All Forum Posts by: Andrew Postell

@Stuart Chinworth prices will almost certainly not hold steady in 2017 nor come down.  Right now demand is significantly higher than supply.  A "healthy" housing market has 4-6 months of inventory.  Healthy means that all economic classes can find a home and afford to purchase the home type of thing.  Right now we have 2.4 months of inventory and inventory is decreasing.  We have had nearly these same types of numbers for the past 5 years and that's one of the reasons that we have had a nearly identical increase of 9% annually over that period of time.  These are not my observations, these came directly from the Texas Real Estate Institute which has some really smart people doing research there.  Remember, the population of Texas has doubled in 40 years.  And 90% of that growth has occurred within 50 miles of I-35.  We are in a seller's market.  That's one of the reasons it's extremely difficult to find a deal right now.  Expect this trend to continue in 2017.

@Eric Lyles you will have PMI/MI unless you bring 20% down or prepay it at closing...which would also mean you bringing more to closing. Yes, the PMI/MI is present and you should be aware of it when the time comes to analyze figures. Plenty of people still have that fee with their loan and make a good profit on a home.

@Ryne V. oh, that great to hear.  Yes, she is very good.  

@Eric Lyles thanks for being so open.  It does help us to provide some good advice if you provide good details and you are right, people on BP are extremely helpful.  Many professional financial planners will tell you that you should have 3-6 months of bills saved before you do anything.  In life, emergencies occur.  Rather than putting an unexpected bill on a credit card you should have your 3-6 months of savings to use.  If you do use it, then quickly replace it.  This is probably more important than paying down your car aggressively.  You're going in a good direction in life so we don't want something unplanned to set you "off course".  Secondly, if your company has a matching retirement plan please take advantage of that.  If your company matches 10% and your retirement grows 0%, you still make 10% because of the match.  It will be a long time to use it but there's not a lot of very safe retirement options like a company match.

Once you have those two steps out of the way (and you might have the out of the way already) then we can address other goals - like real estate! It sounds like you may rent right now. It also sounds like you want to own an investment property. What if you could do both? There is a loan type called "FHA" that allow you to buy a duplex, tri-plex, or quad with 3.5% down. The condition is that you have to live in one of the units. If this is something you want to explore make your next savings goal to be 3.5% of the target house value you want to have. You might hear this strategy called "house hacking" on BP. Lots of investors do it. Also, I would recommend to not pay anything else off aggressively. It sounds like your credit is in good order. Cash is one of the items you can't get back (as you alluded to in your post). You haven't wasted money by paying down the vehicle, but maybe we can use that same extra money to start EARNING you some $$$. I hope this post helps!

@Maxwell Lee I liquidated 60% of my inventory in Jacksonville this year.  I think you have a couple more years of property value increase but it is quickly becoming a seller's market there.

@Michael Eng I would recommend McCaw Property Management for a property management group.  Worked with them and so have a lot of investors in our area.  They manage a lot of properties.

@Joe Wright there are plenty of us out here.  What kind of questions can we help with?

@Patrick Livers you are most welcome!  Do you mind giving me a little vote on my post?

@Sarah Callahan there are lots of options for you to still be a successful investor.  There are 3 "main" types of loans that investors use to finance properties - hard money, portfolio, and conventional.  Yes, there are others but those are 3 of the main ones.  Conventional loans do allow a business to be operational for 1 year.  They will analyze tax returns to determine if the business is looking ok so in theory you would need at least 1 year of tax returns filed.  And just because your taxable income is low doesn't mean that you can't qualify.  Conventional lenders can add back in depreciation, business milage, etc. to help you qualify. The confusing part of conventional loans is that lenders can have "overlays".  Overlays are the little extra rules that lenders put on conventional loans.  Conventional loans are governed by Fannie Mae and Freddie Mac (if you recognize those names).  In theory it's not the bank's money....it's Fannie/Freddie money...so they have to do what they are told by Fannie and Freddie.  HOWEVER, a bank can be MORE restrictive if they want to be and Fannie and Freddie are ok with this.  So if Fannie says "we lend on 660 credit" the bank can say "we only lend on 700 credit" and that is acceptable.  So you first need to find a bank with no "overlays".  Because what if that bank is disqualifying you because they need 2 years of tax returns when the guideline only says to use 1 year?  What I am describing happens all the time.  So find a lender with no overlays first.  BUT THERE ARE OTHER OPTIONS.

