All Forum Posts by: Robert Sepulveda

IF the ITIN and the work VISA associated with the authorization of that ITIN are matching with her current work status (employer information matches all documents) then they're in good standing here. As soon as the current employment doesn't match the work visa, walk away. 

Ask for 6 months cancelled checks for cell phone/utilities, previous rent and a car payment if they have it. Then make your best judgement from there. 

My 2 cents.

Banks and mortgage companies haven't caught up to the market when it comes to vacation rentals. Typical purchases and refinances for rental property require an average of 25% of equity in the property or more with few exceptions. Plus, investors have to either prove income with leases, or a rental market survey that gets a 25% or more cut for a vacancy allowance. This works for your very few, very well to do borrowers. But leaves most of the landlords with multiple financed properties with few options. Do you have more than 4 financed properties? Good luck finding a lender.

What have investors resorted to doing? 

• * Lying on their application to say it's a second home or even a new primary residence to avoid the lease issue
• * Buy in more expensive areas so that the market surveys cash flow for traditional financing - Requiring a lot of cash down
• * Recruiting partners to share the costs, and dilute the profits
• * Acquiring Hard Money to now pay 8% -15% interest, so that no one asks questions 

Are there options other than traditional rental property loans that don't resort to hard money. The short answer is yes, but not all are created equal.

Portfolio Lenders are the way to go hear. These are direct lenders who fund with their own capital and thus write their own rules. Since Private Equity firms across the country are flush with cash, there's been a rise in these types of lenders. However, many of them are just following wall streets collateral model for mortgage backed securities. So, you get more of the same that the banks offer.

There are portfolio lenders who WILL offer loans at competitive rates, and who only care about the asset (your property) value and condition. The caveat is that you'll have to kiss a few frogs before you find your happily ever after.

Look for the following when searching for the right portfolio lender and be able to tell if it's their money to lend:

1. Look for private capital lenders - Ask if they fund with their own money (a clue if they really do is ask the next question)
2. Ask if their underwriters are in-house or outside their offices
3. Ask what the typical underwriting turn time is (all a clue, no underwriting should take more than a week - 3 or 4 days is best)
4. What is their typical amount of days to fund (should never be more than 30 days or it's not their money - 15-25 is ideal)
5. Ask how they qualify income (THE BIG ONE) - 
   1. No Income Qualifying is BEST (obviously) - Ask if other property income/debt is considered 
   2. Bank statement income - Also Ideal to show true rental income if provable 
   3. Rent roll/Schedule E - Close to a traditional deal so be careful - It usually means they'll consider all your income/debts
   4. Rental Market Survey - If this is how they do it, walk away - it won't help

Your ideal portfolio lender will require an appraisal and cash reserves (for purchase) and base the loan on the value of the property and it's condition exclusively. They should only consider the subject property and not your total schedule of real estate as well. Does this sound like hard money? Yes, so what's the differentiation? Credit! The better your credit, the better your rate is going to be. This is the difference between a 10% hard money rate, and a 5% investor property rate. Ask what their rates are. If you have great credit but are still being charged 9%, move on, you can get 4.5% on the low end nowadays.

Keep searching and don't settle. Plan ahead and you'll find the few good options there are out there for this rental type.

Good luck investors! 

@Wouter Ceyssens apologies for the delay. For this type of financing, any mention of the appraisal is going to be limited to the original appraisal at the time of purchase when it's within 90 days that a typical appraisal is valid for. Beyond 90 days, an updated appraisal will be used to confirm the value is not below the requested amount and will not exceed that 75% LTV max threshold.

Even in the portfolio lender space where there's more options for investors, you're still going to be limited to the purchase price, plus HUD/Closing Statement costs, and any legitimate repairs you can document.

The added bonus doing it within a Portfolio loan instead of a Fannie Mae loan, is that you would have easier qualifying on the income of the property with the right lender. For example, stated income and stated assets are possible even on long term investment property loans with a Portfolio/Private Lender. They don't have to follow Fannie Mae guidelines so it's easier more than ever for investors to finance their money out of a cash deal or a deal post rehab.

Good Luck all!

@Cliff T. yes, with and without repairs. But the repairs were less than $10k all on one invoice for HVAC. That was palatable for our underwriter at the time. It's why I mention talking to underwriters for every one of these before you proceed. They can underwrite however they see fit. 

@Account Closed Great question and definitely should be dug into to qualify repair invoices being included.

Why I say that it can is from speaking directly to two different nationwide banking underwriters specifically on delayed financing deals I was doing. Because the guideline you correctly site is vague, it doesn't even say that you have to provide the closing statement/HUD, the underwriters are there to determine "initial investment" into the subject property. If it requires maintenance in order for it to pass Fannie Mae, Freddie Mac, VA/FHA guidelines for property working condition of the property, then the underwriter has the discretion to allow the reimbursement of the invoices up to the max LTV and no more than the actual dollar amounts paid in total.

So, if a property cannot qualify for a "qualified mortgage", then the underwriters will see it as an "initial investment" to make it a livable property - especially if you cite FHA/VA guidelines. They're much more strict.

Additionally, if the property cannot be rented until maintenance is complete, then the same applies. So all in all, when the reimbursement of invoices is the goal, it's definitely best to review your scenario with a lender who does direct underwriting. This way you can ask the question ahead of time, and not waste time expecting to recoup say $25k in rehab costs. 

But it is definitely able to be considered part of the initial investment in the property. But also subject to interpretation, since the guideline is vague. 

