Job Change - Will it Affect My Chances of Getting a Loan/Lender?

11 Replies

Hello all! My husband and I are still in the “education” phase of our real estate journey, but we plan to buy our first propert no later than 2020 - quicker if we can save up capital faster than projected. His job environment is not healthy, so he has been trying to find another job within the same field, just at a different establishment. Will that impact our ability to get conventional loans and/or work with hard money lenders at all? I also am studying an accountant program, and I also want to change jobs into that field as it will double my personal income, and thus increase our capital and reserves, and also benefit our real estate journey through the knowledge I will gain. Now that may still be 3-5 years away, but will that make loans harder? Thanks for reading and I hope to learn a lot from you all!

@Melanie Heiges

Shouldn't be an issue. When you change employers within the same industry it's not a problem at all.

If you are working towards improving your education/job opportunities, that's a good thing. Once you take a loan out for a house, it doesn't matter if you change jobs after.

You'll only have an issue if you're switching fields and employers around the same time you're trying to buy property. Then you won't have steady history with the new field. But, that's 3-5 years away for you. Since you're looking to buy something before that, you won't have an issue when the time comes to hop into the accounting field.

@Christopher Phillips Oh ok! So let’s say I switch jobs in 2022, and we have at least 5 deals under our belt, from rentals to flips or anything else, and we’re in the process of obtaining another loan for another deal in 2022. Will our resume of deals help with the fact I just switched jobs?

@Melanie Heiges

Okay. that makes sense.

You have a few choices for flips:

your own cash, or cash pooled with other investors.

hard money or similar private lenders.

You don't typically get a traditional bank loan for flips due to the condition.

So, you would either get hard money loans that will lend for distressed properties or use you own cash.

Hard money lenders base their lending on the project, not on your personal finances. They will require some of your money for the purchase depending on the project to make sure you are putting some skin in the game. Most of it depends on the size of the project and the risk involved, which would on a project by project basis.

@Melanie Heiges

Always happy to help...

Typically, you would buy the property with the hard money loan with 6 month terms.

As an example, 2%-4% (or points) upfront with 12% annual interest with the loan due at 6 months. The loan would be for the purchase and rehab needed. That gives you time to rehab and then sell the property. This is a very simple way to look at it. You would need some money for the points to the hard money lender, some money out of pocket for monthly carrying costs. Usually, the loans would be interest only. Everything is negotiable.

Unless you two know constructions really well, it's advised to start with something relatively simple.

Also, you don't need to refinance the loan. You need to sell it by the time the loan is due.

Part of your exit strategy if you can't sell it would be to refinance and rent out the property. But, that's not a perfect strategy - the fixtures and finishes you might put into a rehab might be at a much higher level than what you would put in a rental.

@Christopher Phillips Oh I see, I think I was combining two different strategies in my head. Learning a lot at once can definitely mix a few things up! But your detail of the scenario has cleared things up, and has actually helped to understand the whole process much better. I believe I was interpreting hard money as not only the interest rate per month, but also a mortgage payment. But as you said, all is negotiable. You’ve been such great help!!

@Melanie Heiges , There are lenders out there also that specialize in rehab/ fix and flip type loans. Their rates are a bit better than hard money, they often offer a bit longer term, maybe 12 months with the option to extend later for an additional fee in-case you don't finish as planned. They'll lend you something like 75% of the acquisition funds PLUS upto 100% of the rehab funds. 

You'll have to have the cash for the rehabs up-front, but basically how it works is you put your 25% down and get the 75% from the lender to acquire (there will be points and fees as @Christopher Phillips mentioned), and during the loan process, you'll provide bids for all of the work needing to be done to the property. Once you acquire, you start your rehab, let's say you upgrade the kitchen and it costs you $15k -- you submit your receipts to the lender to show you paid $15k for the kitchen, and they send someone out to verify the kitchen is done. Then they reimburse you for the $15k you've spent. So-on-and-so-forth until the project is complete. 

This is often a bit easier, not only for a newbie, but for experienced investors as well since it allows them to spread their capital to multiple projects at a time vs. tying up all their capital into one project. I'm not saying I recommend multiple projects at a time, especially while you're starting out. Point being, there are options other than hard money loans for what you're trying to do. 

By the way, Kudos to you for making a plan and doing your due-diligence! It will pay off once you close your first deal! :)

@Sasha Mohammed

That’s good to hear! I gotta say, I was getting slightly discouraged from a few things I’ve heard in other posts, thinking hard money may be the only way to fund a flip if I didn’t have deals in my belt or private money. I’ll definitely be looking into other loan options as well. 

Thank you for you help and input!