Looking for opinions based on current situation!

17 Replies

Hello All,

Per the title, I am looking for opinions here. I currently own one rental property with a bank mortgage that I purchased at 21 yo (just over 2 years ago). 

Here is the dilemma - after we purchased this home, we moved, and we lived in it for approximately a year. By doing this, I left my job and the industry I was in because I disliked it and became a real estate agent. We ended up purchasing another home to live in. Stupid, I know. This home is in my fiance's name. We will be selling it soon without taking a loss and he will no longer have a mortgage to his name. Our credit is pretty strong, we only have about 7k cash on hand, and we screwed ourselves into a good bit of debt. Needless to say we got onto the wrong path for a few different reasons, but now we are getting back on track.

I cannot get another mortgage - I do not have a two or even one year job history at this point and I do not have the income or down payment.

He cannot currently get another mortgage because he is tied up in this one. He has the job history, income, and credit. 

1. I would like insight on options I personally have.

2. Do we just wait until he is open to get another mortgage? If so, if we do not have the down payment, how do we approach that?

3. If he does get the next investment property in his name, how would we get the next and the next if we just rely on our own personal line of credit with no money down...?

4. Do I suck it up and go back into the industry that I disliked at the time and buckle down knowing I can bring in thousands of extra dollars per month? (Not interested in being a real estate agent for full-time career)

I know this is a lot. I know this is far from ideal. I know what position we are in and would appreciate feedback only based on a positive note. I am still learning a great deal. 

Thanks in advance,

Katie

@Kathryn Bennett , I just have a few questions to get a solid understanding. From your current position, you have 2 homes correct? What is your intentional end state, you want to invest in more properties and build your portfolio or just get out from the ones you currently own? I apologize for my misunderstanding, but if you could clear this up really quick... I will give you my 2 cents. Thanks

@Kathryn Bennett , Thank you for the clarity. I am working on the assumption that you bought the first and second home with no intention on renting it out. I would agree that off loading the first home is a good start, and looking to buy more value add properties is your next step.

1. You could off load both properties, or just the one, and look into house hacking, by purchasing a duplex, triplex, or quadplex. Either rent the second home out to build that equity or as previously suggested, sell it for some extra dollars. 

2. Look into hard money lenders, and find those value add deals. You will need to bring some money to the table, but it will allow you to buy in cash and refi into a better loan (essentially the BRRRR method).

3. Start looking into homes with seller assist, where the seller becomes the bank. Ask them to work with you, and tell them you need 3, 5, or 7 years to pay them out with whatever you can negotiate (i.e. like a balloon payment). This would give you more than enough time to meet that 2 year employment history, and you can refi it for a long term loan via a bank. 

4. I also recommend reading Brandon Turner's book (buying rental properties with no and low money down), and just continue to save as much as possible. 

I hope this helps, and good luck!

Matt,

Thank you very much. The first home was actually purchased with the intent to rent it out and I currently have an infinite return on it. 

We kind of lost sight of our end goal with buying the second one and getting ourselves into debt, but we are trying to autocorrect now. Luckily, we will be relocating for my fiancé's job and they will be purchasing the second home (which we live in) from us if we can't sell it within 60 days of his relocation and we have actually gained some equity on it, but not much. The mortgage is too high for us to even break even if we rent it out based on what I see in the current market. I could be wrong, but data says otherwise. 

Now it's time to buckle down and save, pay off our debts, keep learning, and I want to start networking as well.

@Kathryn Bennett , If you have an infinite return, and it's cashing flowing decently, then just put a HELOC on it. You can either put your fiance's name on the first property before getting the HELOC, wait until you have 2 years of income from your new employment, and/or wait until you have 2 years of rental income from the property to help in supporting the loan (or whatever your lender is requiring). You could also put the property into an LLC as opposed to putting his name on it as well, but you would just be back into the situation your currently in, with lesser terms when you go to refi (due to LLC). This would factor in for your long term goals and your ability to only acquire a limited amount of properties in your own name.

you say you 'screwed yourself in to a good bit of debt'... what does that mean? If that is not the mortgages you should pay that off prior to buying more real estate. Good luck 

Originally posted by @Mike H. :

you say you 'screwed yourself in to a good bit of debt'... what does that mean? If that is not the mortgages you should pay that off prior to buying more real estate. Good luck 

 We currently have around 30k in personal loans/credit card debt. 

Originally posted by @Matt Crusinberry :

@Kathryn Bennett, If you have an infinite return, and it's cashing flowing decently, then just put a HELOC on it. You can either put your fiance's name on the first property before getting the HELOC, wait until you have 2 years of income from your new employment, and/or wait until you have 2 years of rental income from the property to help in supporting the loan (or whatever your lender is requiring). You could also put the property into an LLC as opposed to putting his name on it as well, but you would just be back into the situation your currently in, with lesser terms when you go to refi (due to LLC). This would factor in for your long term goals and your ability to only acquire a limited amount of properties in your own name.

