Financing Ideas Needed

Financing, Hard Money Lenders, Private Money
1

Bought and rehabbed 2 multifamily properties with 100% cash in the last 20 months. Combined annual NOI $100K.

Interested in cash-out to buy a third 19-unit multifamily property. This one requires no rehab but rent roll low due to poor management.

Properties all in Baltimore, MD.

What is the best option to finance new property?

2

Will lenders accept my other two income-producing properties as collateral so I can just get one mortgage on the new property?

The new property has not been managed too well - high vacancies and delinquencies and high expenses. We know we can do much much better.

3

You can get a hard money lender to cross collaterize or better yet, just make your offer match current as is value.

4

Two options:

  1. I would take loans out on the properties that are up and running with banks to get the best interest rate and terms, and use the money to buy the third multi-family/commercial property, or;
  2. Have a hard money lender loan you the money for the third property, bring it up to par and then refinance it with a bank loan. Yes, you might have to cross-collateralize in this case, and I would personally prefer option 1 - less risk.
5

Thanks Hasan and Laura for your advice.

I am trying to get a home equity loan first - looks like the lowest cost - for a down payment.

Maybe the sellers will agree to hold $1MM note for 12 mos.

I will also offer $5K monthly interest, which matches their current NOI.

With specific actions from due diligence, I plan to improve rent roll and slash costs and produce stabilized 6 mos history.

I then finance with conventional loan and payoff sellers.

If sellers won’t hold note, no deal - I don’t want to bleed red ink each month. Didn’t know hard money is so EXPENSIVE! 15% and up to 5 POINTS!! Ouchhh!!!

What do you think?

6

BTW - Can’t qualify for conventional loan where debt income ratio is 45%. Little dry powder left given $1mm plus on 2 rehabs.

7

I think bank loan would be a good option, yet please consider all the things like interest rate before applying for loan.

8

YES, Hard Money Loans are expensive but sometime much easier to lend you money and the only option too. You just have to find the RIGHT hard money lender, try Private Money Lenders also.

9

Here, see my take on this. I just published a post about alternatives to mortgage.

http://www.reiclub.com/forums/index.php/topic,49555.0.html