivably come up with using equity in my existing properties. But then you're still stuck with the original problem of how to get out from under the hard money? That's where I keep coming up against a wall...

Mathew

Jon,

Indeed I was talking about multifamily. I wouldn't want all my eggs in one basket trying to rent a million dollar SFM to one person, although I'm sure someone is out there doing just that! I know it's not for me. If I understand you correctly you're saying that with increased value (of any commercial loan) and time it could be refinanced conventionally but that those requirements are distinctly different than the residential loan requirements I'm used to? Thanks for the help...

Bill,

"Now, if the newbies will come down to earth at say a 100K property, an 80K would be better, a 1-4 property, those are deals that can be pulled down, otherwise, taking this to a million dollar deal is obsurd unless you have the horsepower and experience to own such a property. Yes, I'm the daydream killer. :)"

Yes, you're the day dream killer. No, I'm not so crazy to believe that anyone (family or otherwise) would loan me a million dollars without a lot of experience and my own "pot to spit in". As I said in my post it was a hypothetical number I chose...I chose it because I was pretty sure that if I put 100K as a hypothetical number that someone else would come on and post about how there wasn't enough upside in a 70K HML loan and they wouldn't touch it without exorbitant fees because it wasn't worth their time.

So yeah, I'm a little frustrated by your response...and I realize that is my fault because I'm new and I didn't post a clear question. So, lets reset, and see if that will help. I do appreciate the time and effort you put into your post and I definitely pulled good things out of it about the background and the real world example of what you need to be prepared for in a worst case scenario, so thank you.

What I was trying to ask is how does refinancing work in a buy and hold scenario when hard money is involved? I hear it talked about as an exit strategy all the time (both on the podcasts and the forums) but I also know that it isn't as easy as just walking into a bank and saying, hey, I've got some property, lets refinance. So, what is a bank looking for when considering it?

Thank you for your time and thoughts,

Mathew

Hi all,

I've been doing a lot of reading and research on finding other ways to buy and hold apartment properties. By other ways I mean outside of the traditional 25% down mortgages or commercial loans. So lets just pretend that I found a property for 1.0 million (for ease of the example) and had a combination of 30% private money and 70% hard money already lined up. We know that the hard money lenders are going to want their money back within the year. From what I've read it seems like I should be able to find a local bank or an investment bank who will refinance the loan, assuming that it cash flows and is increasing in equity through decreased expenses and increased income coming in.

When going to those local banks do they look solely at how the property is performing or does the owner's personal credit come into play? I have quite good credit but I have a house with less than 30% equity which is holding up traditional banks from loaning me more, hence my search for other forms of financing. In the vast experience of BP is that likely to be a problem with a refinance of a private deal as well?

If I got the refinance would they typically be able to refi the whole amount so I could pay back both the PM and the HML or would it only be 70% that they'd allow. I know that seems like a stupid question, who'd only refi part of a loan?!? But, I'm trying to get my base facts straight before I start trying to put a deal together with money coming from multiple sources.

Thanks for any help,

Mathew

Daniel,

Please let us know what happens with your duplex refinance. I was in the same boat. Have a duplex renting for 2300 a month but is small in square footage. I've been aggressive with my rents while others haven't kept up with the area's rising trendiness. They're selling for 350-375 with comparable rents but more square footage, although mine is updated. I tried to make the argument in my appraisal rebuttal that the rents justified the price. The appraiser disagreed and I came in about 9K short from 70% LTV. I'd be interested to hear if yours comes through.

Mathew

Thanks for the update! I'm glad some of them worked out. I guess the hassle with banks is just par for the course.