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.
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...
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@James Hamling Thank you very much for this kind request. I appreciate you taking the time to write this post and show your gratitude. Up Votes are always appreciated!
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Gregory Brown No, a HELOC is basically a loan product that allows you to tap into the equity of your home without affecting your current first position mortgage. It works Similar to how a credit card works as in you have a certain amount of credit you CAN use and you pay interest on the amount of credit you use. HELOC's terms are usually shorter, ex. pay back the balance in 5 yrs, and rates can be 3-5%.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Anthony Hofgren Do you and your friend own your primary? Is the vacation home near vacation destinations and or family members? There are certain boxes a vacation home needs to fit into and I'd need more info to say for sure.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Eric Meyer Rates for OCC are in the low 3s/mid 2s for 30 yr/15yr respectfully so a cash out refi may be beneficial to you and allow you to draw on the equity and do your repairs. DM me and I can help you further.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Cliff Tomlin do you mean can YOU as an owner of a property who is currently IN foreclosure or are you asking how to BUY foreclosures?
If you are in FC, you cannot buy as no lender will lend if any property you own are in a lis pendis/foreclosure proceedings. As for purchasing, if you can get an REO list or a wholesaler that is the best way to access current FCs without knowing more about your situation.
Thanks for replying! Both of us have our own primary residence and we both have families. We were thinking of getting a vacation home in the Orlando area we could use for family vacations together and/or independently. We would obviously rent it out when we are not using it.
My mom and I are starting an investment company. We should have around $100,000 in cash to start, but not sure how financing happens while under a company name. We are wanting to start in multi-family.
Google hasn’t been the best with answers. What can your experience share?
New to Real Estate · West Covina, CA · Member since 2020 · 23 posts · 1 vote
6y
@Jonathan Taylor Hi, Jonathan! Thanks for this! I am a newbie investor looking for a duplex. I plan to live in one and rent the other. My price range is 400-450, fixer upper. Thinking of loaning 500-525k with rehab. I was wondering, if the house doesn't get approved by a conventional loan. What are the requirements for an FHA 203k rehab loan? Like down payment etc. will I get a higher rate because of the loan? Also are their other options for me besides getting a private money lender? Any other government assistance loans? I'm a first time homebuyer, 770 credit score. Thinking of putting down either 10-20% down payment. Thanks so much!
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Jason Henlon Rates and terms vary by lender but basics are:
DSCR 1.1-1.33+, rates in high 5s to 6s, 30 yr fixed. For purchases expect 25%-30% down, and refis are higher rates but cash out limited to around 70% (75% on well qualified investors). Was there more to this question or were you looking for baseline options?
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Tiffany J. what are you buying? For a primary residence, you will have to pay PMI if you buy with less than 20% down. As far as what is better, this question is best answered by a deal to analyze because it depends on what your goals are as an investor.
Think of it this way, the APR or interest rate of the loan is relative to the amount of RISK the lender is taking on. The more skin in the game (cash you bring to the table) the less risk to the lender so the rate is likely to be lower.
Rate is relative to risk. Trademark pending on this statement ;-)
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Miho Y. I am not a tax expert so best to consult with a CPA. From my understanding, you do lose some tax benefits with the property but if you have a free and clear property, that increases your cash flow substantially. Run the numbers and compare with your CPA.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Richard Prillerman From what you sent, doing a cash out refi on your 200k in equity would give you the cash to buy more properties but I would need to see the specific numbers on the properties you are referencing. Sent you a DM for info to best guide you in.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Debra Irvine The lending institutions I have cap the amounts of rehab on the lower priced properties (less than 100k) to no more than the purchase price. so a 60k property do not get more than 60k in rehab. This isn't an industry-wide standard, just the lenders I work with so it could change depending on who lends on this. Its also riskier for the lender to give more on the reno than the property is worth As-is.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
5y
@Steve Morris The reality of this for a newbie is highly unlikely. Experience investors can achieve this by leveraging but I have not met anyone who has successfully accomplished this when starting out.
Basics are:you borrower someone's money guaranteeing them a certain return once you refi (ex 10% return),. Buy a property with this money, renovate it, refinance it based on a higher appraisal, repay said lender and now you own a property that cash flows based on the refi with nothing of your own into the deal. In reality, its unrealisitc because who would trust a newbie to know how to accurately run numbers/account for the uncertainties/manage a reno and come out ahead. If I am wrong, I am happy to hear success stories.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
5y
@Rachel Black You can try NACA.com for an owner occupied first property or conventional 5% down, but you would need cash to close and renovate conventionally. Its very hard to actually achieve 'no money down' properties but I don't know your market.
@Jonathan Taylor I don't know the route I should take, should I open another llc to buy my first RE property through? What would be different going that way vs. Through myself and not a legal entity? I will own quite a few units one day and i want to start off on the right foot. I live in southern NJ not sure if that matters.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
5y
@Simon Obas Thats the struggle. HMLs are 9-15% with 2-5 pts. There are fix and flip lenders who are lower but still in the 8-10% range that focus on F/F. This is the option I send all my clients who are flippers as they can get better rates and the lender knows how to analyze flips. but 75-85% is what I am seeing for the purchase but 100% of the reno no more than 70% ARV
Good evening Jonathan. I’m new to real estate investing but I want to be a bit aggressive. I’m looking at a few 20 unit properties that are around 1-1.2. What would you consider a great price point to get into real estate? Am I biting off too much for my potential first purchase? Thank you for all of the awesome podcast episodes. I’m working my way through all of them and they’re full of insight and motivation.
Hey Jonathan! I’m an investor in Philly with 2 rental properties (3 units). I have a mortgage through Wells Fargo for one of the properties and I’m going through them to refinance that property. The property appraised for 150k (25k more than what I paid for it) I paid the refinancing fees and I paid an appraiser all totaling about $800. Wells Fargo called me and told me that they can’t refinance my property because since I live at home and don’t own the property I live in or pay rent they can’t count my rental income as income. (Both properties gross 34k yearly rent and cash flow positive). They said my debt to income ratio is too high. I feel like me living at home and not paying rent should help me in this situation, not hurt me. Is there anything I can do about this or am I out of the $800 I paid for all of this? Thanks in advance!
Hi Jonathan, I recently bought my 5th rental property (1st one bought with primary loan 5 years ago, rest bought as strict investment loans) with a 15% down primary residence conventional loan and moved in. I would like to do it again when my one year of required occupancy is up, any rules against doing so if I'm purchasing another property in the same area? I am wanting to purchase a duplex 2 blocks away from the current one I just bought in one year and I am not sure if the bank will allow me to as an owner occupied loan.
Greensburg, KS · Member since 2019 · 24 posts · 1 vote
5y
@Jonathan Taylor
Thanks again for taking the time to answer questions. Awesome information you’ve given me. We have never even spoke to anyone regarding a seller finance. Being short capital to start with I was thinking this my be the time to go for it. Still need to see what the seller is needing.
Retired? Want passive income?
Or need cash for something else right now?
Hmm maybe is afraid with everything going on trying to sell before anything bad effects the value?
Thanks for your knowledge and information. Was looking at one property and saw 4 more same owner, figured go for all!!! Lol thanks again.