All Forum Posts by: Robert Ferrell

Hey everyone! I'm planning on purchasing my first rental in IN within the next 12 months. The purchase will be all cash and the properties I'm aiming for will be 50k or less. So what I'm looking for are investor friendly banks/institutions that are A.) Willing to do cash out refi's so I can pull the cash back out of the property, B.) Offer 30yr fixed on properties under 50k, and C.) have little to no seasoning periods. Those are the three MUSTS that I am looking for. A few other helpful things would be: No appraisal needed and 80% LTV offered. So if anyone has a recommendation on a bank they use or one that may fit some/most of those standards, please let me know. I will be reaching out and making sure I am pre-approved before making my purchase as a quick cash out refi is imperative for my strategy. Thanks!

@Wes Blackwell That basically captures the sentiment of the contractors I was able to find and contact. I'm not against paying for quality work, but it does indeed have to be quality work! They're in business to make money just as much as flippers are, and everyone wins if we can all work together. Thanks for sending over the info on your contact. Much appreciated!

Hey @Wes Blackwell I'm looking to invest about an hour North of Sacramento in Yuba City. Do you know if this GC is willing to travel? Please PM and let me know!

Looking to get my first flip project going in my hometown of Yuba City, CA and am having some trouble finding a GC to manage the rehab. I've contacted a few companies and told them what I'm looking for, but they all have said they generally don't do work for flips. So, if there are any flippers/investors in the Sacramento and/or surrounding area that could recommend a competent and professional GC, that would be much appreciated. Thanks!

@Bob Green Thanks for the reply, Bob. At this point, I am currently in the planning stage of my investing career. I hope to get started within the year. Like most other newbies, I too became stuck after the conventional loans run out. Portfolio lending is an excellent idea though! I will definitely PM you to find out more.

Hey BP!

My question is about funding buy and holds. After you have gone the conventional route of either 4 or 10 bank mortgages, what is the best way to refi out of a private money loan? I could be wrong, but I doubt many private lenders are looking to tie up their funds in a 30yr note. Let me know your suggestions. Thanks!

Thank you @Matt K. for reiterating my intention. After reading @Linda S. and @Yuriy Skripnichenko responses, I was wondering the same thing: were they doing all their own work or were any of those deals turn key like I am looking into. Either way, I'm thankful for the advice and glad to hear that it can be done. Now the only question to answer is should it be done in my situation.

Linda, like you mentioned, this is definitely intended to be a short term financing option for me. I don't have incredibly high limits, all balances tallied equal to $16500. But, all I am looking to pul from my cards is around 10-15k to use as a 20-25% downpayment, then use hard money to fund the rest. My credit score is around 750, and although I've taken pride in getting it to where it is now, merely 630 a year ago, I am not all that detered by a momentary dip due to loading some major debt onto them for a short time. After doing this though, I am worried a bank may not approve a cash out refi. Plus, to be honest, until posing this question in the forums, I didn't even realize there would be upfront costs when getting a cash out refi. I am still very new to understanding creative finance.

Yuriy, I am thinking that will be one of my next moves, namely speaking with banks to find out what my eligibility for refinance would like if I had X amount of credit card debt, even though the debt was used strategically for asset purchase rather than frivolously for random purchases. This entire idea crumbles if that refi cant be secured. Because like I said, this is a short term financing option only and I do not want to be stuck with those balances sitting on my cards.

I would very much rather utilize the funds of a private lender and then do the cashout refi with a bank, but A.) I have no track record, and B.) so far as I know, there aren't any high net worth people in my network willing to hand over 50k to help a newbie get started. I'm not saying these things for pity, I am just trying to be realistic. That is a main reason why I wanted to try using my credit cards and hard money to atleast get one property under my belt by myself so that when I find a private lender, they would have more of a reason to trust that I have a proven strategy.

