Lending Updates - IMPORTANT

I recently went through the whole process on a couple of projects and had some incredible success, after the typical bumps. While there are some restrictions and pains in this process, there still remains no other opportunity better than this program, in my opinion.  After 2 months of not hearing back from a lender on a home equity loan, I decided that I needed to investigate some new resources.  I heard the lender cry busy, I left message after message with no response and even had a horrible appraisal come in.  I finally decided enough was enough.  One of my clients, who owns Aurora Sign had some success with Citizens Bank and referred me on to them.  There are some restrictions on the number of deals they can finance, however they still go to 90%.  Yes, that’s right, 90%.  Industry wide you’ll hear people say 80%, even 70%, but in reality there are still banks doing home equity loans and refi’s at higher LTV’s.  It’s important to note that I show solid income and I have a score in the 700’s.

I met with 2 of their appraisers (that I’ve never worked with) provided them my comps and they hit the value exactly.  As an investor, you get to know value pretty quickly.  I have likely sold more homes in Aurora than 99% of agents and likely investigated more homes than the average appraiser has appraised.  This experience helps me understand value to the point where it’s nearly gut instinct.  Obviously, I need to have sold comps within 1 mile that are less than 6 months old, with similar square footage, beds and baths.  This is key for the appraiser, so I do my homework on every single unit.  One appraiser that I met with recently had a great comment, he said, "I’m not the price police".  This was great because some appraisers think they have to scrutinize everything that is successful as though it’s fraud of some sort.  Obviously, this program is based on acquiring properties that are undervalued and realizing that value via rehab.  The equity that is created here is largely due to 2 main facts. 1. - We buy foreclosed homes at incredible prices (Typically around $100K).  2. - We get these home rehabbed at incredible values.  The rehab that our crew does would retail around 2-3 times what we pay.  The crew has been assembled to do, what nobody else can do, at half the cost.  I’ve shopped rehabbers for years, and never found anyone even close.

We all know that the landscape of this business is changing and appraisers and banks are nervous.  Our track record is extremely solid and it’s really starting to pay off.   It’s a great sign that there are still banks that are eager for our business.  It’s important to continue to develop new banking relationships and foster current relationships.  I’m THRILLED to announce that we are in the process of developing a new loan program.  I have 2 commercial banks that will lend 80% of the "as completed" value, that’s right, the END VALUE.  Both First Choice Bank and Golden Eagle Bank have partnered with me in order to expand my business with this incredible offering.  This concept has been around for quite some time, however it was not always available to real estate investors.  Banks have been lending to builders for years utilizing this concept.  80% of the end value is available for the purchase and construction, often through escrow accounts.  This program is new and will require some tweaking, I’m sure, but it’s an amazing opportunity and will provide investors with a great second option.  When I started buying foreclosures, the banks required 20% down and the rehab was funded out of pocket.  With much negotiation and a lot of vision on the part of First Choice Bank, the bank agreed to go to 90% of the purchase price.  After all, if you put 10% down and rehab the home, the bank is typically around 60% - 65% LTV based on the completed value.  This is actually quite a conservative loan.  In order to recapture your capital, a cash out refinance was necessary.  I do still see value in this process and will continue to utilize cash out lenders as needed.  The benefit of the new program will be the elimination of the cash out refinance, and the benefit of having only 1 loan. This will provide us with 1 set of closing costs, the elimination of the Deeding process back and forth for the refinance as well as less cash out of pocket.

There are 2 huge components to getting this program approved.  1. I’ve worked diligently with my commercial bank to perform accurately for myself and my investors, which allowed the banks to better understand our business.  2. I’ve researched and provided appraisers with accurate numbers.  The most important step in this process is working with banks and appraisers to get accurate values and progressive programs.  This has been the focus of my professional career for the last 8 years and has materialized with the development of this latest product.  These factors have opened an incredible door for us.  This process will not be perfect, as nothing is, but it will allow investors an incredible opportunity to grow their portfolios. 

If you’d like to learn more about the new 80% "As Completed" program please contact me via email @ joshblank@gmail.com.

This entry was posted on Saturday, July 19th, 2008 at 7:19 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.