All Forum Posts by: Corbin Jones

I've went from 4 units (3 properties) to 28 units (14 properties) over the past 3 years using seller financing. I typically buy on land contract with very little money down and 5 year balloons. I have a great working relationship with a small local bank that loans for their own note portfolio. I refinanced my first land contract last year, which was a 3 unit. My banker is presenting the refi of 5 duplexes this coming week. The new loan will be a commercial blanket loan, 20 year amortization, 5/1 arm starting at 4.750% and the LTV will be at 80-85% LTV.

I'll still have a couple of single family houses, 2 duplexes, and 5 unit complex on contract needing refi in the next 4 years. I see no issues getting it done. I make $14/hr at my job....

Nik Parks,

As mentioned, for 1-4 unit properties value will most likely be based on comparables, not NOI.

As for paying back investors or hard money, Sam W. touched on it but I'll try to detail. Refinancing can be used but you need to increase the value significantly more than the example you mentioned.

The biggest confusion I see when talking to people about refinancing is that they don't realize that when you refinance you are taking out an entirely new loan, and the original loans need to be paid back before anything else in the order of position. So your first position mortgage needs to be paid back first, second position (investor) second and so on.

So putting it in numbers, you pay 100k, you get 80k (first position) from the bank and 20k (second position) from an investor or hard money. For example purposes we'll say you have a lender who will do 80% LTV, although this may be difficult to find.

For the first 12 months they will base a refi on the original purchase price and the max a bank will loan is 80k. Keep in mind you still owe the bank 80k (first position) which would need to be paid back before anything else. So the only reason to do this is for a lower rate.

After 12 months, if you want to pay back the investor, you need to get a loan large enough to cover the 80k owed to the bank plus the 20k owed to the investor so a total of 100k. Since the max LTV is 80% you need it to appraise for 125k (125*80%=100). The bank will give you a brand new loan for 100k, 80k will pay back the bank (first position), 20k will pay back the investor (second position). You will not receive any extra cash in this case.

If the appraisal comes in even higher, say 150k. The bank will loan 120k (150*80%=120) The 80k owed to the bank (first position) gets paid back. The 20k to the investor (second position) gets paid next, you get a check for the leftovers!

Hope that helps,