All Forum Posts by: Brody Veilleux

Refinancing into DSCR will give you a higher interest rate. Potentially a higher monthly mortgage payment. Look into cash out refi into conventional if you need the funds to continue to invest. If not a rate and term refinance into conventional loan will help you save more on your monthly payment because you lose FHA MIP.

You are allowed to put up to 10 properties on your personal credit. You still would have to personally guarantee the business being that going into DSCR would be your first time. It will likely be best to build up your experience before considering the business route so you don't have to personally guarantee.

Best,

Jamael Romans

United Mortgage Corp Lender

There's nothing specifically wrong with your proposal, but I'd just do a rate and term conventional refi and forget the LLC. The DSCR will still have a personal guarantee, and whether reported to the credit bureaus or not it needs to be disclosed as a debt, so there's no benefit there. Your conventional options will likely be better and keeping in your personal name is much easier to manage...just my 0.02

@Brody Veilleux you may want to look into an FHA 203(k)m which allows you to roll in renovation costs.

@Brody Veilleux

I did all my house hacks with renovation loans. FHA 203k and Fannie Mae HomeStyle.

Doing the house hack + brrrr strategy using these loans is absolutely the best way to do this.

You can find fixer upper multiunit properties which will in turn cash flow better after you renovate.

Youll be more likely to buy at a discount and don’t need the property to be move in ready to purchase.

You’ll use the banks money to completely fix it up, also increasing the equity of the property which comes in very handy when you’re ready to refinance to get rid of mortgage insurance, potentially pull a heloc, or just be more bankable in general.

One of the concerns above is not being able to do the work yourself on a 203k.

I’ve been in this game a while, and I can tell you that the people that are new that think they can do work themselves often times get in over their heads and think they’re saving money. But they actually end up costing themselves a ton more time, stress, and about the same money.

You’re getting the bank to finance the reno. So find the right contractor for the job and get it done quickly and efficiently.

I grew up in the construction business and swung a hammer since I was 12. I still don’t do any of the work myself on my properties.

It's. Great strategy and you have a lot of options now with Fannie Mae now allowing low down payment owner occupant loans on up to 4 units. It used to only be FHA.

If you have any other questions please don’t hesitate to ask!

Yes, but with a FHA 203k loan you and your relatives can't be doing the work!

Since you will need to get quotes for the work during the purchase process and can't do work yourself and can't use your contractor relatives you will pay quite a but more for the rehab.

Also, a seller who has a good agent will realize these loans are more complicated and that this type of financing is less likely to result in a sale. For example what do you do when the quotes come in grossly more than you hoped for? You back out of the deal. So, a seller will sell to a cash buyer instead of you even if the cash buyer's price is a little lower. 

Hi Brody - first, why do you want to transfer it to an LLC? I'm not a lawyer, and you can speak to an attorney about this, but in my experience people are typically thinking that putting their property in an LLC "protects" them.

If you're the sole owner of the LLC, it just acts as an extension of you. That alone will not protect you from litigation.

So there really are no pros, in my opinion, to putting your property you're house hacking in an LLC.

The reason you get the low down payment and the low interest rates are because you're personally guaranteeing the loan based on your stable income. 

If your concern is liability, what I did was get an umbrella insurance policy on the properties I house hacked under my name. That covered any incidentals or lawsuits that could arise with my tenants on the property. 

Buying a property to house hack with an LLC basically defeats the purpose of doing it. The idea of house hacking is using owner-occupant low risk mortgages to become a real estate investor and a landlord, to jumpstart your journey.

But ultimately, that's a decision you need to make with your attorney. 

House-hacking and BRRRR go hand-in-hand. That's how I bought my first house and completed a remodel. It's like free REI school and it's gets easier once you do it. Find a property that's challenging but nothing too scary. Hopefully the market keeps creeping up in your favor which helps a future appraisal. 

Trust the process and trust your numbers. 

Another thing I didn't mention but should have is that its VERY hard to create enough forced appreciation with a rehab when you use FHA because the property needs to be in pretty good condition to qualify for an FHA loan to begin with. Most people who do BRRRR start with a very distressed often uninhabitable property because there is more upside potential with a rehab.

I didn't say you can't refinance the loan, only that it may not make sense. Many but not all people who do BRRRR buy and/or rehab in cash and only refinance once at the end. (That's what I have been doing).

Property manager's are expensive. Figure around 10% of incoming rent going to the PM.

For cap ex, vacancy, and maintenance, 5% each or 15% total would be pretty common amounts to budget.

So, that means about 25% of your income rent will go to the PM, cap ex, vacancy, and maintenance. As you can see obtaining good cash-flow isn't always simple or easy with all those expenses.

As for your personal property, I'm conservative. I don't view having an expensive primary residence as a goal and while a mortgage to buy an investment is GREAT because what it buys pays you. A mortgage to buy a primary residence is something you are always paying for.

So, I personally would focus on generating wealth and income and then eventually when I reached a certain point I would start to use some of that income for myself personally. Then that money could go to save for a down payment on a primary residence and as I said I would be conservative about what I bought.

People who are wealthy buy their time back before they blow the grossly increase their standard of living. The famous example is how Warren Buffet still lives in the same home he bought ~70 years ago for something like $35k.