All Forum Posts by: Chris Ellis

If you are going through a traditional bank and someone else brings the down payment money, they will want that person to sign off on the loan as well. 

The reference was in regards to private money and not banks. A bridge loan will be structured as interest only with a balloon payment at the end. A longer term loan of 25 to 30 years will cover interest and the principle in payments. 

Cash flow shows the ability to pay back a loan. A lender only charges interest. An investor is a different game in which they will take pieces of the pie. 

The other side note for a traditional bank is that if the money is "borrowed" as a investor brings it to the table, they will also want that investor to sign off as a personal guarantor and also look at their income. From a bank perspective, yes it is certainly going to be added to the DSCR.

The way I see these types of deals getting done is through private money. The money is also not necessarily declared as debt. It must be seasoned for 30 to 60 days or they will be looking to source it. Keep them as less than 20% owner on the LLC formed to purchase property. If it is sourced the partnership can be explained and you are also working with more lenient sources than a traditional bank.

80% is going to be extremely difficult to find. 70% is what most lenders will do it at. 

Typical move for a non-owner occupied is to put the property under an LLC. If renovations are involved then it would most likely be structured as an interest only bridge loan. If the intent is to keep the property as a rental, then the loan would be refinanced to a long term when renovations complete and tenant in place. If the intent is to sell, then pay the balloon payment with the sale and walk away with the cash.

Considering it is your first property it is also realistic to expect a request for somewhere in the vicinity of 20% as a down payment. I'll be happy to connect you to the right sources to get it done if you'd like.  

What about just doing a buy and hold in Alabama and then just sell the property when you are getting closer to making your move back to Texas?

If you are working with a legitimate hard money lender you should be able to receive an offer with preliminary information provided and no money out of pocket. Upon accepting the initial offer, you will be required to cover the cost of a third party appraiser. Do not even waste time finding your own appraiser as the lender will want to use their preferred source. 

Closing costs are a different story. This is generally taken out of the loan provided. So the only out of pocket to expect with a legitimate source is going to be the appraisal. 

Feel free to connect if you would like help walking through the process or want to compete against your lender that you have lined up.

It is going to make the paper trail much more difficult to show when you are looking to refinance or sell the property. If you want to accept credit/debit cards to make it easier for tenants, then set up a merchant account. Otherwise deposited checks are great. 

Zelle can work but you need to put something in place to make sure the flow of cash is recorded with your banking institution. It's almost like taking cash from a tenant. It can be done, but can create issues in the future if not done properly.

Ask for last 3 months bank statements to verify deposits of mentioned income. 

First you need to make sure that the hard money lender will allow gap funding. There are a lot who don't. A traditional gap lender is not going to get the other 30% covered. They might cover 10% to help bridge some of that gap and take second position on a lien. 

The other option is to get more creative with funding options that exist. This 30% can potentially be raised through unsecured business lines of credit, business term loans, personal loans, etc...

Feel free to connect if you would like to explore options that might be available to you.

Last-ditch is to always keep on the hunt for more potential investors. In an ideal world these investors would be competing against one another for your project. Lame answer but true.

On the more creative side would be to create some energy or some excitement around the project as almost a takeaway. There are many folks who will tell white lies in this direction which I cannot promote so think being honest is the most sincere way to generate a response without imposing on them. It also helps in creating a lasting relationship as you move on to other projects, which is another enticement. The idea of duplicating your process. 

That being said, you reiterate numbers that you can accurately portray and stress your worry as you do here in potentially losing the investment opportunity. "Let's put in a lower offer and see what he says. We already agreed the value was there." The other is to show actual numbers that you see. "There are this many people looking at this every day. Right now. There are this many offers. I know you are busy and we have plans but we have to make a move or will lose it."

Take the ideas for what they are and I hope they help.