Send me your financing questions

Buying & Selling Real Estate
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Send me your financing questions

Jonathan Taylor
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes

Hello BP community,

I have observed a lot of confusion on the forums about financing options and the availability of programs for RE investors. As I have gained a ton of knowledge from the forums in my own journey, I would love to give back and answer any questions you have about the financing world. If I don't know the answer, I'm sure the community can step up and help as I am by no means the end all, be all of info. 

So, what do you have questions about?

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Melanie Lashus
Rental Property Investor · Centreville, VA · Member since 2020 · 6 posts · 10 votes
6y

@Jonathan Taylor

I’m very new to all this and am in the “educate thyself” phase. I currently own two properties.

I appreciate your offer of information!

What I *think* I understand:

- there are MANY ways to finance deals.

- small banks/etc can be more flexible in terms

- there is a limit (10?) to the number of bank mortgages a person can have.

What I’m confused about:

So much of what I read/listen to is experienced investors (with way more than 10 properties) talking about buying properties with a variety of creative financing strategies) and then “Refinancing” the property into a “traditional” mortgage later on.

So- what kinds of refi’s are these? Don’t they count against the 10(?) loans you can have?

What am I missing? This is never explained in the podcasts or books...

6Reply
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  • Matthew Duch
    Los Angeles, CA · Member since 2019 · 9 posts · 4 votes
    6y

    Hey Jonathan! 

    Thanks so much for creating this thread, and taking your time to answer questions from the BP community. Is it currently possible to get a 5% - 10% down conventional loan on multi-family properties (2-4 units) in Los Angeles? I'm hearing that it's much more difficult now with how competitive the market has been the last several months. I've also been seeing properties go for $30,000 - $100,000 + over the listing price. Is this a typical trend that you've been seeing?

    3Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Matthew Duch this is a bit of a moving target as there was a four unit down the block from me that sold for 90K below asking in April of this year. Its market dependent but Fannie and freddie have guidelines to purchase 2-4 units but LTV depend on unit count and occupancy. If you plan to occupy the 2-4 unit property, lower down payments are possible, 5-10% range, but as an investment property in CA, 15-25% is a realistic range.

    5Reply
  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    Thanks for the offer @Jonathan Taylor.

    Many of our clients are new real estate investors who would like to purchase properties in a new LLC. Often they have difficulty finding loans to new LLC's without having strong balance sheets. What would your general advice be?

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    6Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Daniel Hyman Id be curious to see what the difficulty is. If they are trying to close under an entity while going full document purchase, there will be a challenge as institutional lenders (rocket, UWM, loan depot, RCN, etc) will have a more fine tooth comb approach but with DSCR based/bank statement programs are more accepting to LLC or entity ownership. Rates are reflective of the loan type. Lowest rates are with institutional lenders while DSCR based will be higher but easier to close in an entity. Does that help answer your question?

    3Reply
  • Suzan Richardson
    Member since 2020 · 3 posts · 2 votes
    6y

    @Jonathan Taylor

    Thanks for being available!

    I found a 1987 trailer house on almost a acre of land. They are asking around $54,000, I offered a $40,000 cash offer. Was wondering if I should give up the cash on a older place. I can rent it for $700 month as is and have them fix what needs to be done and don’t charge a deposit! Bad idea or Ok?

    2Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Suzan Richardson I do not know your area but if you have run the numbers on this deal and believe what you are offering is a strong offer and it can cash flow based on actual comps you ran in your area, then I would move forward.

    1Reply
  • Suzan Richardson
    Member since 2020 · 3 posts · 2 votes
    6y

    Thank you for responding! I live in a small town in Southeast Texas. Was a little apprehensive of paying $40,000 cash for a older mobile home that the land needs a lot of cleaning up. When that is done and do some painting inside the Mobile Home and cleaning Also thought about resale it for $65,000.  We I have have to pay a lot of Taxes you think? 

    0Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Suzan Richardson As I am not an expert in MH financing or TX taxes, I suggest you contact a local who knows your market better than I. 

