Second Opinion on Leveraging a Rental Property

[Chris Nappi]

Hello. My wife and I have two fully paid off properties in San Francisco; Presidio adjacent and Lower Pacific Heights. We had planned on selling one of them to pay for a new primary residence in SoCal. I'd love to speak with a mortgage professional to get a second opinion on if it's possible for us to keep all of our properties. My current conventional (Bank) lender is great for a standard mortgage, however, I don't believe they have access to many programs for investors or able to work outside the standard box. We'd hate to give up a property if we don't have to, even if we're just breaking even on it. Thank you.

[Dave Skow]

@Chris Nappi- thanks for the post ...sounds like the  key issues will be 1)  how  your present primary property will be   classified and  treated for  qualifying  and  2) what sort of purchase price and  loan amt are  you  wanting / needing for the new place  ?   3)  do you have  down payment funds  to use  wqithout  selling the proeprty ?

[Tony Ngo]

Hi Chris

I think it is possible if you & your wife income could cover it.  As mortgage broker myself, the first thing i would do 

1) calculate your income from 2 payoff rentals compared to expenses (tax,insurance,etc on rental property).

2) calculate PITI (principal,interest,tax,insurance) of your new subject primary property

3) Then evaluate if your income could qualify from #1 & #2 together.

Conventional lending will give you best rate. If you don't qualify this route, you can can look for DSCR and other created lending that wholesale lenders can provide to you. If you haven't speak to any mortgage broker yet, feel free to contact me. I would love help and share my knowledge to you.

[Jared Rine]

@Chris Nappi...you need someone who deals with creative situations and flip it around and see how to structure accordingly, while still trying to get you the best terms.  Pm if you haven't found what you were looking for.  Assuming income works and can figure out structure, I don't see why you wouldn't be able to do what you're trying to do.

[Caroline Gerardo]

Refinance one non owner cash out using that for down on Newport Beach house (just guessing). You will need a lease to cash flow cover #1 Presidio and then lease #2 Lower Pacific Heights and use the net income to aid the DTI on the purchase. #1 rate won't be pretty

Other choice: cross collateralize all three with exit LTV set for any of the three. This gives a larger super jumbo loan with owner occupied rates.

You need great FICO's, reserve money in 401k or liquid funds,  are you working or retired? 

What are your goals and capital gains if you sell? Get your CPA in the mix, know the basis +  costs - fees - taxes. The 1031 could go away in the future but look at exchanging one or both of the SF properties now. What is the delta now ?

[David Bilandzija]

@Chris Nappi There's a few ways to "skin the cat" in terms of qualifying for conventional financing.  Most loan officers/mortgage brokers will focus on traditional income sources that appear on your tax return.  There is another way to show ability to repay and qualify.  

Since it sounds like your goal is to maintain ownership of the SF homes you might want to consider a few different approaches based on your financial situation.  

[Erik Browning]

@Chris Nappi You should have no problem qualifying for a loan on a new primary - especially since they are paid off. It will likely come down to what's on your tax return, specifically Schedule E's last 2 year history. 

I routinely work with client that have multiple properties and are in a similar situation and would be happy to jump on the phone with you.

[Basit Siddiqi]

If you have two paid off properties - You can do a refinance on one property and purchase the property with the refinance proceeds to go towards the purchase price / down payment.

Best of luck