All Forum Posts by: Chris Teti

Definitely a great tool to have in your toolbox. Just be careful that as the balance gets higher, it will negatively impact your DTI and if you ever move, you will lose that working capital.

@Chad Summy Sounds like you two are really trying to do the right thing. The good part is you have plenty of options and different ways you can go. Good luck! 

@Chad Summy So you're family member is out $120K and is allowing you to pay them back at 0% interest with no payback timeline? That's kind of crazy.

For me personally, I don't think I would be comfortable with that. I would probably take out a mortgage on the property to pay them back (interest rates are very low right now vs who knows what they will be a few years down the road), and take the $40Kish that is left over to seed your next investment property. If your family member is willing to basically lend you $120K with no strings attached, I would use that to purchase the next investment property and give them a return (like 5% or 8%  or something). Assuming that if they are allowing you to use $120K of their $$ at 0% with no timetable of paying them back, they probably have more money to work with and they probably have a network of friends and/or business associates that have $$ as well. If you bring them into your plans, do right by them, and show them a good return, it could potentially unlock access to significantly more $$ to work with. 

@Chris Henry That's a tough one. If you are using a private lender and making a "cash" offer, then you definitely have a stronger offer compared to others with mortgage financing. It should also allow you to close quicker too, which helps strengthen your offer further. As far as how much lower you can offer, that's really hard to say as it depends on your market, how you found the property, and the property itself. For example if you found it off market, the market for that will be smaller with less visibility, so you can make a lower offer and negotiate from there. If your market is hot and it's on the MLS, especially in a desirable neighborhood, it could get quite a bit of interest and you have to come strong regardless. For example I'm seeing properties in my area get 9 offers within the first couple days of being for sale, you aren't getting one of those unless you come with a strong offer.

I guess my best advice would be figure out what you need to get the property at for your numbers to work and go with that. If you don't get it, move on to the next instead of overpaying for a property and getting stuck with a bad project where the numbers are too tight. If you try to go into a popular property in a hot market with a low ball offer, you won't get it.

Hope that helps, good luck! 

It depends on your market. Right now a no money down or FHA loans are losing out to stronger conventional or cash offers because there is so much activity on houses that are currently for sale. So they may be a good option to keep more cash in your pocket, it may make it harder to actually secure the property.

@Rosaria Pipitone This is a good example of when investors start looking at the BRRRR model utilizating hard money. They use hard money to purchase the investment property, renovate, and then get it rented out. At that point you have a fixed up cash flowing property that you can refinance either through a more traditional commercial lender or a longer term hard money rental loan. They won't be as cheap as the residential mortgages though.

There are many ways to do it and ultimately it is something you have to decide for yourself what is the best fit for you. I work with investors from across the country and I've seen many that put their properties in their name to get the best mortgage rates and get insurance to cover them while others put them into an LLC for the separation and protection.

If you are going to grow your rental portfolio, at some point you will have to start putting them into an LLC (or multiple LLC's). My option is that I would do this from the beginning for several reasons:

1) Liability protection (consult with your attorney on this).

2) Separation of business and personal credit (keeping your rental mortgages off of your personal credit allows you to be more bankable for any lending you might need such as personal mortgages, car loans, etc).

3) Leveraging business revenue to secure additional business lending (such as business lines of credit).

4) Loan flexibility (there are several hard money lenders that have pretty good long term renal programs with flexible terms unlike most residential mortgages that will be stricter on some of terms such as where the down payment and closing costs $$ comes from).

Good luck!

@Schnell Johnson  One option for bridge financing are unsecured business lines of credit. The great thing about them is that you can use them over and over, not just for one deal. 

I had the same as @Kerry Baird. HELOC was closed, home refinanced, and then I had to re-apply for the HELOC again. Worked out better actually b/c the house was worth more so I got a bigger HELOC.

Jesse is right, the minimum payments count against your DTI. I believe your score determines your rate and the DTI determines your loan amount. I'm not a mortgage broker so I could be wrong about that.