obtaining loans based on income of the property

17 Replies

Hey Everyone,

This is my first post in BP. 

I started listening about 5 weeks ago awhile exercising and it has opened my eyes to the possibilities in real estate investing. I own 2 properties free and clear which I have had for about 5 years. My dad is a conservative investor and he always told me that I should buy with cash only. But after reading these posts, reading about 12 books, and listening to over 100 podcasts, I'm convinced that there is a better way. I really love the BRRRR method and I was going to try to apply that, but then I go an idea: If I can cash out of these properties at 70-80%, I should be able to get about 160k, give or take. Instead of using that to buy properties with cash, why shouldn't I use that as downpayment on investments? As long as I buy under market with built in equity I shouldn't spread myself too thin.

But I actually live overseas (Japan) and I can't really use my income to get a loan in the US.  I have heard that you can get loans based on the income of the property you are purchasing.  Could anyone tell me what this is called? I am hesitant to just call up a lender and ask them what kind of loan that is.  I at least want to know what its called and how it is generally done before approaching anyone.  

If anyone could help me out I would really appreciate it! 

Thanks in advance! 

I would just like to add that I am a citizen and resident in my local area, I just spend most of my time out of country and don't have the income like a w2 or anything to qualify for a loan in the traditional way.

@Daniel Infante . You're unlikely to be able to borrow 70-80%, you'll probably have to settle for less. Not leveraging to the max is not a bad idea. It may limit your returns but it also reduces risk. Less leverage leans more toward your dad's way of thinking. You're looking at non-conforming or non-conventional financing. Terms (LTV, interest rate, ARM vs fixed, etc) will not be as good but may be acceptable. I suggest you find a mortgage broker with knowledge of non-conforming and commercial lenders. Some people prefer to go straight to the lender but I've found that a good broker is valuable and earns his/her money. Search for a broker who markets to investors, or ask a realtor if they know such a broker. The broker will collect your information, give you an opinion of the type of lending product you qualify for (or let you know you don't qualify), shop you out to lenders, and present you an offer. This process is slower than conventional lending so be patient.

Originally posted by @Daniel Infante :

I would just like to add that I am a citizen and resident in my local area, I just spend most of my time out of country and don't have the income like a w2 or anything to qualify for a loan in the traditional way.

As long as you have a us bank account that's all you need. The lender will look at the DSCR of the properties and can do 75 LTV cash out. Being over seas not an issue.


 

@Daniel Infante - Are you in Tokyo?  If so, there's a monthly BP meetup on the 3rd Thursday of the month in Roppongi (where else?).  You should go, if you can.  Although attendance varies widely each month, many investors there invest in the US.  Let me know if you can't find the info for the meetup, I can share it.  I'll be back in Tokyo this month, but will unfortunately miss the meetup.

There are also other active Japan-based investors on these forums, I'd recommend you search them out.  I was in Tokyo for a bit, and would be happy to connect and introduce you to a few other investors, if you are interested.  

If you're going to target BRRR properties, I think your best bet would be to team up with an agent and/or PM, and let them recommend lenders to you. That process worked for me and my partners.

Best of luck, and don't hesitate to post questions. 

Originally posted by @Guifre Mora :
Originally posted by @Daniel Infante:

I would just like to add that I am a citizen and resident in my local area, I just spend most of my time out of country and don't have the income like a w2 or anything to qualify for a loan in the traditional way.

As long as you have a us bank account that's all you need. The lender will look at the DSCR of the properties and can do 75 LTV cash out. Being over seas not an issue.

Guifre, Thanks for the reply! I really appreciate it! So you think lenders would accept DSCR on a small multifamily loan, or would I have to get a commercial loan for that?

 

 

Originally posted by @David Gotsill :

@Daniel Infante - Are you in Tokyo?  If so, there's a monthly BP meetup on the 3rd Thursday of the month in Roppongi (where else?).  You should go, if you can.  Although attendance varies widely each month, many investors there invest in the US.  Let me know if you can't find the info for the meetup, I can share it.  I'll be back in Tokyo this month, but will unfortunately miss the meetup.

There are also other active Japan-based investors on these forums, I'd recommend you search them out.  I was in Tokyo for a bit, and would be happy to connect and introduce you to a few other investors, if you are interested.  