@Maria Marrero Your investment property would qualify for a basic cash out mortgage or HELOC. You're well beyond 12 months seasoning requirements. You can typically get 65% of the value in your property in cash with either an investment property portfolio loan or a conventional investment property loan.

On your primary, you can technically use the delayed financing for any property. However, individual lenders often require anything outside of the standard loan (now called a "qualified mortgage" ) to be a business purpose or investment property loan. It limits your options on who will do it, but yes it's possible. Let me know if you need a referral that handles your area.

@Maria Marrero A HELOC is a great tool for flexible cash management. But it's very rarely available on investment property. Delayed financing is primarily on investment property you paid cash for. So if you want to use a HELOC, you are typically using it on your primary residence 12 months or more after you acquire the property ( unless you got one right at purchase).

Delayed financing is first and foremost a product that allows you to get your cash out of an investment property IMMEDIATELY after you've paid cash for it. Whereas a HELOC requires normal seasoning of 6 or 12 months depending on the lender.

A HELOC is very good when you have equity in your primary home, and would like to tap it to invest in other property. Essentially, you'd be paying cash for an investment property with the HELOC (assuming you have enough of a line of credit) and could then use Delayed Financing to repay the HELOC and have it available for the next opportunity. There are plenty of other uses. These are just a few.

Also, delayed financing essentially can be permanent financing, as you'd have fixed long term rates available in around the 4.5% to 5.25% range lately. Whereas, a HELOC runs about 1/4 to 1% higher and is typically variable based on either the Prime or Libor index.

Good choice @Jieh Larson

@Jieh Larson Great to hear!!! who did you end up using for the loan?

Just wanted to share an overview I wrote out on Delayed financing. Feel free to discuss and ask questions. I see it comes up a lot, so thought this would help:

Delayed Financing - Investors can Cash out of your investment property 1 day after purchase

OVERVIEW

In a competitive housing market with historically low inventory, many Real Estate Investors, are paying cash for their investment properties. Be it a flip or rental property, paying cash to differentiate yourself in a competitive market can mean the difference between a good deal, or a marginal and maybe even overpriced deal. Paying all cash makes a huge difference in leveraging the offer and terms you want. Sellers know there's no questionable loan needed to close the sale of their home and escrows can close in as little as 14 days if so desired.

However, once an investor buys a property with their hard earned cash - or even with syndicated funds from other investors or family- lenders have typically required 12 months seasoning before you could refinance out your cash. Some cases allowed refinance after 6 months. This ties up your cash for a long time and means many investors can only do one cash deal a year. But there's an alternative.

Delayed Financing is a conventional mortgage refinance of an investment property that was paid for with all cash. Technically, you can request a refinance 1 day after the sale closes on your purchase. However, you can refinance within 6 months after the close of your purchase under these guidelines.

QUALIFICATIONS

We're speaking primarily of Fannie Mae's delayed financing guidelines, so your typical Investment Property Cash-Out Refinance matrix applies. This means you can cash out 75% of the value of your home for a single unit property or 70% of the value for a 2-4 unit property. It must have been an arms length transaction to qualify, so don't buy from friends or family and expect to be able to use this program. And all the sources of funds must be able to be documented.

Sources of Funds - Typically cash is king and any cash coming from a bank account, qualified retirement account that allows for a real estate purchase (typically a self-directed IRA), or borrowed 401k funds. You can mix and match funds from any of these and other accounted sources and qualify to cash-out under this program. But can you borrow anything other than your own funds (401k, IRA) and still qualify? The answer is yes.

Borrowed funds are allowed with some caveats. The primary restriction being that there can not be any lien applied or stipulated on or to the subject property. So if you borrow from friend's or family, for example, they cannot be secured by any type of deed to the property. Tie it up contractually as you may, but keep in mind, that the conditions of the agreement/note can affect your qualification.

Any institutional source of funds is allowed as well. Borrow from your credit cards, someone else's line of credit, cash out from another property can all be used to purchase your investment property with ALL CASH and qualify for Delayed Financing. Just know that borrowed funds MUST be paid down first at closing to secure the creditor.

HOW MUCH CAN I CASH OUT

Technically, you can cash out up to 100% of what you paid for the property. What determines what you paid is the closing statement of your purchase transaction (i.e. HUD-1). This document also confirms that no mortgages were used in the purchase and itemizes all of your closing costs. These closing costs can also be calculated in your total purchase cost that you can recoup. However, you're limited to that 75% or 70% loan to value respectively.

What determines this value. The appraisal of course. But which one? If you are applying immediately after the close of your purchase, the original appraisal you acquired for the purchase is used. If you didn't use one (since you paid cash and were confident in the value), then a new one will be ordered. This is where the word "Technically" in the previous paragraph comes in. Most appraisals apply for 60 or 90 days. Most lenders will require you use the previous appraisal no matter what. Some will allow a new appraisal to be ordered if you show you made significant improvements to the value of the property before applying for the cash-out. So technically, if you got a great deal when you paid cash, your appraised value may be higher than you paid for the property. If it's say 25% higher than you paid, then you can recoup 100% of the total purchase costs.

This works very well for many investors who typically buy fixer uppers to rehab and rent for cash flow. Many times, if you buy shrewdly, you can recoup the majority, if not all, of your funds you used to buy your investment property. This then frees up your cash to move on to the next property and repeat. So, if building a portfolio of property is your game, Delayed Financing could be the answer to your prayers in speeding up that process without complicating your offers and leverage earned by using ALL CASH.