Conventional loans are designed for permanent financing.  Meaning if you are buying and holding the property....likely to rent.  So another option to conventional lending is "portfolio" lending.  Portfolio lending is the bank's own money.  So they call the shots...and not Fannie/Freddie.  So a portfolio loan could ignore your income entirely.  And in fact there are portfolio loans that do just that!  Portfolio loans differ greatly from bank to bank so it is important when you find a portfolio loan to learn the terms.  The loan may only amortize over 15 years, or be an adjustable interest rate, or have a balloon payment.  These may seem like bad terms at first but if you are going to have income in 2 years and refinance out of the portfolio loan in 2 years to a conventional loan who cares if the loan adjusts in 7 years?  Just be aware of all the information and you will make a good decision.  BUT THERE ARE OTHER OPTIONS.

Let's say you and your husband were just looking to flip properties. Hard Money Loans are out there for you to examine.  Hard Money loans are loan types that are TEMPORARY financing.  Meaning for just a few months. So you can buy a property with hard money, renovate, and flip it. And Hard Money loans care about the deal on the property and not your taxable income. Well, they care about your assets too but we're just limiting this to income for now.  Hard Money loans will charge a higher interest rate...maybe even 15%...but if you are clearing $20,000 on a flip who cares that you paid someone 15% for 1 month?  

There are other options but hopefully these descriptions will help some.  Feel free to Private Message me with any specific questions.  Thanks!

@Patrick Livers this post is going to be lengthy but it will be the exact information you need to have.  

If you purchased these properties in 2016, and you haven't filed your 2016 taxes yet, then a "conventional" loan will allow you to use rental income from those properties with an executed lease agreement.  A conventional loan is a loan governed by Fannie Mae and Freddie Mac.  They are the loan types with the most favorable terms (low interest rate, fixed rate, 30 year term, etc) Once you file your taxes, or if you bought the properties before 2016 and have already filed your 2015 taxes, then they have to be on your tax returns for the income to be used.  So if you think you should be able to use this rental income, and the bank is still telling you no, then I would suggest going to another bank.  These are CONVENTIONAL rules. Keep in mind that banks are allowed to be MORE restrictive on the guidelines...but not less restrictive.  So if the conventional guidelines state that they will lend on a 660 credit score the bank can actually say "Well, we aren't lending below 700" and Fannie/Freddie are ok with this.  These extra rules are called "overlays".  The bank you are talking to may just have an overlay that disqualifies you from using the income.  Look for a lender with no "overlays" and you will find the most flexible lender you can find.  But there is another option.  

If for whatever reason you cannot qualify for a conventional loan you can seek out a "portfolio" loan. A portfolio loan is a loan type that the bank has direct control over...because it is essentially the bank's direct money...and not Fannie/Freddie money.  So the bank can say, we'll lend on "whatever".  Each bank will have different rules for their portfolio money.  Some banks will have higher interest rates.  Some banks will only have a 15 year mortgage, some banks will have Adjustable Rates.  So it's each banks direct money, each bank's terms could be different.  It is important that if you need a portfolio loan that you find out all the terms for these loans.  An example of a portfolio loan is that as long as the house cash flows $1 then you can be approved.  Meaning they ignore income ENTIRELY!  Now, they will still want you to have decent credit and some assets...but if income is the real issue then seek portfolio.  Private message me if you need any more help on this subject.  Thanks!