Moving beyond 4 mortgages from 6200 miles away (with my Brother)

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Moving beyond 4 mortgages from 6200 miles away (with my Brother)

Matthew PinkstonPro Member
Rental Property Investor · Yokohama Shi, Kanagawa-ken · Member since 2015 · 81 posts · 30 votes

Hello all! I'm looking for some feedback regarding my thoughts on how to acquire my next buy and hold property. 

I currently own 4 duplexes in Ames, IA, and after many years of expensive lessons, have finally turned them into solid income producing properties with growing equity. 

I've also moved to Japan.. So, this creates a number of hurdles to acquiring my next state-side property.

I'm willing to keep searching for a lender that will work with me. However, after talking to my brother, he expressed interest in getting involved. He has a decent income and zero debt. So, we were considering getting the loan in his name, and I'd take care of everything else (down payment, setting up management, etc.) We're going to start shopping for lenders tomorrow. 

Before we jump into this, has anyone else overcome the 4 mortgage/non w-2 income loan problem this way? And what's a good way to calculate our fair shares of the deal? 

Any input would be appreciated. 

Thanks!

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Daniel Ryu
Investor · Suwanee, GA · Member since 2014 · 579 posts · 347 votes
10y

@Shaun Weekes

My real estate investing partner and I both live in Korea. My partner applied for and received a conventional loan though he and I both are working for a foreign company.

p356 of the April 2014 Fannie Mae Selling Guide states

Foreign income can be used to qualify under certain conditions - 2 years of income taxes filed (the LO wanted 3 years) and some income verification statements.

It wasn't easy. We went through about 4 lenders. The mortgage broker we ended up using was someone he knew through an aunt. Not a close relationship but it wasn't a cold call either.

It took about two months to process. We had to put together a very sharp presentation. The presentation included all the necessary documents and guided the LO and underwriter through the paperwork, including explaining the Foreign Earned Income Exclusion - form 2555. It probably helped that he also had some assets in the US and had been at his current job for several years.

Later, I heard another person in the meetup I help organize - The Seoul REI Meetup - also applied for and received a loan. He had also been living in Korea for a long time and had a good job at a university (but it was foreign income).

My investing partner applied for and got approval, by the way, but he didn't end up using the loan because we ended up buying something all cash with some other partners instead - a short sale. 

So perhaps there might have been more problems down the line. 

Anyways.. just wanted to add that to the conversation ^^

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    Well Fannie no longer has a limit on 4 mortgages..they upped it to 10 a few years ago. As for the non w2...if you have 2 years of self employment income, they should count the lowest of those two years as your income I believe. Now being overseas...that part I am not sure about. @Upen Patel is a mortgage broker, and should have a much better handle on the lending side though.

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  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    10y
    @Matthew Pinkston You can get up to 10 conventional loans.

    With regards to your situation and you partnering with your brother, here are my quick comments:
    * You are now considered an Expat, so you don't have access to the conventional loans. If you are getting a loan, then you only option will be lenders how can do residential portfolio loans. These loans will typically be 5-7 ARMs and will carry a higher interest rate.
    * If the loan is done in your brother's name, but he does not have the cash, then he will have to show where he is getting the funds for the down payment and closing cost. This is create an issue of un-sourced funds which will not pass underwriting. You can possibly gift the funds to him, but I am not sure if this will create a tax issue. Besides this setup will not give you any equity stake in the purchase, as you will not be on the loan or on any other external agreement.

    My recommendation would be to speak with a few lender to understand your options. Make sure you put everything on the table. In mortgage lending you are going to a disservice to yourself, if you don't disclose everything to the lender. A minor change in circumstance can complete derail a loan.

    Good luck.
    [email protected]571-200-6180
    0Reply
  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y
    Originally posted by @Matthew Pinkston:

    Hello all! I'm looking for some feedback regarding my thoughts on how to acquire my next buy and hold property. 

    I currently own 4 duplexes in Ames, IA, and after many years of expensive lessons, have finally turned them into solid income producing properties with growing equity. 

    I've also moved to Japan.. So, this creates a number of hurdles to acquiring my next state-side property.

    I'm willing to keep searching for a lender that will work with me. However, after talking to my brother, he expressed interest in getting involved. He has a decent income and zero debt. So, we were considering getting the loan in his name, and I'd take care of everything else (down payment, setting up management, etc.) We're going to start shopping for lenders tomorrow. 