I thought about the HELOC but I wouldn't be able to get it on my own. I don't think I can add my fiance to the rental property at this point unless I am missing something. I was planning to speak with someone about a HELOC that way I know what is required of me so I can plan accordingly. Based on everything I have read about LLC, it doesn't offer any real protection for an individual. It seems as though it is a pretend veil. My end goal is to have everything into a corporation where my personal name is not attached whatsoever but that will take plenty of time, so I am starting from where I am.

Kathryn, I've been there before with the debt. You really should make sacrifices and dig your way out. It's a really bad habit to get in to with the debt. With that much debt and 7k in cash for two people you shouldn't get another house til you get your feet on solid ground. 

Good luck 

Originally posted by @Mike H. :

Kathryn, I've been there before with the debt. You really should make sacrifices and dig your way out. It's a really bad habit to get in to with the debt. With that much debt and 7k in cash for two people you shouldn't get another house til you get your feet on solid ground. 

Good luck 

 Agreed. It's very hard especially when you have another person who is not nearly as sacrifice driven as me. I had no debt besides minimal debt for a vehicle and twice as much saved a few years ago, but with buying the first home we spent a good deal. He also doesn't share my mentality nearly as much. Working on that :)

Thank you!

Katie

Originally posted by @Account Closed :

I dont know why people give up such personal info but OP did........lol.  Dave Ramsey would advise not to get married right now.     You and your fiance are not on the same page on the most important thing.    Money issues.    If you having problems now it will only get worse.

Sorry.

I would not say it’s an “issue”and quite frankly I don’t care what Dave Ramsey says either way because he isn’t me or my situation! We got ourselves into debt, we recognized it, and are making our way out now. And problems do not always get worse; otherwise what is a solution? ;)

@Kathryn Bennett , If you don't have a mortgage on the property yet, you are able to put your "soon to be" on the house (however this may not be an option). On a side note, I agree with you... Let Dave and his followers do them, and you do you. Although I'm a fan of Dave's, he's not for me either (as per his debt ideas). Sounds like you have a plan, and you're continuing to learn the market and the investing game. I personally think you're moving in the right direction, keep it up. Good Luck!

.

1. Opinions are like noses.

2. The typical strategy is to save up for down-payments.  

3. We have continued buying the next and the next by saving up.  We have had success with the debt-reduction aspect of Dave Ramsey; we personally have gotten "gazelle intense" in paying off debt, and saving up everything...bonuses, tax returns, birthday presents, bought older cars, etc. in a quest for down payment funds.  After an emergency fund in the business accounts, we also saved up excess from the rentals so that they could buy the next property.  

4. Get to using that real estate license and earn some commissions! You don't have to do this as a profession, but you asked how you can go forward.  How many commissions would it take to get a down payment for one rental house a year?  How many commissions would it take to earn the down payment for two rental houses a year? Reverse engineer this.

5. Whether married or not, each of you can get 10 conventional mortgages in your own names.  That would be 20.  Each of you would have to qualify. 

6. Also get "gazelle intense" and pay off the credit card debt, which associated increase in FICO will result in lower interest rates and better monthly payments on your future acquisitions. 

7. Another avenue for growing a portfolio organically would be to move into an owner-occupied house with an eye that this would soon be a rental. Possibly a light fixer in which you can force value.

8. Look to be a serial mover.  You can go forward accumulating properties, as you buy a house that will be a future rental.  It is possible to buy up to 4 units (quad-plex) on an owner occupied mortgage, with the associated owner-occupied down payment and interest rates.  Rent out the other units, remain a year and move. Rinse and repeat. 

It sounds like you have not gotten the hang of buying properties that make financial sense. If you can not buy a property that will work as a rental, or house hack, dont do it. Stay away from buying houses until you can learn to buy them right.

I am not trying to be mean. Its reality. Investors buy properties at a discount. YOu did not do that. Sell them now.

After you read some more books, blogs, videos, whatever, and get a better feel for finding below market properties, then you can start to think about getting into a house again. Renting is so much cheaper than owning a house. You need low cost right now to be able to get out of debt. And dont rent the apartment or house that you love, because it is too much and you will stay there for a long time. The whole idea is to stay at a place where you can save money.

I would have a heart to heart with a potential spouse about finances before it gets ugly. Ask me how I know. 1st wife no discussion until it was a problem. Then resentment, anger, hostility. 2nd marriage we discussed everything under the sun. We were on the same page about the most important stuff like money, family, spending. And somewhat close to polar opposites on the not important stuff like she loves hot sauce on everything, and I will not eat it at all. Keeps things interesting.

Good Luck!!