Turning Hard Money Into Play Dough - How To Refinance

Many of the real estate investors that I work with on a daily basis are beginning to see the fruits of their labor. Those that wisely decided to buy and hold, whether it be through traditional 'landlording' or through long term lease options, are seeing sizeable monthly incomes being had from their hard work. With the good times, comes the questions though. What about the investors that used more expensive private money or hard money to acquire these properties? You know, the money that cost them 10-18% on an interest only basis. The awesome thing is that these properties were bought at such a discount that they are still cash flowing nicely at this high rate. The thing that sucks though, is that they are seemingly stranded on this island of nowhere. This island that never sees them paying down the debt and the balloon looms. Thanks to the 'good ole boys', Mr. Dodd and Mr. Frank, investors are not able to refinance these packages the same way that they did in the past. After searching, they were indeed able to find longer term hard money or some 'institutions' that would offer them a rate of 9.99% and high points to refinance. This though really did not do much as the term was still too short and in reality, the rate just was not worth the trouble. In January 2012, a new private program was released to assist investors in refinancing these packages and getting them the rate and term loan that they were looking for. To give you an idea of how the process worked, let's look at this example: 'Joe' is an investor in Phoenix, AZ. Over the last 4 years, Joe was able to pick up some gems of deals in the valley of the sun. He located and began using an investor that charged 18% but required no money down and was easy to use. Since Joes cash flow on these properties were so good (because he was picking the homes up for 30-40 cents on the dollar), he was covering the payments with ease and making a great return while building up over 100 properties in his portfolio. Joe, really didn't have a time frame to return the funds (as the lender at that rate, they were in no hurry to get the money back), but he knew that he was leaving money on the table. He searched for over 10 months before he learned of the new program. Joe was able to refinance all of his properties into one loan package (although he actually broke them down into 3 packages), he received a rate of 6.5%, 25 year amortization, with a call in 10 years and was able to do the whole deal with no out of pocket money and by supplying only BPO values for the properties. Joes cash flow shot through the roof. Joe is not alone in the need for this program. Most every investor that has purchased properties using hard money in the last 3 years should be busting down the doors to get this type of funding. What makes this really appealing is that now the investors can use the hard money to acquire properties, restructure the values, get them debt servicing, and slide them over into buy and hold packages. The more creative investors are even placing end buyers into the properties for long term lease option tenant buyers. It still works within the loan and cuts out all of the maintenance (but that's another article altogether).