Advice on No Doc/No income rental loans.....

[Elina Aske]

Hi community, 

I have a question re: the best way to tap into my equity or find cash for 20% down payment, without the requirement of proof of income or tax return. A little about my RE background.... I purchased my first home in D.C. back in 2013 as a primary. I have since done a full demo and renovation, converting it into a rental, two 3BR units and have some cashflow, but not long enough to qualify for the traditional W2/income loans. I have spoken to DSCR lenders who can possibly help me finance the home but still need help with the 20% down payment.

Tips: I have about 200k+ in equity. Also, I have good credit.

Goal: To get some money for 20-25% down payment for a rental investment using home equity or other ways, which is where I need help. I prefer lenders or options without interest rates that are overwhelming or too high. 

I am still learning so please be kind and/or resourceful with your comments.  Thank you so much. 

[Nick Belsky]

@Elina Aske

Honestly, if the interest rate is making or breaking your deals, then you have a losing strategy.  The rates that we see now are not high in any regards compared to the rates that investors have been very profitable with for several decades.  Rates are a factor, yes, but by no means the most important.  There are so many other variables to consider that far outweigh the rate.  Either you cash flow or you don't, the numbers work or they don't.  If rate is the only cause you can find, then it's not a good deal to begin with.

With $200k in equity and 20% down, you are looking to purchase a $1MM home? DSCR loans are a great way to purchase investment properties. Cash out pricing is likely between 5.50-7.50% right now, depending on a few of your borrower characteristics (credit mainly). $1MM rentals that cash flow can be tricky to make numbers work. People do it all the time, but I see most rentals in the $150-500k range where numbers work easily at 80LTV. You could almost buy two properties with $200k, if not 3 that may cash flow together better than one $1MM one.

Cheers!

[Jack Tulloch]

Hey @Elina Aske,

I agree with Nick here. The rising interest rates have certainly made things tricky, but positive cash flow is still rather easily attainable with the right property. DSCR loans are definitely the way to go in this situation leveraging a cash out refi. Big question I have is, how long has this property been cash flowing? That can impact the loan amount you can receive from a private lender. Feel free to connect with me!

[Elina Aske]

Quote from @Nick Belsky:

@Elina Aske

Honestly, if the interest rate is making or breaking your deals, then you have a losing strategy.  The rates that we see now are not high in any regards compared to the rates that investors have been very profitable with for several decades.  Rates are a factor, yes, but by no means the most important.  There are so many other variables to consider that far outweigh the rate.  Either you cash flow or you don't, the numbers work or they don't.  If rate is the only cause you can find, then it's not a good deal to begin with.

With $200k in equity and 20% down, you are looking to purchase a $1MM home? DSCR loans are a great way to purchase investment properties. Cash out pricing is likely between 5.50-7.50% right now, depending on a few of your borrower characteristics (credit mainly). $1MM rentals that cash flow can be tricky to make numbers work. People do it all the time, but I see most rentals in the $150-500k range where numbers work easily at 80LTV. You could almost buy two properties with $200k, if not 3 that may cash flow together better than one $1MM one.

Cheers!

Thank you, Nick! What you're saying about choosing homes in mid range prices absolutely makes sense. I am trying to figure out the best type of loans for accessing my equity with no income verification, and possibly less risk on that property. I am mostly needing to access it simply for the purpose of 20% down payment needed for my next investment. The properties I'm interested in cost between 300-450k, and are estimated to bring in 4k in cash flow if purchased. Currently my rental property which has 460k loan on it brings in 7,600/mo in cash flow, and mortgage is around $2600/mo. I like the cash flow on it. I'm only dumping all the numbers on here because one might see the smartest way, financing wise, to go about acquiring 2nd and 3rd property in the price range mentioned, while maximizing cashflow. I have considered selling the property to reinvest it into more properties, but I' feel like it's a good cash cow.  

[Brad S.]

