All Forum Posts by: Carl Dowdy

In my experience most banks underwriting a conventional mortgage will let you pull out 75% of the appraised value on a refinance.  If the appraised value is $70k, you can get 75% of that when you close the loan.  This is assuming you have held the property for 6 months.  If you are operating under the delayed financing exception and financing the property with a mortgage within 6 months of the purchase date the bank still goes off the appraisal but you cannot get back more than what you paid for the house.  

@Brian Pinckard One umbrella policy. As the name implies, it’s intended to cover liability for most everything (after the primary coverage in most cases), from driving your car to mananging your rentals. Compare rates for $1M, $2M, and $5M, and see what makes sense for you based on your assets. I use Owners Insurance Company (aka Auto Owners Insurances Company) but I haven’t shopped it in  a while and I’m not sure if they write in NC. Doesn’t have to be the same insurer you use for other insurance, but there may be discounts for bundling. 

I find the 30 year fixed interest rate to be more advantageous than the protection that an LLC might offer. In Colorado, premises liability extends beyond the property owner to also include a "person legally responsible for the condition of real property". In Colorado, if you're self managing, you've got to look more closely at the legal analysis than simply how title is held. I suspect it's similar in many other states, but I can't say.

Delayed financing exception is nice if all requirements are met.  Have used it a bunch.  They do require the "cash" used to purchased the property with to be sourced, so you have to prepared to pay it back to where it came from.  This can be an issue if the "cash" came from another cash-out financing, since in that case you do not want to have to pay down the 30 year loan you just obtained a few months prior on a different property.  Learned that one the hard way. 

@Billy Smith the lender who recently did at 30 yr fixed at 4.375% with 20% down charges a $995 underwriting fee on every loan, but there were no points or credits at that rate. Roughly $300k loan.  Same rate on a recent cash out refi (75% loan to value) on a similar loan amount but with a $1,200 credit. 

If I have 6 financed properties I can go get a 7th financed property. It’s not that hard to find banks that go up to 10 financed properties with conventional 30 year fixed mortgages. But if I were to try to get that 7th financed property with a friend who has 4 financed properties, then that means together we already have 10 financed properties (6 + 4), which is the limit. At that point ditch the friend or go commercial. 

A few responses to questions raised thus far re conventional investment loans...

Yes, some lenders will let you use HELOC for downpayment on investment property.

As for rates, it varies on, among other things, amount of the loan and % of downpayment.  4.75% might not be bad on a 30 year fixed right now at certain loan amounts with 20% down. In Colorado on a $300k 30 year fixed you can get around 4.375% right now with 20% down. Rate improves with 25% down. 

Would you still have to come up with 20% down with the brrrr method when you refi? Kind of, but not really.  First of all, it’s often 25% down on a cash out. But that’s 25% of appraised value, and the hope is it appraises for more than you actually have in it. A simplified example: $300k purchase, with $40k in improvements, that then appraises for $400k, means you can take a cash out loan at $300k if 25% equity must be kept in it.  You’ve got $40k in the house, which is a lot less than 25% actual cash down. 

@Jason Boulay's post is great.  Some of the other posts having varying degrees of misinformation so tread carefully!

The Americans with Disabilities Act applies to places of public accommodation.  This means it does not apply to the living quarters within the vast majority of rental properties discussed in the BP forums.  The ADA uses the words "service animal" and such animals include only dogs and to some extent miniature horses.  Under the ADA, a "service animal" does not include an animal that provides only emotional support.  But again, this is immaterial to most requests for a support animal because of the ADA's limited applicability in housing. 

The Fair Housing Act has much broader applicability to rental units. If you're renting only a few single family houses, check the exceptions as it might not apply. To avoid confusion when discussing the FHA on this topic, it is common to use the words "assistance animal" and not "service animal" as the definitions are quite different. For example, the FHA includes emotional support animals within its definition and it is not limited to dogs and miniature horses.

There are other federal and state laws that may apply as well, but the FHA probably isn't a bad place to start. I don't want to go into further detail because I don't want to provide legal advice or get something wrong, or even worse, both!

To learn more about "service animal" vs "assistance animal" I like this law firm's short blog post https://fairhousing.foxrothschild.com/2017/07/arti...

Here is a post by this same firm on FHA exemptions https://fairhousing.foxrothschild.com/2011/01/arti...

This HUD memo discusses ADA vs FHA a bit and discusses landlord rights under FHA, to the extent they're the same as Section 504 https://www.hud.gov/sites/documents/SERVANIMALS_NT...

I routinely let tenants move in a few days early for free if the place is empty. Doesn't cost me anything and it's as an opportunity to build good will.  My leases provide that if the tenant is allowed to occupy the property in any manner before the term starts, that all provisions shall immediately apply as if the term had been amended to commence on that date, or something to that effect.  

Another issue with respect to the source of the down payment is that while you can use gifted funds to purchase a primary residence with a conventional loan, you cannot use gifted funds as the down payment on an investment property with a conventional loan, to the best of my knowledge. One way around that is to combine the gifted funds with other cash (loan from parents or friends, HELOC, etc.), buy the property with no lien on it, and then immediately finance it without a seasoning period.

Great feedback.  Thanks!  I agree I can be more brief overall and with respect to the electrical warning, more general.  All of my rentals are relatively old, at least 50 years, but no reason to believe anything is wrong, so the statement should be more about taking precautions in general.  

Fortunately the standard (at least in Colorado) is to take reasonable safety measures, not to ensure the place is safe.  The point of this in part is to document and reinforce that reasonable safety measures were taken and communicated.  My first step was actually taking those actions, which go well beyond most rentals and owner occupied homes in the area that I've seen.  Even the egress window contractor questions why I've paid him $40k in the last 10 months instead of spreading it out.