    Before we jump into this, has anyone else overcome the 4 mortgage/non w-2 income loan problem this way? And what's a good way to calculate our fair shares of the deal? 

    Any input would be appreciated. 

    Thanks!

     If you're a US citizen still claiming income on us tax returns and both you and your brother are on the loan.  I don't see why you can't both purchase an investment home together.

    0Reply
  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    10y
    @Shaun Weekes:

    All US citizens are required to fill US Tax Return irrespective of where they live.

    But for the purposes of a mortgage, if you are a US Citizen/Resident Alien living outside the US, then you considered an Expat. As an Expat there borrowers are not eligible for conventional loans.

    [email protected]571-200-6180
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  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y
    Originally posted by @Upen Patel:
    @Shaun Weekes:

    All US citizens are required to fill US Tax Return irrespective of where they live.

    But for the purposes of a mortgage, if you are a US Citizen/Resident Alien living outside the US, then you considered an Expat. As an Expat there borrowers are not eligible for conventional loans.

     I have completed many loans for customers working for Microsoft in China and D.O.D. in Japan and I've never had that issue.  I respect your views but I respectfully disagree on this one.

    0Reply
  • Matthew PinkstonPro Member
    OP
    Rental Property Investor · Yokohama Shi, Kanagawa-ken · Member since 2015 · 81 posts · 30 votes
    10y

    Thanks @Russell Brazil and @Upen Patel! I wasn't aware that Fannie would go to 10 mortgages. I know I can't qualify by myself as an expat, but I also haven't considered trying to co-sign with my brother. I assumed that might not be allowed. @Shaun Weekes, is there anything special I need to prepare, or a special type of lender I need to approach, or should we just walk in to a bank, explain the situation, and see what happens?

    That would definitely be best for both of us I think, but even if the loan is only in his name, we could at least get started. I'm trying to get this done for his sake as well and I know we can make a mutually beneficial plan. (Though don't get me wrong, I'd still like to explore options to build on my own.)

    My final back-up strategy is just to go the Dave Ramsey route by paying off one of my mortgages completely while in Japan, return in 2020, and hit things hard then. 

    Thanks for the info!

    0Reply
  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y

    Best thing is to be honest.

    Are you working and claiming that income on US tax returns?

    0Reply
  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    10y
    @Shaun Weekes There are two types of US citizens/Resident Aliens working/living abroad.
    1) Working for the US Govt or US Business, getting paid in US. They are deployed aboard or are going through company rotation. These folks are NOT Expats. They qualify for conventional loans.
    2) Folks who live and ear abroad. They are getting a pay stub in a foreign country. Does not matter if they work for a US company in that country. These folk ARE Expats, and don't qualify for conventional loans.

    At least this is my understanding. Now that you have put a doubt in my mind, I will have to go research this and speak with my underwriters and investors.

    Happy Holidays.
    [email protected]571-200-6180
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  • Matthew PinkstonPro Member
    OP
    Rental Property Investor · Yokohama Shi, Kanagawa-ken · Member since 2015 · 81 posts · 30 votes
    10y

    Hi Shaun, I definitely want to go by the books!

    And I (technically my CPA) have filed all foreign income on my tax returns.

    1Reply
  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y
    Originally posted by @Upen Patel:
    @Shaun Weekes There are two types of US citizens/Resident Aliens working/living abroad.
    1) Working for the US Govt or US Business, getting paid in US. They are deployed aboard or are going through company rotation. These folks are NOT Expats. They qualify for conventional loans.
    2) Folks who live and ear abroad. They are getting a pay stub in a foreign country. Does not matter if they work for a US company in that country. These folk ARE Expats, and don't qualify for conventional loans.

    At least this is my understanding. Now that you have put a doubt in my mind, I will have to go research this and speak with my underwriters and investors.

    Happy Holidays.

     This well could be correct.  Number 2 hasn't come up with me personally.

    Ill find out as well. 

    Merry Christmas, Happy Holidays and happy new year.

    0Reply
  • Erik Gray
    Lender · Yakima, WA · Member since 2015 · 21 posts · 5 votes
    10y

    Gift funds are not allowed on conforming loans on investment properties.  If the funds are in your brother's account for more than 60 days then Fannie Mae and Freddie Mac don't care.  They are now sourced and seasoned.