Quote from @Elina Aske:

Thank you, Nick! What you're saying about choosing homes in mid range prices absolutely makes sense. I am trying to figure out the best type of loans for accessing my equity with no income verification, and possibly less risk on that property. I am mostly needing to access it simply for the purpose of 20% down payment needed for my next investment. The properties I'm interested in cost between 300-450k, and are estimated to bring in 4k in cash flow if purchased. Currently my rental property which has 460k loan on it brings in 7,600/mo in cash flow, and mortgage is around $2600/mo. I like the cash flow on it. I'm only dumping all the numbers on here because one might see the smartest way, financing wise, to go about acquiring 2nd and 3rd property in the price range mentioned, while maximizing cashflow. I have considered selling the property to reinvest it into more properties, but I' feel like it's a good cash cow.  

*********************************

First of all Congratulations on your current rental, those are great #'s, especially on just 1 property! I realize you bought it in 2013, but even so, we don't see anything close to those #'s in decent areas near me. And, I'm curious as to your potential deals (300-450k @ 4k/mth cf). Are those properties in good B or better areas or are they multi-families. ...just curious

Anyway, since you have converted your primary into a rental, do you own a new primary home? Is there equity in that? Or do you have only the $200k equity in your rental? 

Either way, I'd say that a HELOC sounds like the way to go. I would first get one on your primary (if you have one and have equity). For that route, I just heard that there are no-income HELOC's available for owner occupied homes, up to $250k (up to 90% ltv I think). But, I am not sure which banks/lenders do them in your area. You can also see if there are any no-income HELOC's available for non-owner occ. A little harder to find, but might be possible.

Otherwise (if you have no primary or HELOCs available), you would need to do a cashout refi (dscr) on your rental. I'm getting quoted a little over 5% on one of mine right now, which isn't too bad. Just work out the #'s based on both your current rental and your proposed rental, to average out the expenses and cashflow. It would probably be worth it with the #'s you presented.

[Elina Aske]

Quote from @Brad S.:

Quote from @Elina Aske:

Thank you, Nick! What you're saying about choosing homes in mid range prices absolutely makes sense. I am trying to figure out the best type of loans for accessing my equity with no income verification, and possibly less risk on that property. I am mostly needing to access it simply for the purpose of 20% down payment needed for my next investment. The properties I'm interested in cost between 300-450k, and are estimated to bring in 4k in cash flow if purchased. Currently my rental property which has 460k loan on it brings in 7,600/mo in cash flow, and mortgage is around $2600/mo. I like the cash flow on it. I'm only dumping all the numbers on here because one might see the smartest way, financing wise, to go about acquiring 2nd and 3rd property in the price range mentioned, while maximizing cashflow. I have considered selling the property to reinvest it into more properties, but I' feel like it's a good cash cow.  

*********************************

First of all Congratulations on your current rental, those are great #'s, especially on just 1 property! I realize you bought it in 2013, but even so, we don't see anything close to those #'s in decent areas near me. And, I'm curious as to your potential deals (300-450k @ 4k/mth cf). Are those properties in good B or better areas or are they multi-families. ...just curious

Anyway, since you have converted your primary into a rental, do you own a new primary home? Is there equity in that? Or do you have only the $200k equity in your rental? 

Either way, I'd say that a HELOC sounds like the way to go. I would first get one on your primary (if you have one and have equity). For that route, I just heard that there are no-income HELOC's available for owner occupied homes, up to $250k (up to 90% ltv I think). But, I am not sure which banks/lenders do them in your area. You can also see if there are any no-income HELOC's available for non-owner occ. A little harder to find, but might be possible.

Otherwise (if you have no primary or HELOCs available), you would need to do a cashout refi (dscr) on your rental. I'm getting quoted a little over 5% on one of mine right now, which isn't too bad. Just work out the #'s based on both your current rental and your proposed rental, to average out the expenses and cashflow. It would probably be worth it with the #'s you presented.

