All Forum Posts by: Carlos Valencia

Hello Brian, 

Personally I would wait to save more because you want to have the flexibility when you buy your first investment. The good thing is that rates have slowly started to drop. Allowing you to borrow money at a cheaper cost. In order to qualify for your first investment loan you will need to put down 25% of the properties purchase price. Hence why 15k wont get you too far unless the properties your looking at are 100k and below but even at 100k you still need 25k so your 10k short. Plus you will need money for closing cost as well. 

I know you mentioned you do not want to live in the property. But what many new investors do in order to buy with low down payment is they buy it as primary so they can acquire with 3-5% down. If you can deal with living there for 12 months then move out with your family afterwards then you are good as you just acquired your first rental property. Just make sure that when doing this house hacking strategy that you run the numbers to make sure you will cash flow or at the very least break even upon moving out. You don't want to get yourself in a situation where you have to cover part of the monthly mortgage every month otherwise how will you get to travel and live the investor life right? 

You mentioned you want to travel while renting out this property. Is your job remote or do you think that just having one rental property will be enough to retire and live the retired life? If this is your goal to live off of rental income you will need to acquire many properties until you reach your overall goal of making enough off rents that will cover all of your living expenses plus a little extra for fun stuff. Just stuff to think about when beginning your journey. This will be a long term game plan. Be patient and last tip is to keep your active income as long as you can and try to continue to increase that active income every year as that will help you grow your rental portfolio much faster and live below your means. 

@Albert Bui @Matthew Kwan

Hello Elwin, 

If its free and clear you should just do a cash out refi. It will be a more cost effective rate than a Heloc. Helocs are almost like hard money rates lol. HElocs are prime 8.50% plus 2-3% depending on the Heloc product you use. Refis are more in the 7-8s for investments. 

@Albert Bui @Matthew Kwan

Hello Felicia, 

The good news is that rates have started to come down a bit so that can help your cashflow a little more. Typically if you put 25% down you do get better rate assuming you have a 760 or better fico. Not sure what market your in but if you can find something that you can potentially at the very least break even then that's a win in this market. What you don't want is to be negative even if its $100 unless you have a plan where you know that the appreciation will help offset that negative rent or you know you can squeeze out more juice in the near future by adding more value to the property later. If you have more than 25% down and you know that you can use the rest of the money you have to help you fix the property or invest it in another asset where the money will continue to grow then by all means go for it. Keep in mind that when you invest all of your capital into one property that money will be stuck there until you can cash out refi or sell the property. 

If you are ok living with roommates another option is house hacking where you buy a property as a primary and rent out the rest of the property then move out after 12 months to acquire your next one. The great thing about this strategy is that you can put as little as 3-5% down allowing you to keep more of your cash in your pocket and still get a lower rate. If you played your cards right you may even cashflow upon moving out because you will now rent the space your were living in. There's many paths to grow your real estate portfolio just make sure you pick the one that is right for you and remember this real estate game is a long term investment. 

@Albert Bui @Matthew Kwan

Hello Ian, 

Using a Heloc to purchase your next investment is not a problem. Some lenders allow you to go up to 90% combined loan to value meaning whatever your balance on your first mortgage is plus the equity loan can go up to 90% of your homes value. Example if you owe 300k and your home is valued at 600k you can only borrow up to 90% of the 600k value. 540k is 90% of 600k. If your balance is 300k then that means you can take a line of credit of about 240k on your property. Depending on the type of Heloc you get its interest only payment for the first 3, 5 or 10 years then the remaining time will be a payment of principal and interest. 

Heloc is a full documentation loan meaning that they will verify your income and credit. Just because you may have enough equity to go up to 240k doesn't mean you will be able to access it all because what if you can only qualify for 100k. The next factor is since you are looking to use that towards a down payment for your next investment you will need at least 20-25% down payment. Make sure to do your due diligence when acquiring your next property as you will need to make sure the rents can cover your mortgage payment. Any negative balance will go against your DTI when qualifying for the investment loan. Lender only uses 75% of your rents to offset the mortgage payment with taxes and insurance.

