All Forum Posts by: Rivers Fike

I would recommend the following in this order. 
1. wait and save cash

2. HELOC

3. Credit Card 

The Heloc will give you a much better rate than the credit card after the 0% expired. 

Is your plan for this property to fix and flip it or live in it?

This is definitely a portfolio that you could get a second position portfolio loan on.

I’ve lent on several similar portfolios recently with interest only terms and below hard money loan costs.  

When you say market rate do you mean the rates for conventional loans or hard money? If wanting below conventional rates, I see that as unlikely to find.

A HELOC is going to fall in between your conventional money and hard money cost wise.

The most important thing starting out is to underwrite the deal properly with your financing terms in order to understand whether or not it will work.  

Leverage can be very powerful to expand a real estate portfolio, but you have to maintain cashflow while growing. 

I use 3 times gross rent as a minimum.  But advise looking holistically at the tenants employment, rental history, credit and background.  I also look at the other monthly payments a tenant has car payments, consumer debt payments, etc to make sure they can comfortably pay the rent. 

I underwrite these types of loans based off of the equity in the property with the combined first and second position loans. Income from 2021 isn’t important, instead I determine if the property can be sold to cover the capital invested in the event of a default.  From your description, it seems like you have plenty of equity in this property to get a fixed second position loan that you are looking for.  Once the collateral is established, I look to make sure the borrower has the capacity to service the debt. 

Also, keep in mind that the second position debt is riskier for the lender and will carry a correspondingly higher interest rate than the first position.  

For me, having the lien filed is preferred since it provides a public record and the lien holder will be notified in order to clear the title if the property is sold. 

But every situation is different, so of course it’s best to seek advice from a real estate attorney. 

I’ve done this a couple of different ways depending on the situation. 

The simplest way is a promissory note laying out the terms of the loan (term, interest, payment frequency, etc.) but this leaves you with no recourse to take ownership of the property if the loan is not repaid. 

The way to give the loan and have the property as collateral is to work with an attorney and file a lien against the property.  The details will still be agreed to with a promissory note but there is now real collateral in the event of non payment. 

You can get a second position private loan to access the equity in your investment property. This can be a good option if you have a low interest first position loan. 

Hi Sean, happy to take a look at your current properties and see if we can provide a solution.  We have done similar portfolio loans in Houston. 

PM and we can discuss.