I have been investing in real estate for 2 years now. In those three years I have purchased 3 properties. Each time I used HML then refinanced for the cash out and held on to the properties putting tenants in them. My plans are to keep a few and sell a few but I want to hold them for at least 2 years to avoid capital gains tax since they are all in my name and not my LLC. ( I find it easier to refinance if they are in my name)
I want to pick up the pace and buy more properties at a time but even with HML I put out money for points and rehab costs if the deal is not low enough to cover 100% total acquisition and costs.
My question to you experienced rehabbers/REI’s is , is there a way I can leverage the equity in my properties to use them to buy other properties instead of having to have to bring cash tot he table each time, or at least not as much cash…especially if I want to buy more than one property at at a time.
Is this a bridge loan? How does this work and will HMLs allow it?
Any advice would be helpful as I am ready to step up business to the next level.
Can someone explain to me how brige loans work? I want to use one to help me buy another property without having to bring a ton of cash the table but rather as a bridge loan. Is this realistic if I am using HML to aquire the property?
Bridge loans are typically for owner-occupied homes and are designed for a homeowner to be able to access their equity on their current home for a down payment on the new home. I have never done one because they never seem to be advantageous to the borrower. The ones I have seen only go to 80% of the value, and you must still qualify on all of the mortgage payments. Current home must be on the market.
Perhaps others know of a bridge loan that an investor can use, but I haven’t heard of one.
There is a loan available that will allow you to utilize the equity in your properties to purchase other properties. It is not a bridge loan. I think it is either a blanket or wraparound mortgage. It is more of a commercial product. I was considering it at one point. You must still leave 70% to 80% of equity in the currently owned property and the new purchase.
For example, if you have a property worth $200,000 and your current loan on the property is $100,000 and the required ltv is 80%, then you must leave at $160,000 in the property and you can’t take out more than $60,000 to utilize on your next purchase. One more thing, if the new propery is worth $200,000, you must also leave $160,000 in equity in the property. Therefore they would apply $40,000 towards your downpayment.
Here are some details on another loan program that allows for the purchase/refinance of multiple residential properties using one loan (blanket loan configuration):
Must have => 5 properties to qualify.
Loan amounts Up To 3,000,000
Loan program can be used for purchase, rate & term and cash out refinance transactions.
LTVs up to 80% will be considered
Program allows for properties to be located in different towns.
Partial releases are permissible (Releases will be granted but the LTV must be low enough after the release to keep the portfolio performing).
Properties must cash flow in order to be considered—a minimum of 1.2 DCR is allowed.
Borrower’s Income is not a qualifying factor for loan approval (cash flow of property portfolio is)
Financing as a LLC is allowed
The popularity and demand for this program has been overwhelming as it allows the investor to:
[b]- Improve Your Scores and Debt Ratio
Increase Your Cash Flow From Your Portfolio
Increase Your Chances To Qualify For Fannie Mae Investor Rates On Future Investments