    1Reply
  • Macy Nguyen
    Member since 2020 · 6 posts · 1 vote
    6y

    @Jonathan Taylor

    Hello! And thank you for lending your hands on - that said... we are newbies to this investing world. We sold our home 2 months ago and was going to buy our dream home but thought to pause on that as we are in our mid 30s... and we think we want to switch our game plan. We are thinking of getting a couple duplex to start but we aren’t 100% sure how to go about? We have about $100k cash... 780 credit... umm... the duplex we’re thinking is $600k... any advice?

    1Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Macy Nguyen Sounds like you are in a good position to buy. What specifically are your questions? You have good credit and a good amount of liquidity. What is your plan? Buy as many doors as you can with the 100k? Will you be doing any work to the properties or do you want to buy turn key? Will you be occupying the duplex? 

    0Reply
  • Rachel H.
    San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
    6y
    Originally posted by @Suzan Richardson:

    Thank you for responding! I live in a small town in Southeast Texas. Was a little apprehensive of paying $40,000 cash for a older mobile home that the land needs a lot of cleaning up. When that is done and do some painting inside the Mobile Home and cleaning Also thought about resale it for $65,000.  We I have have to pay a lot of Taxes you think? 

    If that includes the land with the mobile home, you may want to look into it a little further. Figure out what similar mobile homes on land are worth and selling for in the area. As for financing, you may want to work with a lender that specializes in financing for manufactured homes. Most times, you can talk to your local mobile home dealership to see what referrals they have for lenders. Usually, they work with lenders regularly in order to sell the homes they have in their inventory to their customers. Hope that helps! 

    5Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Rachel H. Thanks for the input. 

    1Reply
  • Samuel Gates
    Rancho Cucamonga, CA · Member since 2019 · 16 posts · 2 votes
    6y

    @Jonathan Taylor

    I am in the Southern California area and I am looking into investing in Los Angeles or Illinois. I have an 810 credit score and want to shop around for the best rates but also do not want to have a number of hard inquiries on my credit. Would a broker be able to shop multiple rates available to me or would an online service be more appropriate?

    1Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Samuel Gates Yes, a broker's job is to know all pertinent programs on the market and to provide you with options to get you the best rates. How we operate is we don't run credit until we have a lender lined up, have done our due diligence to confirm all numbers work, and have addresses any potential issues up front. Once we have that done, we run credit upon submission. 

    2Reply
  • Samuel Gates
    Rancho Cucamonga, CA · Member since 2019 · 16 posts · 2 votes
    6y

    @Jonathan Taylor  Awesome! This is what I believed but, wanted to confirm. I have few more questions on that note.   

    1. I am working with a Real Estate Agent in Illinois and wanted to know if finding a Commercial Real Estate Broker would be crossing any lines. The Agent has a bank they work with and while the downpayment percentage is good they do not have the best rates.

    2. I want to do creative financing but wanted to know if any form of creative financing is looked down on by the buy/agent if a deal is already listed.

    Thanks,

    1Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Samuel Gates You have the right to shop around and are not obligated to use a recommendation from a RE Agent. If you the numbers dont quite fit, I encourage my clients to shop around as sometimes we cannot beat the rates but most of the time we can. DM me and I would be happy to answer any more questions. Creative financing is deal dependent, some sellers wont take FHA, some sellers are willing to do seller-carry, really depends.

    0Reply
  • Craig Anderson
    Investor · Member since 2020 · 201 posts · 92 votes
    6y

    I'm a new investor in SoCal, and I'm saving what I can to invest. However, can I get a 100% loan for an investment if I have a steady W2 job and good credit? Also, is there a cap on that type of loan? I would like to get a home below market value, and refi after a year with an increase in ARV. Would this be something that I talk to a smaller local bank rather than big corps?