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  • Matthew PinkstonPro Member
    OP
    Rental Property Investor · Yokohama Shi, Kanagawa-ken · Member since 2015 · 81 posts · 30 votes
    10y

    @Shaun Weekes, @Upen Patel Please let me know what you find out! I'd love to be able to approach the bank and describe my situation with a basic understanding of what's even possible.

    @Erik Gray, thanks for the info! Once I understand my options with the bank, understanding my timing will definitely be a big part of this. I may have to wait until next June when I'm back in the US to make any big decisions anyway, but I'll know to have the funds in place well beforehand. 

    0Reply
  • Daniel Ryu
    Investor · Suwanee, GA · Member since 2014 · 579 posts · 347 votes
    10y

    @Shaun Weekes

    My real estate investing partner and I both live in Korea. My partner applied for and received a conventional loan though he and I both are working for a foreign company.

    p356 of the April 2014 Fannie Mae Selling Guide states

    Foreign income can be used to qualify under certain conditions - 2 years of income taxes filed (the LO wanted 3 years) and some income verification statements.

    It wasn't easy. We went through about 4 lenders. The mortgage broker we ended up using was someone he knew through an aunt. Not a close relationship but it wasn't a cold call either.

    It took about two months to process. We had to put together a very sharp presentation. The presentation included all the necessary documents and guided the LO and underwriter through the paperwork, including explaining the Foreign Earned Income Exclusion - form 2555. It probably helped that he also had some assets in the US and had been at his current job for several years.

    Later, I heard another person in the meetup I help organize - The Seoul REI Meetup - also applied for and received a loan. He had also been living in Korea for a long time and had a good job at a university (but it was foreign income).

    My investing partner applied for and got approval, by the way, but he didn't end up using the loan because we ended up buying something all cash with some other partners instead - a short sale. 

    So perhaps there might have been more problems down the line. 

    Anyways.. just wanted to add that to the conversation ^^

    3Reply
  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    10y
    [email protected]571-200-6180
    1Reply
  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y
    Originally posted by @Daniel Ryu:

    @Shaun Weekes

    @Upen Patel

    My real estate investing partner and I both live in Korea. My partner applied for and received a conventional loan though he and I both are working for a foreign company.

    p356 of the April 2014 Fannie Mae Selling Guide states

    Foreign income can be used to qualify under certain conditions - 2 years of income taxes filed (the LO wanted 3 years) and some income verification statements.

    It wasn't easy. We went through about 4 lenders. The mortgage broker we ended up using was someone he knew through an aunt. Not a close relationship but it wasn't a cold call either.

    It took about two months to process. We had to put together a very sharp presentation. The presentation included all the necessary documents and guided the LO and underwriter through the paperwork, including explaining the Foreign Earned Income Exclusion - form 2555. It probably helped that he also had some assets in the US and had been at his current job for several years.

    Later, I heard another person in the meetup I help organize - The Seoul REI Meetup - also applied for and received a loan. He had also been living in Korea for a long time and had a good job at a university (but it was foreign income).

    My investing partner applied for and got approval, by the way, but he didn't end up using the loan because we ended up buying something all cash with some other partners instead - a short sale. 

    So perhaps there might have been more problems down the line. 

    Anyways.. just wanted to add that to the conversation ^^

     Again I have a tremendous amount of respect for other but the above statement confirms what I already knew.

    I just didn't want to sound like I was attacking anyone.  

    Thank you for the response.

    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    You could also look for local portfolio lenders who will not go by conventional fannie guidelines. You may have to get ARMs, but they are an option. 

    You should be able to find multiple lenders who will go up to 10 mortgages with conventional. 

    if you really want to maximize things and you come up with a good agreement with your brother you could each buy 10 properties individually to maximize conventional loan options. 

    0Reply
  • Dmitri L.
    Investor · DFW, TX · Member since 2013 · 319 posts · 101 votes
    10y

    The Fannie and Freddie selling guides are great resources to find out the latest on this type of question directly from the source. At 1000+ pages they can be daunting at first, but they are decently well-organized, and once you find the right section, relatively readable as well.

    As a USA citizen living abroad, you definitely can get loans in the US, and you definitely can use foreign sourced income to qualify. Obviously if those salary/tax statements are in a language other than English, prepare to jump through some hoops like certified translation (tip - do it online!), but it's not a huge deal at all once you find a good lender who will be flexible enough to work with you on this.