Hi Brad, thank you! My potential deals are in a different area, decent area for rentals in Bowie MD, which I've noticed prices going up. The purchase prices are now a little too high for me in DC, where my current property is located, so I've been looking elsewhere like in MD. The no-income HELOC sounds good but I don't own a primary:-(

5% is not too bad. I am getting quoted higher than 6% for DSCR (750 credit score), but I also haven't shopped around much. Ideally, I prefer to do a separate DSCR loan for the new property but due to the lack of cash for a down payment, I may have to trade my low interest mortgage (3% FHA) for a cash out refi. I'm not too sure about giving up my 3% int. mortgage for a 7%, but if it's the only way to scale, I'm having to consider it. You're right, the numbers would need to balance out and make sense to make a move like this one. Happy to hear more tips if you have any, and glad to share any info that could be useful.

[Elina Aske]

Quote from @Jack Tulloch:

Hey @Elina Aske,

I agree with Nick here. The rising interest rates have certainly made things tricky, but positive cash flow is still rather easily attainable with the right property. DSCR loans are definitely the way to go in this situation leveraging a cash out refi. Big question I have is, how long has this property been cash flowing? That can impact the loan amount you can receive from a private lender. Feel free to connect with me!

 Hi Jack, yes , it may be the way to go! 

[Kevin Woodard]

Quote from @Brad S.:

Quote from @Elina Aske:

Thank you, Nick! What you're saying about choosing homes in mid range prices absolutely makes sense. I am trying to figure out the best type of loans for accessing my equity with no income verification, and possibly less risk on that property. I am mostly needing to access it simply for the purpose of 20% down payment needed for my next investment. The properties I'm interested in cost between 300-450k, and are estimated to bring in 4k in cash flow if purchased. Currently my rental property which has 460k loan on it brings in 7,600/mo in cash flow, and mortgage is around $2600/mo. I like the cash flow on it. I'm only dumping all the numbers on here because one might see the smartest way, financing wise, to go about acquiring 2nd and 3rd property in the price range mentioned, while maximizing cashflow. I have considered selling the property to reinvest it into more properties, but I' feel like it's a good cash cow.  

*********************************

First of all Congratulations on your current rental, those are great #'s, especially on just 1 property! I realize you bought it in 2013, but even so, we don't see anything close to those #'s in decent areas near me. And, I'm curious as to your potential deals (300-450k @ 4k/mth cf). Are those properties in good B or better areas or are they multi-families. ...just curious

Anyway, since you have converted your primary into a rental, do you own a new primary home? Is there equity in that? Or do you have only the $200k equity in your rental? 

Either way, I'd say that a HELOC sounds like the way to go. I would first get one on your primary (if you have one and have equity). For that route, I just heard that there are no-income HELOC's available for owner occupied homes, up to $250k (up to 90% ltv I think). But, I am not sure which banks/lenders do them in your area. You can also see if there are any no-income HELOC's available for non-owner occ. A little harder to find, but might be possible.

Otherwise (if you have no primary or HELOCs available), you would need to do a cashout refi (dscr) on your rental. I'm getting quoted a little over 5% on one of mine right now, which isn't too bad. Just work out the #'s based on both your current rental and your proposed rental, to average out the expenses and cashflow. It would probably be worth it with the #'s you presented.

5+% is not bad. What is the loan amount, leverage, and DSCR with that particular deal? I see pretty drastic shifts in the rate depending on those three factors.

[Dave Skow]

@Elina Aske-  most lenders will want the  returns.....some ideas  1) ask the present lenders  you  have to see if they can offer any  heloc  options  that  dont  require much  documents  2)  ask the banks you have  relationships  with  the same  question  3) are  you  adverse to having a  co borrower  involved   4)  leverage / borrower  against other  assets  like  401k / retirement / car  or  savings   5)  perosnal  unsecured loan  ......good luck

[Stephanie P.]

