All Forum Posts by: Account Closed

Originally posted by @Dan Barli:

Hi Mikal,

It's difficult to say if that sounds "correct" or not, but if the numbers make sense for you, then I would say go for it. When you have money partners, there is no limit to what creativity you can use or how you can structure deals. It has to make sense for the money partner and also for you. If it does, then move forward.

Hope that helps! 

Hey Michael,
could you send me this contact? 

Thanks!
Originally posted by @Michael Noto:

@George Bittar I work with a lender that lends in NJ that will lend with title held in a LLC and they will lend up to 75% LTV as long as the DSCR is at least 1.2 for 1-4 families and they will even lend on townhomes and condos also that meet the minimum DSCR.

Their seasoning requirements are 30 days to use appraised value for the cash out refi so you should be good there as well.

PM me and I will get you over some details on the program they offer which has a 30-year term.

Also, I am not sure if the property is in NJ but if it isn't they can likely help you anyway because they lend in 34 other states.

Originally posted by @Andy Rousch:

I have two great lenders for residential in NJ. They both work for different companies so you can compare rates but I will inbox them to you. 

Originally posted by @Christopher Giannino:

@Gerald Boone

I bought a property back in September of 2017 and then went through the process of refinancing in April of 2018.  I spoke to a couple of lenders once I closed back in September 2017 and they all required a seasoning period of 6 months.  I bought with conventional financing though so that's why I needed a seasoning period.  Feel free to PM me to get a referral of who I used.

Originally posted by @Andrew Postell:

Receiving a cash out loan on an investment property can be a very confusing item. This post is designed to bring some clarity to taking cash out of a property with a conventional loan and help you navigate the sometimes-challenging cash out rules for properties. Admittedly, this post will probably be for the mid-level to expert level investor. There could be some important items in here if you are just starting out but it might get confusing in a hurry. If you have any questions, then please reach out. Lots of people on this forum can answer questions and many are very helpful individuals.

We will cover:

1. The conventional rules for a cash out loan
2. Buying a home with cash
3. How to properly structure buying a property with cash

1.  The Conventional Rules For a Cash Out Loan

Fannie Mae and Freddie Mac are the Government Agencies that sponsor conventional lending. Most banks will have these loans as an option. There are other loan types as well but for brevity we will limit this post to the “Conventional” lending (Fannie/Freddie).

• Conventional Loans limit your cash out on an investment property to 75% of the “After Repair Value” on a Single-Family home (70% on a 2-4 unit home). This is also the same percentage that you need for a non-cash out refinance (more on why that is important later).
• If you purchased the investment property with a loan, then conventional loans will require you to wait 6 month to take cash out.
  • This rule does not apply if you purchased the home with CASH (more on that in section 2).

Let’s explore some examples here:

• If you purchased a property with a 15% down conventional loan (85% loan to value) and you wanted to get cash out, you wouldn’t be able to do so since the cash out limit is 75% of the “Loan to Value”. The MAXIMUM cash out you can receive is 75% of the value of the property.
• If you purchased a property with a loan, but did the rehab on with your own cash, then you would need to wait 6 months to get that cash back. Keep in mind you could only receive 75% back of the After Repair Value.  
  • So if you bought a home with a loan of $50k, it required $30k in renovations, and it appraised for $100k after the repair work was complete then….
    • You would refinance the $50k loan, receive back $25k in cash…since $75k would be 75% of the After Repair Value.

2.  Buying a home with Cash

Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:

• If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.
  • There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC
  • BUT you will be limited to the amount of….
    • Your purchase price + closing costs (costs when you purchased the home)
    • OR
    • 75% of the “After Repair Value”…

WHICHEVER IS THE LOWER AMOUNT (super important)

These rules are important to understand so here are two examples:

• Example 1: If you purchased a home with $50k of cash, and put $30k of renovations into the loan, and the home was worth $100k. 75% is $75k and $50k is your purchase price. So you could only receive $50k in your first 6 months of ownership since the LOWER amount is your purchase price. After 6 months you could receive the full 75% of the ARV.
• Example 2: If you purchased a home with $80k of cash, put $5k into the home, and the home was worth $100k. 75% would be $75k and your purchase price is $80k…so the lower amount is $75k.

When buying a home with cash you can absolutely get cash back right away but you will be limited to the lower of those two amounts.

3.  HOW TO PROPERLY STRUCTURE BUYING A HOME WITH CASH

With these rules, you can see how it can be confusing to get conventional lending when buying a home with cash but there is absolutely a proper method to structuring your deals when buying cash. Here’s the secret:

• Create an LLC and have the LLC lend you a mortgage on the property you are receiving.

The reason why this works is because instead of you needing cash or receiving a cash out loan, we are now refinancing a loan – your loan. There no reason to wait any time or have any “whichever is lower” rule come into play. We are just refinancing a loan.

Here’s how it works:

• You create an LLC
• You buy a home
• Your LLC gives you a loan for the home
• You file the deed for that loan at the county courthouse
• You use the money from the LLC to buy and fix up the property
• Once the property is completed, your conventional lender comes to refinance the loan
• Your conventional lender runs title and sees there is a loan.
• Your conventional lender refinances you into a new loan, and cuts a check to your LLC…a check in the amount of 75% of the value.

Please don't confuse this 75% with a "cash out" amount. The non-cash out LTV on a refinance is also 75%. We are refinancing a mortgage. Your LLC's mortgage. Essentially your LLC has become the bank/hard money lender/etc. However you want to think about it. You get to set the interest rate (it can be 0%) and you get your investment amount back sooner.

Some things to think of:

• To file a deed at the county courthouse is $100-$150 in cost (depending on which county)
• And you want that note to be pretty close to 70% of the ARV for the property if you don't want to bring any money to closing. 70% will allow you to roll in your closing costs. If you want it to be at 75% just keep in mind you would need to bring your closing costs out of your pocket to complete the refinance.

This was a lot of information. Feel free to ask additional questions if you need. Thanks!

we just closed on a BRRRR we are doing over in Williamstown. Being a local of sicklerville I can agree 100% with that analysis though! We are going to start a thread to show the progress on this BRRR soon! Will def  message you!
Originally posted by @Mike Bonadies:

@Account Closed @Nana G. @Ari Bildner - I grew up in Sicklerville and I am a landlord in neighboring Washington Twp. The Sicklerville NJ has some strong potential for BRRR and I've both bought rentals and wholesaled BRRRs in the area. Feel free to PM me and we can connect. I'd love to talk about the area - I'm always open for a call.

As for the Sicklerville itself, anyone who is a native will tell you its a bit of a misnomer. Sicklerville splits two townships and townships are what matter for rentals. Sicklerville is 50% in Gloucester TWP and 50% in Winslow TWP. Here is the quick pros and cons on both.

Gloucester: 

Pros -  Good tenant pool, strong schools, most houses have public utilities, consider the more desirable area of Sicklerville by the local population

Cons - higher taxes, pulling permits takes the full ~21 days, higher home prices, overall thinner margins

Winslow:

Pros - Lower cost houses, rental friendly township, strong demand for rentals, slowly up & coming in certain neighborhoods, lower taxes, overall fatter margins

Cons - Lots of C and D neighborhoods and lackluster tenant pools, poor schools, the more east you get the more well/oil/septic you find, considered less desirable area of Sicklerville by the local population

By the numbers both GC and WT have similar rent rolls only off by $100 to $200 depending on the house type, therefore Winslow you will net more but have a slightly riskier house

Again this is just a general view, you'll want to look at each sub-division as there are massive swings within each twp (Ex: Brittany Woods compared to Cobblestone in GC)