    0Reply
  • Jonathan Taylor
    OP
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    6y

    @Craig Anderson 100% financing isn't a realistic expectation in SoCal. The HMLs I work with expect the borrower to bring cash to the table to reduce the risk. What do you mean 'Is there a cap for this type of loan?' Did you mean is there a limit to how much you can borrower based on your W-2 income? If so, you are limited by your Debt-to-Income ratio outlined in the conventional guidelines which is 43%. But to be direct, expecting 100% financing on your first property for an under market SFR in SoCal is next to impossible in this market. As far as who is better, local banks or big corps, again, it depends on what your are trying to accomplish. I have taken my clients to local banks when the numbers work and larger lending institutions when it is more beneficial for them. Hope that helps.

    0Reply
  • Melanie Lashus
    Rental Property Investor · Centreville, VA · Member since 2020 · 6 posts · 10 votes
    6y

    @Jonathan Taylor

    I’m very new to all this and am in the “educate thyself” phase. I currently own two properties.

    I appreciate your offer of information!

    What I *think* I understand:

    - there are MANY ways to finance deals.

    - small banks/etc can be more flexible in terms

    - there is a limit (10?) to the number of bank mortgages a person can have.

    What I’m confused about:

    So much of what I read/listen to is experienced investors (with way more than 10 properties) talking about buying properties with a variety of creative financing strategies) and then “Refinancing” the property into a “traditional” mortgage later on.

    So- what kinds of refi’s are these? Don’t they count against the 10(?) loans you can have?

    What am I missing? This is never explained in the podcasts or books...

    6Reply
  • Carol Birnberg
    Knoxville, TN · Member since 2016 · 78 posts · 3 votes
    6y

    @Jonathan Taylor DCSR?

    1Reply
  • Cheryl Moore
    New to Real Estate · Dayton, OH · Member since 2020 · 122 posts · 39 votes
    6y

    @Jonathan Taylor I am new to RE investing. I am reading Buy Rehab Rent Refinance Repeat . When you refinance to take you investment out of the property Do you then have a mortgage?

    1Reply
  • Kimberly Carver
    Member since 2020 · 119 posts · 56 votes
    6y

    @Jonathan Taylor

    How does unemployment effect mortgage eligibility?

    The root of the question- friend with husband who owns business that is still closed for COVID, collecting unemployment. Wife working w2. Pre approved based on last years tax returns for the business plus wife income. Will they be able to buy together or is being on unemployment and automatic no?

    (They might be able to swing it on just wife’s income and they have 25% down for rental.)

    0Reply
  • Wade Kulesa
    Member since 2020 · 22 posts · 82 votes
    6y

    @Jonathan Taylor

    Looking at a cabin on a popular lake in South Dakota. They are asking $130K, last sold in 2016 for $99k. Big issue is, the cabin sits on land leased from a local Native American tribe. Currently 3 yrs. in on a 15 yr. lease. Wanting to AirBnB it, but having trouble getting financing. Been told it will not qualify for traditional mortgage financing. Appreciate any help. Thoughts?

    1Reply
  • Maria Membreno
    New to Real Estate · Inland Empire, CA · Member since 2020 · 19 posts · 8 votes
    6y

    @Jonathan Taylor

    Hello Jonathan. I'm so very new to the investing world. I have a home with some equity. I want to but my first investment in IL. The home is selling for 27k. Do you recommend getting a home loan or getting a HELOC? Thank you in advance.

    0Reply
  • Anais Hawkins
    Rental Property Investor · Charlotte, NC · Member since 2020 · 21 posts · 5 votes
    6y

    @Jonathan Taylor

    Hello Jonathan this is amazing thank you so much!

    My husband and I want to buy our first investment in January (after taxes)

    We are furloughed thanks to covid but we don't want to give up. We now only have 10k in 401k to offer and about 15k in collateral but both of us have very high credit scores. With our circumstances is it possible for us to individually claim a house under FHA so we can get two homes for low rates? We want one to be a flip so we can make our second purchase a buy and hold MFH what would you suggest to get this outcome? We are currently looking into a mortgage broker.

    0Reply
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