Quote from @Elina Aske:

Hi community, 

I have a question re: the best way to tap into my equity or find cash for 20% down payment, without the requirement of proof of income or tax return. A little about my RE background.... I purchased my first home in D.C. back in 2013 as a primary. I have since done a full demo and renovation, converting it into a rental, two 3BR units and have some cashflow, but not long enough to qualify for the traditional W2/income loans. I have spoken to DSCR lenders who can possibly help me finance the home but still need help with the 20% down payment.

Tips: I have about 200k+ in equity. Also, I have good credit.

Goal: To get some money for 20-25% down payment for a rental investment using home equity or other ways, which is where I need help. I prefer lenders or options without interest rates that are overwhelming or too high. 

I am still learning so please be kind and/or resourceful with your comments.  Thank you so much. 

 Hey Elina

Congratulations on your success so far.

Interest rates on DSCR for cash out, multi family are going to be in the 6's right now. The 5's went away in February from what I'm seeing.

You could refinance the 2 unit and get some cash and then consider purchasing outside this market.  DC metro, Bowie, Silver Spring etc... is expensive and won't cash flow as well as some other markets.  You could get a professional management company and have more doors and good cash flow.

Just a thought.

Stephanie

[Elina Aske]

Quote from @Stephanie P.:

Quote from @Elina Aske:

Hi community, 

I have a question re: the best way to tap into my equity or find cash for 20% down payment, without the requirement of proof of income or tax return. A little about my RE background.... I purchased my first home in D.C. back in 2013 as a primary. I have since done a full demo and renovation, converting it into a rental, two 3BR units and have some cashflow, but not long enough to qualify for the traditional W2/income loans. I have spoken to DSCR lenders who can possibly help me finance the home but still need help with the 20% down payment.

Tips: I have about 200k+ in equity. Also, I have good credit.

Goal: To get some money for 20-25% down payment for a rental investment using home equity or other ways, which is where I need help. I prefer lenders or options without interest rates that are overwhelming or too high. 

I am still learning so please be kind and/or resourceful with your comments.  Thank you so much. 

 Hey Elina

Congratulations on your success so far.

Interest rates on DSCR for cash out, multi family are going to be in the 6's right now. The 5's went away in February from what I'm seeing.

You could refinance the 2 unit and get some cash and then consider purchasing outside this market.  DC metro, Bowie, Silver Spring etc... is expensive and won't cash flow as well as some other markets.  You could get a professional management company and have more doors and good cash flow.

Just a thought.

Stephanie

[Elina Aske]

Thanks, Stephanie. Those are all wonderful tips! Any upcoming or booming areas you’d recommend looking into, just curious! Thanks again 


Quote from @Stephanie P.:

Quote from @Elina Aske:

Hi community, 

I have a question re: the best way to tap into my equity or find cash for 20% down payment, without the requirement of proof of income or tax return. A little about my RE background.... I purchased my first home in D.C. back in 2013 as a primary. I have since done a full demo and renovation, converting it into a rental, two 3BR units and have some cashflow, but not long enough to qualify for the traditional W2/income loans. I have spoken to DSCR lenders who can possibly help me finance the home but still need help with the 20% down payment.

Tips: I have about 200k+ in equity. Also, I have good credit.

Goal: To get some money for 20-25% down payment for a rental investment using home equity or other ways, which is where I need help. I prefer lenders or options without interest rates that are overwhelming or too high. 

I am still learning so please be kind and/or resourceful with your comments.  Thank you so much. 

 Hey Elina

Congratulations on your success so far.

Interest rates on DSCR for cash out, multi family are going to be in the 6's right now. The 5's went away in February from what I'm seeing.

You could refinance the 2 unit and get some cash and then consider purchasing outside this market.  DC metro, Bowie, Silver Spring etc... is expensive and won't cash flow as well as some other markets.  You could get a professional management company and have more doors and good cash flow.

Just a thought.

Stephanie