If you're going to target BRRR properties, I think your best bet would be to team up with an agent and/or PM, and let them recommend lenders to you. That process worked for me and my partners.

Best of luck, and don't hesitate to post questions. 

David, I didn't know there are groups here in Japan.  This network is crazy! Unfortunately, I'm in Hiroshima most of the time, its a bit of a way from Tokyo, but I may think about going sometime soon.  I would totally appreciate the introduction to other investors here.  When will you be coming to Japan?

 

Originally posted by @Jeff Ronningen :

@Daniel Infante. You're unlikely to be able to borrow 70-80%, you'll probably have to settle for less. Not leveraging to the max is not a bad idea. It may limit your returns but it also reduces risk. Less leverage leans more toward your dad's way of thinking. You're looking at non-conforming or non-conventional financing. Terms (LTV, interest rate, ARM vs fixed, etc) will not be as good but may be acceptable. I suggest you find a mortgage broker with knowledge of non-conforming and commercial lenders. Some people prefer to go straight to the lender but I've found that a good broker is valuable and earns his/her money. Search for a broker who markets to investors, or ask a realtor if they know such a broker. The broker will collect your information, give you an opinion of the type of lending product you qualify for (or let you know you don't qualify), shop you out to lenders, and present you an offer. This process is slower than conventional lending so be patient.

Jeff, Thanks for your reply! much appreciated.  I will definitely start looking for mortgage brokers.  I'm currently still in the absorption phase right now.  Listening to a few podcasts a day, reading about 3-5 hours, scanning properties, etc.  But my plan is to start being much more active in the new year.  I'm sure your advice will help me out  a lot, thanks again!

 

Originally posted by @Daniel Infante :
Originally posted by @Guifre Mora:
Originally posted by @Daniel Infante:

I would just like to add that I am a citizen and resident in my local area, I just spend most of my time out of country and don't have the income like a w2 or anything to qualify for a loan in the traditional way.

As long as you have a us bank account that's all you need. The lender will look at the DSCR of the properties and can do 75 LTV cash out. Being over seas not an issue.

Guifre, Thanks for the reply! I really appreciate it! So you think lenders would accept DSCR on a small multifamily loan, or would I have to get a commercial loan for that?

Banks will see your financials. 

Commercial lenders will use the DSCR , rent roll and 2 years Operating statement. For multi family lenders this is what they do all day long so they specialize on it.

 

 

 

@Daniel Infante

There are several investor products out there that go up to 75% (some even to 80%) loan to value without income.  The rates are higher than the regular Fannie/Freddie rates, but they're still in the 5's and 6's on 30 year fixed.  Money is cheap right now.  Let it work for you.  Cash is better, but to scale your business, borrow while it's cheap.

Best of luck

Stephanie

Originally posted by @David Gotsill :

Hey @Daniel Infante  There are a number of active Japan-based BPers. Among those that I communicate with most frequently are: @Daniel Mills , @Matthew Pinkston and  @Casey Maeda

I'm in Japan in late December. I'll be close-ish to Hiroshima (on Shikoku), but no time for REI chats (sob).

Much appreciated! I reached out to them.  This network really is more powerful than I fist gave it credit for! Unfortunately, I won't be in Japan then anyway.  Spending about a month in Europe for the holiday season.  But definitely let me know next time you come to Japan.  You are based in california? 

 

Seems like you have a lot of responses here. Like most people said you are likely to get 75% on your existing properties. The question really then is.. what are you goals? are you looking to create cash-flow streams (rentals) or appreciation. BRRRR definitely meets both criteria, however since you aren't local to the US it maybe a small challenge to find that managing the remotely is a pain. It'd be great to actually create an investor friend or 3 that would be your working partner while you get to be the finance partner. Such partners are good to have if you can workout a deal that is fair to both sides. This way your money works for you while you are in Japan working on whatever it is you do there.

