Where should I go from here?

12 Replies

Hey everybody! I purchased a duplex in Hillsboro, Oregon in March 2016. It’s got close to $90k equity. I also opened up a sub shop in September of 2016. All I’ve heard from lenders is that to be qualified for another purchase, they need 2 years tax returns from the business. My goal is to purchase another property ASAP. Side note, my fiancée just purchased a duplex a mile away from mine and I will be renting out my owner occupied side to live in hers. Is there any thoughts or suggestions on how I can get another multi family before another year passes? Cheers!

Can't you get a HELOC (Home Equity Line of Credit)? To get a business credit I'm pretty sure you do need 2 years of tax returns. But personally, you can apply, and i don't think a HELOC has a waiting period, you will still need to have a proof of income.

@Kyle Ritt I'm sure you can partner with your fiancee to get financing. You can also partner with others ... and might require some legal structure around it. It is a little more complicated ... but can be done. 

Henri Meli

    Yes I believe I can get a HELOC, I will ask a local bank and see if I can get a good rate on one. I also don’t think that my fiancée can help me since she just got an owner occupied loan.

    Look for other lenders, large, small medium. Local banks, and credit unions, etc. You each have one loan, and your not married. So not even close to 10 mortgages. Ask about both typical home mortgages, and HELOC. Another option is to create an LLC and partner up with your fiancee and think long term. Then notify your lenders that you are going to transfer title to your LLC. Have an attorney draft up the incorporation papers and partnership agreement, Talk to your CPA about tax issues and best structure for your business plan, and have attorney transfer title of properties to LLC and put both investment properties in the LLC. You can then show experience in the REI industry since you both have investment properties, and have existing mature assets in the LLC. Banks then could see you as a more secure option and give you business line of credit. and you have now executed a viable business plan that banks can see.

    Brian Bradley, Attorney in California (#266693), Michigan (#P77453) and Washington (#50116)

    Call Vince Kingston at eagle home mortgage in tigard. He house hacks himself, very creative. I just used him to do a cash out refi on a rental I bought in 2015. Had 150k in equity, we took out 70k and still cash flow.

    Good luck, equity is a great problem to have!

    The cash out refi sounds like a great plan, I think I may still need 1 more year on my tax returns to show the income for it, I will give Vince a call for sure. As for creating an LLC, I don’t think we will do that quite yet because We want to get a couple more house hack multi families as owner occupied for the better rate. I am thinking once we have 2 more properties and a single family then we can start putting those into LLCs

    Congrats @Kyle Ritt ! Go for the HELOC if you plan to acquire you're next solo. The reason I like the HELOC over the cash-out refinance is the HELOC pretty much acts like a credit card - you only pay (and accumulate interest) on your current balance. So if it takes you 3-6 months to find another deal, you aren't paying monthly for it. With a cash-out refinance, you're paying on the full balance of the loan the day it closes. BUT, consider the terms for each.

    If you're looking for a partnership, start talking to all of your friends and family. You broker the deal by putting it together, they sign for the loan, you provide the down payment...split everything 50/50 (or any version of this scenario). 

    Jay Helms

    @Jay Helms thank you for that great info! I am leaning towards a HELOC, I will try to get one even though I don’t have 2 full yrs tax returns from my business. The HELOC worries me a little bit because of the adjustable rate, but I like how I can control how much I take out. So if I don’t need 60k for a 5% down payment on another owner-occupied then I can only take out for example 20k.

    Are there any suggestions as to getting an umbrella policy for my first duplex, or putting that into an LLC? Also with the new tax law next year, if my property is in an LLC, does anybody know if I can get a better tax break on that rental income? Cheers!

    Howdy @Kyle Ritt

    An umbrella policy should be good enough to cover you (your properties) up to $1M. If your are wanting liability protection. It serves the same purpose as protection using an LLC. Once your property values go over that then you can think about LLC's. Of course you will get any number of opinions on this. Just compare costs and the administrative differences. Then make your own decision.

    Thank you John! That is great feedback

    @Kyle Ritt - correct on the HELOC. In regards to the LLC or umbrella...talk with your legal counsel. I have held both and if I can hold a property in a LLC I will but if I can't, an umbrella is certainly worth the money. In Florida (not sure about where you're investing), the property has to be insured in which the property is titled to. By that I mean, I couldn't get insurance on the property under my LLC name, if the property was titled to me personally and vice versa. When shopping around for umbrella, grab tiered quotes. Don't just go with $1MM, check out $2MM, etc. You might find the extra coverage isn't much more.

    Jay Helms

    Thank you Jay!

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