Im a 20 year old investor in IL I own 5 residential properties
1 duplex worth 125,000 I owe 70
2- 4 Plex each worth 230,000- 250,000 I owe 190,000 each
1 house worth 75,000 I owe nothing
1 house worth 90,000 I owe 70,000
I am trying to use the equity in these properties to buy a 15 unit apartment building asking price 550,000 is there anyway I can structure a deal so I can get the apartment building(I do not mind refinancing everything) or am I just wasting my time trying to find something. FICO 683,663,649. Also 2006 will be the first year I show any rental income.
Thank you
Andrew
Very impressive portfolio Andrew. What you want to know is that lenders do not like to refinance NOO properties that are owned less than 1 year. Some will do it but they will likely only go up to 80-90% of the appraised value. I have done one refinance on a NOO for 100% of the appraisal four months after I purchased it, but I don’t think in these loans are done by anyone anymore. Also you will want to finance as few properties as possible to avoid paying closing costs multiple times.
You won’t have any problems getting this done with your credit scores and equity.
Iron Age touched upon what is called title seasoning; the length of time you have been on deed.
You could consider collateralizing as opposed to equity stripping; there are quite a few commercial loan programs that allow for this type of leverage.
I do not know how much I need as a downpayment (my guess is about 20%) im looking for someone who can help me start to finish…also could you please tell me a bit more about collateralizing as opposed to equity stripping and maybe point me in the direction of a lender who does that.
Andrew
Instead of taking out five new loans and paying cash for the commercial property, take out one loan on the commercial property and put the other five units up as collateral.
Are you incorporated? LLC? You can get business lines of credit with your current properties as collateral. Plus the tax benefits.
Firstly, that is a very nice portfolio for a 20 yr. old. Second, I would suggest the idea (not necessarily the best idea, but one to consider) would be to take out second mortgages (heloc, loc, stand alone 2nd ect.) for the reason that they do not require appraisals nor will they effect your current rates on your current properties.
About the purchase, I do not think you need more than a 10% dp, it is a dp and shows true interest in the property. Also, commercial properties are b/n 50- 90% based on the property in the sense that they are evaluating the building as much or more than the person buying it. What can really be in your benefit is your dscr (debt and service coverage ratio) if it is 1.1 or below 1.1, you are evaluated more- anything above it the majority is property based. Essentially, you need to know all your costs involved in the property- mortgage/taxes/insurance/maintenance then divide that by your noi (all done by on a monthly basis) that will determine you dscr.
Lastly, to proposition a bank for any commercial loan you need a portfolio on the property (better you write one than have a loan officer fabricate one) as to where all the income is coming from (including names of the tenants current and here you can include other income you make) and where the expenses are going. You can get a commercial loan with a 663 mid but you are cutting it close.