If anyone has any other financing options that work well with turnkeys that you would suggest I look into besides credit cards, I am all ears. Like I've said before, I don't want to make this risky and hard on myself if I dont have to. But, I am also willing to do so if there is no other option.

@Eric M. Wohlwend Yes, that is something I am afraid of, having a bank pull my credit and see massive credit card debt. Even though the debt was incurred for a very specific purpose with a plan to pay it off quickly. I have two questions for you though. First, if buying entire houses using credit cards worked just fine for you, why would you not recommend that strategy? Second, if you had private money lenders at your disposal, why did you not utilize their money instead of the credit cards to begin with?

@Matt K. At the moment, that is all it is, an idea. I actually never would have thought of using credit cards to fund real estate purchases if I didn't hear about other investors, and even Brandon Turner himself, using them for that purpose. For me though, and this specific strategy I am trying to do, I couldn't figure out how to make it work without being negative cash flow (at least, of course, up until the refi). That is why I wanted to take the idea to the forums and get feedback. Clearly, it seems my approach is misguided. But I am wondering how other investors use credit cards to purchase and make it work. If I could find an alternative route, I would be happy to take it. There is nothing specific about using a credit card that entices me. It is simply the only means I have at the moment to come up with 10-15k.

In regard to your response, I do have a few questions/comments though. When you said it is hard to get a loan sub 50k, did you mean like a regular 30 year fixed where you put 20% down and the bank carries the rest? Or did you mean for a cash out refi after a property has already been purchased?

Second, the turnkey company I plan on using is Clayton Morris's company Morris Invest. From what I've seen in all of his youtube videos/customer testimonials, the houses are in B and C neighborhoods and tend to have high occupancy. They are generally 3 bed 1 bath houses that rent for around $700 or so a month with projected expenses around 40% (he claims that is a conservative number but I generally like to use at least 50%).

From what I understand, his company sells fully renovated and rented properties to investors at a price that is profitable for them yet also has some built in equity for the investor. For example, his company is all in for 30k, investor buys the house for 40k and the appraised value is 50k. Therefore the investor would have that 10k spread. This is why the refi should allow you to get back all your cash (80% of 50k=40k) to pay off any loans you used to get the property. Although, you still would probably have to come out of pocket a little to cover any extra interest that the cash out didn't cover.

I just don't want to make excuses and say well I don't have 40k so I guess I'll never invest. I want to take action and I want to get started. It's all just coming down to figuring out how to finance. I don't want to make things purposeful hard for myself, but I am also willing to do something unconvential and perhaps more costly to get my foot in the door if need be.

@Stuart M. First off, thanks for responding. Tons of great info that I overlooked when thinking about using this strategy. 

The reason why I haven't really considered a traditional mortgage is because I plan on buying my first rental from a turnkey company. From what I've read, they can be purchased using traditional mortgages, but it makes the process much quicker and easier if you can come in with cash and then refi after the purchase/seasoning period. Also, on an investment property wouldn't they expect me to have 6 months worth of reserve just incase anything should happen? Because that is something I do not have. Although, I do have access to credit in excess of what I would need to use to aquire the property, should any emergency arise.

The houses this company offers generally sell in the 40-60k range, so my plan was to pull about 10-15k from my credit cards (whatever 20% of the purchase price would be) and fund the remainder with a hard money loan. Then, I would go for the cash out refi to pay back the cards and the hard money and secure a long term mortgage on the property. 

You mentioned that the debt-to-income may stifle my attempt to get the refi, this is something I was also worried about. I'm not sure how understanding a bank would be if I were to explain to them why my credit card debt was so high and that the cash out refi would be for the purpose of paying those balances off. Therefore they wouldn't have to worry about me trying to manage so many debt payments.

It would probably take a year or two for me to save 10-15k for the 20% down, that is another big reason why I was thinking about leveraging my credit cards to help aquire the property. I really don't want to have to wait that long to get into the game if there is an alternative (albeit more costly) way that I can take action and get started.

Let me know what you think.