All Forum Posts by: Andrew Postell

@Anthony Wright these questions are so specific that I would highly suggest consulting a tax professional.  The up front expenses you incur prior to a property being "Placed in Service" are usually capitalized.  Big ticket items such as structural, roof, and HVAC repairs also fall into this category. In 2014 the IRS set out a large set of rules defining capitalization vs. deducting expenses and there are so to review it's a full time job.  Thus the reasoning for a CPA.  If you do have depreciation  it does help you a little when it comes time to qualifying for a conventional loan.   So based on your scenario you may choose one path over another.  Hope this helps some.

@Robert Hursey from the lending perspective if you need a loan to buy your next property you can get a loan in a business entity name with a "portfolio" loan.  A portfolio loan comes from an individual bank's own money.  So the bank can call the shots on how they want to structure the loan and who's allowed to be on title, etc.  Most portfolio loans will allow you to buy in the business entity name.  You may have to personally guarantee the mortgage payments but your purchase contract, deed, etc. can all be in the business name.  Portfolio loans do vary widely - from higher interest rates to shorter amortization schedules - so make sure you know all the details BEFORE putting in a contract on a home.  Interview different banks to find out each bank's tolerances and loan differences.  The conventional loan products are the ones that require an individual person to buy the home, be on the mortgage, deed, title, etc.  Most investors do use a conventional loan to buy the property and then switch the deed to the business entity name after closing.  In either case you would have to have to business setup before you start buying the property.  Hope this helps.  Thanks!

@Robert Howard there's some lending concepts here for you to be aware of that I think would help out your math. To refinance a conventional loan you are limited to 75% of the After Repair Value (ARV) on the home. Also, a cash out conventional loan limits your "Loan-to-Value" at 75%. I would suggest modifying your loan numbers in Year 2-30 and that will help the numbers be more acurate. I have a hunch that you are looking to get more equity out of the home. Then you would need to gain access to a portfolio loan. Portfolio loans are non-conventional loans that are governed by each individual bank differently. It is essentially the banks own money. They can go up to 80% LTV...but they might have other things that are very different. They may only be a 20 year mortgage, which would make your payment higher because you are paying it off quicker. They may be a higher interest rate, which again would make the monthly payment higher. They might be an adjustable rate mortgage, balloon payment, etc. Lines of credit on an investment property also have similar structures. Some banks do not go over 70% LTV on a LOC, some will have a significantly higher rate, etc. Conventional loans are what most investors want to receive first since they are the lowest rate, a fixed rate, and can be amortized over 30 years. If you have more questions on this feel free to Private Message me. Hope this helps!

@Barshay Graves I would recommend speaking with a permanent finance lender first.  Most of the hard money guys I work with require a prequalification letter from a permanent lender if the customer is looking to permanently keep the property.  You see everyone's hesitation on this post to what you are doing.  Using Hard Money is acceptable but make sure you have a way to get out of that loan before starting it.

Some very interesting numbers on the Fort Worth Housing Report from GFWAR. 

December 2016 Statistics At-A-Glance
• 971 – Homes sold in December 2016, 4.4 percent less than November 2015.
• $196,800 – Median price in December 2016, 13.8 percent more than December 2015.
• 1.6 – Monthly housing inventory in December 2016, 0.1 months less than December 2015.
• 37 – Average number of days homes spent on the market in December 2016, four days less than December 2015.
• 1,564 – Active home listings on the market in December 2016, 4.3 percent less than December 2015.

@Irfan Saeed I would not be concerned...except that no one at the bank told you this in the beginning of the process? That would be somewhat important information to know before you get started with a loan. Although, I couldn't tell if you were refinancing yourself into an FHA loan or if someone was buying the house and using FHA money. In either case, this is a normal process.

@Mindy Jensen I was wondering if I was overshooting it with that reference but glad you got it ;)

@Amber Toussaint thanks for the great description.   What you are experiencing is very common for a lot of investors.  I might express to find a different lender that understands investment properties better but before we get there let's cover some basic items:  

Loan in LLC Name: The conventional guideline here is that you must close a conventional loan in an individuals name. What most investors do is after closing they then switch the deed over to the LLC name. The other option you have is that can just get a "portfolio" loan for this property. The main difference here is that a conventional loan is governed by Fannie Mae and Freddie Mac (if you recognize those names). A portfolio loan is a loan that is governed by the bank...and therefore the bank can call the shots on the loan. Fannie/Freddie require a person to be on the loan and on title. Portfolio loans normaly do not. I say normally because there are 15,000 banks in America and each bank will have some different rules to it's own money. So a conventional loan can get you a 30 year fixed rate. But a portfolio loan might be a 20 year Adjustable Rate loan. So when interviewing banks ask about these features if the portfolio route is where you want to go.

"Affording" an investment property:  In theory, you should always be able to afford to buy an investment property.  The whole idea is that when you buy and hold a property the rent covers the mortgage.  Since you would only buy a property that cash flows, you should always be able to afford a rental property!  If the bank is saying you cannot it would be a red flag to me to search elsewhere for a lender.  Conventional loans allow you to use projected rental income when you purchase, and to use an executed lease when you refinance.   

Conventional vs. FHA loans: The other red flag that sticks out to me is the 10% down conventional loan description. Maybe someone at the bank misspoke but conventional guidelines require 15% on a duplex if it is your primary residence. The bank is not allowed to go lower than 15% down on a conventional loan. FHA does allow 10% down though. An FHA loan is a good loan type but it has some items that are important to know about. Just make sure on which loan type they are quoting you on.

*Whew*!  I know this was a lot and there probably is a lot more we could talk about.  I did move here from NY and if there is anything else you would like to discuss then feel free to Private Message me.  Thanks!

@Mindy Jensen thanks for the explanation.  Since the highest score is a 10 I look forward to having an 11 ;)

I see on the right hand side of Bigger Pockets that some people have scores. How do you get a score and how can you score higher?