Posted by Bruce Barilar on July 22, 2002 at 22:22:50:
Gary, I think that as time goes on you will have some difficulty pulling your money back out, because seasoning is a problem. Try and open yourself up to other ways of doing deals. If you are keeping the property structure your financing on the way in to suit your strategy. This is what I have done: Using my WLOC I can buy up to 80% ARV, pulling cash out up front if I want to and keep it, flip it to an owner occupant or wholesale it to an investor-whatever will make me money. If you do not have a WLOC, go to Ed and Terry’s seminar and they will help you. Just food for thought.
Regards, Bruce
Is this a seasoning issue? I pay cash for a property, getting the property for say 75% of its appraised value. A month after closing, I go to a lender to put an 80%LTV first mortgage on the property. Will they use the appraised value or will they say NO, saying what I paid for the property is its value…Anybody using this type of technique?
Re: Related to Seasoning - Posted by Matt (MPD) IL
Posted by Matt (MPD) IL on July 23, 2002 at 24:52:01:
Gary,
You could possibly run into seasoning issues even with paying cash for the property. I have run across several lenders that will stick to the black letter response in the appraiser’s report and in a USPAP report it does ask if a property had any recent sales. If your purchase price were to show up in the appraiser’s report, you could possibly run into an issue with the lender or appraiser asking you to submit detailed evidence of dollars spent in rehabbing a property in order to raise it’s value to the ARV. If this happens, about the only thing you can do is look for another lender.
I have secured Warehouse Lines of Credit (I believe this is what Paul refers to with WLOC) which allow me to purchase the property and fix it up and I get 80% of both the purchase and rehab costs as long as they don’t total more than 80% of the ARV. Any more than the 80% must come out of my pocket along with the 20%.
My lender is also a portfolio lender which means they don’t sell their loans on the secondary market. They keep and service all their loans in house. This is crucial when trying to work around seasoning issues and when you find a lender that does this they are allowed to make most of their own rules. The more comfortable the lender becomes with you, the less likely you are to have a problem when you buy for .50 on the dollar and flip it wholesale without putting a dime in rehab. As long as they know you aren’t playing with numbers and getting fake appraisals you are golden.
About your lender. I have been having some problems with seasoning. Any help is appreciated.
Where are you located? How did you find this type of lender? Will they lend nation wide or just locally?
Thanks a bunch,
Ryan
Nice to meet you Matt. I’m a newbie from Chicago, just curious what part of Illinois you from and how the market here has been treating you lately? How long have you been investing?