All Forum Posts by: Rob Terpilowski

Thanks @Paul Bowers!  I've been networking through as many wholesalers in the area as possible and this came through one of their distribution lists.

I just completed my first BRRRR project, getting the long term financing in place this week. Details of the project are below:

Properties: 2 duplexes, side by side in Tacoma, WA
Acquisition Date:  3/31/17
Acquisition price: $340,000
Rehab costs: $85,000
Appraised Value: $640,000

Original Financed Amount 1st lender: $315,000
Original Financed Amount 2nd position lender: $110,000

Cash-out refi amount @ new appraised valuation: $456,000

The rehab work on the project was completed at the beginning of August, but the refinancing proved to be the most challenging part of this project, and wasn't completed until now (early December)!

Here were some of the challenges that I ran into:

• Lender said they could originally do a conventional 30-year @ a 75% LTV. I have a W2 job, but also own a business which had significant losses in 2014, 2015 which offset a lot of my income. After going to underwriting, they said they couldn't lend based on my numbers, and would need to wait until I filed my 2016 return (I had filed an extension). 2016 return came back mid-october. They said numbers were good enough.
• After going through underwriting, I'm told title will need to be in my personal name (currently title was in LLC name). I was expecting this though, but not expecting to get a call a few days later saying that Fannie/Freddie rules say title must be in my personal name for AT LEAST 6 months prior. So after all that, conventional lending was out.
• Called a dozen different asset based lenders getting quotes.  What I learned about asset based lenders.
  • Great if you don't have W2 income or don't want or can't get a conventional loan, and just use the income of the property to qualify.
  • Rates will be at least 1.5% higher than conventional
  • There will be prepayment penalties within the first 3-5 years.
  • Origination fees will be higher than a bank or credit union.
  • Some could lend as high as 80% LTV.

• Called about 10 community banks and credit unions in the area, and found a few that were interested in lending on the project.  What I learned was:
  • More flexible than conventional lenders.
  • Rates were higher than conventional, but lower than asset based lenders.
  • Origination fees were inline with conventional lenders.
  • LTV ratios were anywhere from 65%-75%
  • Title can be held by an LLC

I ended up going with a credit union due to the lower rates, origination costs and no prepayment penalties.  I was able to get all my capital back (and then a bit more), and the property still cashflows at about $800/month (Pics Below)

And now am looking for my next project.  

I have 2 duplexes in Tacoma, WA with a 3rd duplex set to be completed in March.  I am currently using Pellego Property Management, but I am done with them.  It has been a nightmare with the number of times they have dropped the ball on work orders and I ended up having to be the one to follow up with the vendors and tenants to make sure the work is getting done.  

Does anyone have a property manager that they would highly recommend in the Seattle/Tacoma area?

Thanks,

-Rob

I purchased a distressed property and took title as my LLC. I was told that in order to obtain conventional refinancing once the project was completed I would need to transfer title to my own personal name, complete the refi and could transfer it back to my LLC.

I get to the point now where the bank is ready to do the refi, and they are now telling me that Fannie/Freddie rules require that the title be in my name for at least 6 months before they can refi it w/ a conventional loan.  This is the first that I have heard of this, and if this is the really the case, why isn't it all over the place on the forums and podcasts....  When BRRRR-ing a property, do not take title in an LLC if you want to refi w/ conventional financing in 6 months.

Thoughts?

@Julian Sibley  Yes, 2016 was better and 2017 is better than last year, so will talk w/ the lender about including the P/L from this year as well.  Thanks for the suggestion on the rent schedule w/ appraisal, I'll bring up that point as well.

As a fall-back I have found an asset based lender with rates that would work, thanks @Matt Mcguirk.  Rates are obviously higher than conventional 30-year fixed, so will still try to go conventional if possible.  I'm currently waiting on my CPA to complete my 2016 taxes, probably in about 2 weeks , and then I'll have a better idea.

Thanks @Matt Mcguirk, just sent you a colleague request / PM.

I purchased 2 distressed duplexes next door to each other in the Seattle Tacoma area, initially with the intent of fixing and flipping them. I already had a BRRRR duplex that I purchased a few months prior and was being rehabbed. Turns out I underestimated the rents on these 2 new ones when I got them fixed up and rented, and so would like to keep them as they will cashflow nicely. The problem is that I'm running into issues with the refi process due to my debt to income ratio.

I have a W2 job that pays well, but I also own a business which had some pretty steep losses in 2015 which flowed through to my personal tax return, and smaller losses in 2016.  The first duplex I purchased is still another 6-8 weeks out from completion, and so I have no rental income on that property at this point, but am paying a hard money loan on.  

I've looked at a commercial mortgage, but the loan amount wouldn't be high enough for me to get most of my capital back out.  

I realize there are a lot of details that go into the mortgage decision process for the lender that I couldn't include in here, but just looking for some general/creative ideas of ways that things  could be structured with a lender to make something like this work.

tia,

-Rob

Thanks for the input guys!  I'll be making some calls on Monday to brokers local to the area.

Looking for peoples' recommendations for a firm that can check the occupancy status of a property as well as a firm that does BPOs (doesn't have to be the same company).  The property location is in Evansville Indiana.

Thanks,

-Rob

Hi Tom,

I'm booked the remainder of this afternoon, but I'll PM you my contact info and we'll set up a date/time to connect.

thanks,

-Rob