    I recommend going to a direct lender, and avoiding mortgage brokers, if your situation is a little bit complex. Less hops in the broken telephone, so to speak

    @Matthew Pinkston

    I'll email you the contacts for my lender out of UT. He helped me with a property in TX and I'm pretty sure they work in most states. Good luck!

    Cheers

    Dmitri

    0Reply
  • Jeff Sprunger
    Lockport , NY · Member since 2014 · 265 posts · 124 votes
    10y
    Hey Matthew, couldn't send you a PM, so I'm posting here. Just wanted to say "welcome to Japan"! I'm in Fussa.
    0Reply
  • Dmitri L.
    Investor · DFW, TX · Member since 2013 · 319 posts · 101 votes
    10y
    Originally posted by @Jeff Sprunger:

    Hey Matthew, couldn't send you a PM, so I'm posting here. Just wanted to say "welcome to Japan"! I'm in Fussa.

     Jeff,

    If you can make it to Tokyo on a weekday night, we have a monthly meetup in Roppongi going. Looking to grow this bigger and better in 2016!

    https://www.biggerpockets.com/forums/76/topics/204...

    @Pyrrha Rivers also has a meetup going for the Yokohama/Yokosuka crew

    Cheers

    Dmitri

    0Reply
  • Pyrrha Rivers
    Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
    10y

    @Dmitri L.Thanks for the mention.

    @Jeff SprungerGlad to know you're in country.

    @Matthew PinkstonHave you reached out to the banker contact I shared at our last meeting? I haven't worked with him but when we spoke he sounded quite enthusiastic about working connecting and working with investors abroad.

    Best wishes, keep us posted and I agree that you should make it possible for your brother to enter the investing arena even if it is not completely financially lucrative for you at this time. Making an investment in his education and growth will pay tremendous dividends intangible, perhaps at the beginning but very real. 

    It' is not all about the bottom line some times.

    Happy, Healthy and Prosperous 2016 to all! 

    0Reply
  • Matthew PinkstonPro Member
    OP
    Rental Property Investor · Yokohama Shi, Kanagawa-ken · Member since 2015 · 81 posts · 30 votes
    10y

    I'm extremely happy to see that there are so many options! I honestly thought that this might be one of the harder steps for a long-distance investor with foreign income. 

    Thanks, @Jeff Sprunger! I'm definitely having a blast so far, and hope to stay for awhile. As Dmitri mentioned, if you have a chance to stop by Roppongi for one of our meetings, I'd love to hang out and meet more members.

    @Dmitri L.; Thanks for the referral! Going from "is it possible" to multiple options is quite the motivator. I'd like to ask more about those remote deals you've done as well at the next meeting! Also, I think I may just have to read those Fanny/Freddie selling guides. May be good reading material for the trip back to Japan.

    @Pyrrha Rivers, I haven't contacted him yet, but I've only recently gotten back into a position to start looking for my next property (also, I gotta fess up. I forgot I had that!). I need a personal organization coach as well it seems.. For some reason I had it in my mind that foreign income would automatically make this really hard, but I guess all I needed was to ask! I hope you have an awesome new year, and I hope to see you in 2016!

    I still plan on coaxing my brother to think more seriously about his long-term financial health, but part of my own goals is to be able to provide for my whole family (including him) even if I have to do it myself. 

    Now, to find a deal!

    0Reply
  • Pyrrha Rivers
    Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
    10y

    LOL @Matthew Pinkstonmy question was meant to be a gentle reminder that you have that and if you have misplaced it I would be happy to provide it again. And on that topic, I don't know if this is something everybody know and it's just new to me but I just installed an App on my phone called CamCard. I have been using Cam Scanner to take pictures of documents and produce very good PDF files, so when I found myself with a bunch of business cards from my trip home this summer I thought there had to be an app for that.

    If you don't have something that scan business cards and puts the phone number in your contacts, this is pretty useful.

    I realize your intention is to gently guide your brother to the light :), but if he is not illuminated you will not leave him in darkness. Part of the responsibility that comes with the gift of knowing about RE is to help our loved ones. I see where you're going and I commend you on the path.

    Can't wait to hear about your deal and which of the many financing options you exercise.

    See you in 2016! @Dmitri L., and hope you can make it to our joint meeting in Yokohama @Jeff Sprunger.

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