All Forum Posts by: Brittany Minocchi

Lots of investors do HELOCs or cash out refinances to use the equity to acquire. Ore properties. You’ll be able to access more equity in your primary vs a rental property, and the rate will be higher. Since HELOCs have a variable rate, you’re banking on rates staying the same or decreasing. With a cash out refi, your rate is fixed, but you’re also paying interest on all of those funds instead of only what you draw. Just depends on your risk tolerance with the fixed or variable rate preference and which makes more sense for cash flow. 

Like Mitchell said, you'll need to have a signed lease, first months rent and security deposit for your current home in order to use that rental income. For your other investment, unfortunately we have to go by what's reported on your tax return (net, not gross), so if you took a "loss" then there is no income to use for underwriting purposes. What is your DTI? Not all lenders have the same requirements. This lender might say your DTI is too high for them, but that may not be the case with another lender.

If you know what you want to do with the cash and have an immediate need for a larger amount, I'd recommend a cash out refi over a line of credit. You can compare both options and see which makes more sense with the rate you'd qualify for. Take a look at the rents for both sides vs current mortgage payment (if any), new payment on the cash out or HELOC, taxes, insurance and HOA (if applicable). The rate on a HELOC will fluctuate with the market whereas a cash out refi rate will be fixed, so it depends on your risk tolerance in the instance rates were to go up.

I have yet to find a lender that'll allow a HELOC on an investment property titled to an entity, but there ARE second mortgages that allow it if that's helpful? It's a lump sum loan like a regular mortgage, not a line of credit. Rate is fixed and they do carry prepayment penalties like DSCR loans.

You're welcome! Did the lender happen to mention what their max DTI was? Some lenders have what is called an overlay - this means that they are more strict with their guidelines than Fannie/Freddie require. They just can't be more flexible. For instance, Fannie/Freddie want to see a score of at least 620 for conventional financing. A lender can say that they want 640, but they can't say they want 600. The reason I ask is that if that lender has an overlay, that doesn't necessarily mean another lender won't be able to do it. I don't have enough info so can't say for sure, but figured it was worth mentioning.

Correct, most prepayment penalties are for a max of 5 years. I try and price most of mine out at 3 years if the numbers make sense for the borrower. A shorter penalty will increase the rate a bit, but you never know what'll happen and 5 years can be a long time to commit to....the penalty will be triggered if you sell OR refinance - some people don't know that. I would also double check the structure of the penalty. Sometime they are a flat % the whole time, and sometimes they are tiered. Year 1 is at 5%, year 2 is at 4%, year 3 at 3%, and so on. You're in PA which has funny rules for prepays, many lenders will make you buy it out which will greatly increase your rate. Not all do, though. Some lenders will try to tell you it's a state-specific thing, but that's not true. I'm in OH and we have similar rules, and I've done DSCR loans in both states with prepayment penalties.

Is a HELOC or refinancing your primary an option? I have the same questions as Caleb about the rental (what is it rented for, what is the value, what is the payoff, etc)...how much are you needing to finish your project?

Hey Karina!

30-year fixed investment loans are pretty widely available, there are even some 40-year terms out there where the first 10 years are interest only. ARMs must just be what your local banks are comfortable with. Happy to talk if you have questions or want more info, feel free to reach out :) 

Up to you - there are definitely perks to using an agent, especially if it's someone who works often with investors and knows how to market them. What part of NE Ohio? I'm in the Akron/Canton area. I'd be happy to share info with my circle to see if I have anyone that might be interested (either an agent to list it for you if that's what you decide, or a buyer).

Hey Emily! 

It sounds like a debt service loan is what you're looking for. Employment history, income and DTI are not factors with that type of loan, and you can close in an LLC. The biggest factors will be the property's cash flow and your credit score. Most lenders will require you to personally guarantee the loan, but that doesn't mean that it will report to your personal credit.

With a conventional loan, employment history, income and DTI are factors and you cannot close in an LLC. True commercial financing is for 5+ units, so a SFH wouldn't be considered commercial. Conventional and DSCR aren't always that far apart as far as terms go - it just depends on the situation. The biggest downside to a DSCR is the prepayment penalty, you won't have that with a conventional loan.

Cleveland will have a lower cost of entry and higher cashflow, Columbus a higher cost of entry but probably a good mix of cash flow and appreciation. I will say I've done far more loans for people, the majority of them out of state investors, in Cleveland. You should definitely be able to find decent multifamily properties for under $200k, and multifamily would be my suggestion for starting out if you can swing a larger down payment (depending on loan type, you MAY need 10% more for a multifamily vs a single family, but not always). That way if you have vacancy in one unit, you still have the other that can at least cover some or all of your expenses. 

Happy to answer any questions you have, feel free to reach out whenever!