Take aways here are to make sure you have a high active income to be able to use this strategy. Not sure what market you are in but if its in an expensive market you will need a really high income to proceed. Make sure to plan ahead and speak to an investor friendly lender that can help you look ahead at potential roadblocks and how to avoid them or overcome them before getting your self into a sticky situation. 

@Albert Bui @Matthew Kwan

Hello Shivani, 

Lenders allow you to use 75% of your lease agreement if you acquired your property within the last 12 months and have not filed your tax return for the year when the property was acquired. When looking at your next investment property make sure to look at what is the max rents you can receive for that property. the goal is to cash flow or at the very least break even at 75% of rents received. In the event where you have owned your rental property for 2 years and you have filed your taxes claiming that property as a rental then they will have to use your net income based on what your tax return show for income. At that point they will use 100% of what the net is minus your monthly mortgage including taxes and insurance.  Its best to discuss your scenario further with a investor friendly lender so they can best advise and help you plan to build your investment portfolio because if you make one bad investment that can derail your progress. This is why its good to make sure you still have active income to continue to build your portfolio. Without active income it will become challenging to grow.

@Albert Bui @Matthew Kwan

Hello Maria, 

Depending on your file will depend on the stress of the process. If you are a borrower with a w2 income and no other properties only basic liabilities your file should be very straight forward. Just make sure not to open any new unsecured debts, or change jobs. Other than that all the underwriter needs to verify is your income, assets, and liabilities to make sure you can pay for your mortgage and low risk of defaulting.

@Albert Bui @Matthew Kwan

Hello Connor, 

My team and I are investor friendly mortgage broker and we are happy to connect with you to discuss your scenario and look into what are the best solutions for your current scenario. 

@Albert Bui @Matthew Kwan

Hi Dilcia, 

Did you even try to go conventional? Its always best to have a mortgage planning consult with a mortgage broker/lender to find out what are the pros and cons of using certain products to fund your next investment. Not just to give you one option and not discuss the other options. Its always good to have plan A, B and C as an investor as you never know what can change your scenario at the last minute. Reminder too that once you get more properties under your belt and begin having a bigger real estate investor portfolio your file begins to get more complicated and even a simply loan like DSCR sometimes may ask to prove other items. But typically they DSCR are pretty straight forward.

@Albert Bui @Matthew Kwan

Hello DeAndre, 

Are you assuming that your appraised value is 350k? For owner occupied there is some lenders that can lend you up to 90% CLTV for a Heloc. In your case this would be about 100k-115k. But you would need to qualify of course in order to go this route. Cash out refis usually can go up to 75% LTV for duplex owner occupied. If you appraise at 350k - the 75% you can possibly take out 62k. Not sure how much you need for the remainder of the repairs. First thing is try to find out how much you can qualify for and see what options are available for your scenario. Are they going up to 50% of your income or are the banks your working with now more conservative and maybe only go up to 45% or less.

@Albert Bui @Matthew Kwan

Hi Shivani, 

That's great that you became a full time investor. I'm assuming you are now at a point where you have enough money coming in to cover your minimum living needs. The only challenge when being a full time investor that depending on how much passive income you are generating from your investments that can slow you down in your growth or maybe you have enough to continue at a comfortable pace. Not sure what your overall goal or your end game. I would if you have a lot of time on your hands now its a good idea to go back and get a w2 gig for active income to help you borrow money using conventional mortgages as opposed to using more expensive money like hard money or DSCR loans. You don't necessarily need a w2 for active income it can also be anything else like self employment works too you just have to wait one year of tax returns but run your business for at least to years to use it and make sure you don't write off too much as you want to be able to use the income to qualify for a mortgage. These are just some tips to help you decide on weather you need active income still or not. Good luck on your investing journey.

@Albert Bui @Matthew Kwan