I helped another couple (friends of mine) just buy a 4-plex in San Antonio, they wanted a simple revenue stream and went through a learning curve for first time investors (what they want, don't want, manage, don't want to manage, etc).  On the flip side, since we are friends my help was super cheap :-)  

Do you visit the US frequently that you can manage this on your own or are you here infrequently.  Feel free to reach out if you are interested in central Texas market

@Daniel Infante

Great to hear you've jumped into RE! I would suggest analyzing 2 to 3 deals per day just to get a feel for things. You can easily practice with MLS listings until you understand how to pick a part deals and find the hidden value. It is a lot harder than it seems. But if you keep after it, you will be rewarded. Best of luck!

Originally posted by @Prashant Sheth :

Seems like you have a lot of responses here. Like most people said you are likely to get 75% on your existing properties. The question really then is.. what are you goals? are you looking to create cash-flow streams (rentals) or appreciation. BRRRR definitely meets both criteria, however since you aren't local to the US it maybe a small challenge to find that managing the remotely is a pain. It'd be great to actually create an investor friend or 3 that would be your working partner while you get to be the finance partner. Such partners are good to have if you can workout a deal that is fair to both sides. This way your money works for you while you are in Japan working on whatever it is you do there.

I helped another couple (friends of mine) just buy a 4-plex in San Antonio, they wanted a simple revenue stream and went through a learning curve for first time investors (what they want, don't want, manage, don't want to manage, etc).  On the flip side, since we are friends my help was super cheap :-)  

Do you visit the US frequently that you can manage this on your own or are you here infrequently.  Feel free to reach out if you are interested in central Texas market

thanks for the comment! in my area, I'm pretty much looking for cash flow and forced equity through rehabilitation.  I don't think I need a partner in the states.  I have family there and my long term goal is to move back there at least half of the year.  I'm trying to get control of around 2million worth of property which cashflows about 150 per 100k equity, Then I'll basically stop working out here and spend summer back in the states, and winters traveling.  

But I am going to look into partnerships, I want to get FHA loans, that would help me achieve my goals much faster. But without a w2 that won't be easy. I can put up a good percentage of the downpayment and go in there to do the painting/repair work to get them ready for top dollar rentals in exchange for someone who can get us a great interest rate.

I usually come to the USA for about a month a year, but I will be coming back every time I buy a home that needs rehab work.  We have nearly all the tools to get it done, and I love the work.  I have heard great things about the texas market but also that it is getting a bit overvalued.  Although, I really don't know much about it as I have no connections there and have never run numbers of properties.  But it sounds like if you have been in the market for a few years you must have been doing very well!

Originally posted by @Robert Shedden :

@Daniel Infante

Great to hear you've jumped into RE! I would suggest analyzing 2 to 3 deals per day just to get a feel for things. You can easily practice with MLS listings until you understand how to pick a part deals and find the hidden value. It is a lot harder than it seems. But if you keep after it, you will be rewarded. Best of luck!

Thanks a lot for the advice Robert. Yes, I am trying to do that. I look through the MLS at least once a day and see what is there, running numbers, trying to get an idea of what areas are viable and what type of units. I also just joined a wholesaler community in my area so I'm looking at deals through there as well. Its a lot of fun and I really feel like I am learning a lot about the markets.

regarding your comment about picking apart the deals, I think I know what you mean, but could you elaborate on that a bit? perhaps there is something I'm missing.  If so, I would really appreciate hearing it.  I'm always trying to expand my mind on how to look at opportunities!

 

@Daniel Infante

Some things to look for... can you add a bedroom somewhere or cheaply add some desired amenities? Is the square footage accurate (is there a lot more than the MLS is showing?). Is there extra land that can be built upon, or sold off separately? Are taxes extremely high compared to nearby homes, and can be protested and lowered? In today's tight market, try to find value where others can't (or are too lazy) to find...

Originally posted by @Robert Shedden :

@Daniel Infante

Some things to look for... can you add a bedroom somewhere or cheaply add some desired amenities? Is the square footage accurate (is there a lot more than the MLS is showing?). Is there extra land that can be built upon, or sold off separately? Are taxes extremely high compared to nearby homes, and can be protested and lowered? In today's tight market, try to find value where others can't (or are too lazy) to find...

Robert, good ideas.  I already had the idea of the potential for increasing bedrooms/baths in my mind, but I didn't think about the sq idea or the idea of protesting taxes.  Those are little gold mines.  Thanks so much!