All Forum Posts by: Brett Chandler

@Andy Acosta

I guess I'm not totally sure I understand your plan. There are a few things to consider if you buy a primary every year on a 15yr term, then take the cash out after a year:

1) you will have to pay closing costs twice (once when you purchase, and once when you refi)

2) you will have a higher interest rate on a cash out refi than you would have if you just did a 30yr purchase in the first place

3) depending on how much of a down-payment you make, there may not be enough equity to pull back out for the next purchase

If you are in a property acquisition phase of your investment journey, looking to leverage fully, and willing to move every year, I would either do a cash-out refi on your current primary for your down payment, or take out a HELOC. You will be limited to 80% LTV on a cash-out refi, or 90% CLTV with a HELOC. Then, purchase on a 30yr term, 5-10% down conventional, and use your rental cash flow and job income to pay down the HELOC/save up for the next down payment.

Hope this helps!

Hey bigger pockets community, I'm pretty new to this so the simplest thing is probably for me to tell you my plan and have you guys, the firing squad, shoot some holes in it ;). 

We have about 500K of equity in my primary residence. We are cash flow positive from our W2 jobs by $3-5K/mo. Our risk tolerance is pretty low in terms of introducing additional monthly payments. We are thinking about converting our current 15yr mortgage into an All In One loan and tapping into that equity to purchase a short term rental. Then, using our W2 income as well as the STR income to pay down the line and repeat when there is enough available credit.

I am also wondering if we should look into starting an LLC. Is that an option in my scenario? What are the pros and cons?

Anything else I'm missing? I appreciate the expertise!

@Andy Acosta

There is typically a 6 month seasoning period on a new mortgage. Nothing that says you have to continue to occupy as your primary residence, but it is considered an early payoff if you refi or sell in less than 6 months. How much equity do you have in the place? Have you thought about a HELOC? Much cheaper fees (possibly none). Depending on what you're going to do with the cash and your ability to pay off the HELOC, it might be worth looking into. Good luck!

@Nishan Mann

Thank you for your service. Sounds like you've got a solid plan. Were you discharged with any disability? The VA loan has a pretty significant funding fee, but it is waived if you are disabled. Without disability, conventional can sometimes be a better option - depending on loan amount, credit score, down payment, etc. Also, you are only allowed to have 1 active VA loan, so you would either need to refi into conventional if you want to use your VA loan for the next purchase, or your next purchase would have to be conventional. I am a licensed lender in CA, let me know if you want to talk more specifics. Good luck!

@Bill Gallagher

Do you have access to any equity in your current STR or LTR primary? I am looking at doing something similar. I think I'm going to transition into an All In One loan on my primary, then be able to use my equity as a line of credit to be a 'cash buyer' on a STR. Then use the STR income to pay down the line of credit. Too bad you can't use STR income in your DTI. If you bought another LTR instead, the market rental income would offset your DTI. Just a thought.

@Patrick Thomas Dickinson

Good question, and looks like you've got some solid answers already. There are a lot of moving parts to your scenario. You mentioned multi-family. How many units are you looking for? More than 4 units uses a different criteria. It also depends on where you are looking to buy, and what the maximum conventional loan limits are in that area. I am in the Portland area, where the max is $548,250. If you were looking for a loan amount higher than that limit, it would be a Jumbo loan, and subject to different requirements. Also, your DTI is calculated based on PITI (Principal, Interest, Taxes, and Insurance). Principal is easy to calculate, but there are many factors that determine your interest cost/rate (LTV, Credit score, discount points/credits, etc). Property taxes and insurance are also going to be specific to a given property.

All this to say, you can get a rough idea of your max purchase price, but your lender would need to evaluate on a case-by-case basis for approval. Hope this helps!

@Burke Fisher

Good question! Ultimately, it all comes down to DTI. Do you have the income to qualify for both payments without the rental income on the primary or investment property purchase? If so, do both. If not, it's a matter of personal preference whether you want to get out of your apartment, or capitalize on the rental cash flow. If you do need the rental income to qualify, I would personally do the investment property first. Not sure if your lender would allow you to use rental income on your SFR primary residence toward your DTI. Duplex would be a different story.

Side note - purchasing an investment property is going to have higher down-payment and interest rates. You could buy a primary residence with a lesser down payment and interest rate, then convert it to a rental after the loan seasoning period (6 months), and buy a new primary residence. 

Good luck!

@Andrea M.

Good Question! As a lender myself, there really is 'value' in having good relationships between the borrower, lender, and agent. That said, you shouldn't feel pressured into using your agent's preferred lender, especially if their fees are outrageous. I would spend the time to find a lender that was personal, knowledgeable, and reliable before I would pay higher fees or interest rates. 

I'm in the Portland area, but also licensed in CA. Happy to look over your scenario if you'd like.

Thanks @Geordy Rostad and @Mike Nuss for the replies. I appreciate the feedback! Isee that you both live close by. I have been looking in the Gresham area. I’ve always figured that I would be doing the rehab myself - it’s hard to wrap my head around paying someone else to do something that I’m perfectly capable of. I recognize that having someone else do it saves me a lot of time and opens up more options. I will work that into my numbers and keep analyzing deals. @geordy  I agree with the hot potato comment. Appreciation is great, but passive rental income is the goal. I also agree with @Mike Nuss that mentality is critical to success. As far as having more time when the kids start school, that’s just a fact. When I can say “bye kids, have a good day at school” instead of “get down from there! Take that out of your mouth!” My ability to commit to a rehab will be drastically improved, between 8 and 3 ;) thanks again for the feedback, I’ll keep analyzing deals and see what I can find. 

Hey guys and gals, 

Looking for some tips on how to get started in the SFR market with $130k. I would love to start working the BRRR strategy, but I don't have the time to commit to a rehab until all my kids are in school (4 more years). Financing strategy to get started with the BRRRR's is to pay down my primary mortgage principal (save up) as much as I can and take a HELOC to fund the deals. I live in the Portland area and I'm finding that without a significant down payment, properties do not cash flow well (.5ish%). I hate the idea of waiting 4 years to get started, but I'm not sure I have a good alternative without tying up my capital or landing in a negative cash flow position on something more "move-in-ready". My long term goal is to have 10 or more paid for SFR units in 21 years (retirement eligibility age) and live off of the rent income with enough positive cash flow to reinvest and create generational wealth. I would love to hear any feedback about things that I may be missing, things that worked well for you, things to try, things to avoid, whatever. Thanks so much!