All Forum Posts by: Jeremy Zindel

So I’m currently at 7 financed properties and I’m wondering if I need to consider doing a few Fannie/Freddie rate and term refis to lock in a fixed interest rate before I hit 10 financed properties.  I currently have 7 mortgages, all of which are commercial loans through a couple small local banks.  They are all 5 year balloon on 10-20 year amortization at 4.75-5.0%.

My question is whether or not Fannie/Freddie with do a rate and term refi after I hit 10 financed properties?  Obviously they aren’t going to originate any new loans once I hit 10 but I haven’t been able to find definitive information on where they stand with regard to rate and term refis (no cash out) and the 10 property limit.  Any insight would be greatly appreciated.

So I’m currently at 7 financed properties and I’m wondering if I need to consider doing a few Fannie/Freddie rate and term refis to lock in a fixed interest rate before I hit 10 financed properties.  I currently have 7 mortgages, all of which are commercial loans through a couple small local banks.  They are all 5 year balloon on 10-20 year amortization at 4.75-5.0%.

My question is whether or not Fannie/Freddie with do a rate and term refi after I hit 10 financed properties?  Obviously they aren’t going to originate any new loans once I hit 10 but I haven’t been able to find definitive information on where they stand with regard to rate and term refis (no cash out) and the 10 property limit.  Any insight would be greatly appreciated.

I'm out of town again so I won't be able to make it.  Maybe third time's a charm.

Thanks for setting this up @Scott Dixon and hopefully I'll actually be home for the next one so I can come meet everyone.

Also, if you are interested in a more detailed economic and demographic breakdown for Decatur you can check out the following website, http://www.decaturedc.com/.

The reports under the "Community Profile" tab paint a pretty good picture if you are in to looking at that type of research when selecting a market.

Hi Tou,

Decatur, IL is my home area/market.  I’ve lived in the area my entire life (in a small town about 30 minutes out), worked here since I’ve been out of college, and started investing here in 2012.

Industry/manufacturing is the heart of the city’s economy although it is less dominate than it was in the city’s prime 10-20 years ago. The population of the Decatur itself has decrease since that time but the surrounding communities that make up the larger “metro” area (term used loosely… total population is only 100,00ish) have grown.  Unfortunately the city itself has seen a lot of unemployment which it has had a problem getting past.  A large portion of the inner city population survives on government assistance and programs which, in my opinion, contributes to the higher levels of crime and drug activity in those areas, but we’ll leave that political topic for another discussion…

As far as investing goes, I've been happy with the investments I've made. I have 8 units (one duplex and the rest SFR) that produce good cash flow. All but one of them are in the various neighborhoods out on the perimeter of the city in decent to good residential areas. One is inner city and I don't care for it at all. Don't get me wrong, it cash flows like crazy but it's not the type of property I wanted to build a portfolio with, although there a lot of people here that do. There are lots of dilapidated houses in these areas and unfortunately it just continues to get worse and not better.

There are a ton of properties on the MLS right now that could be picked up for $10-25k and rented for $350-$500/mo but they would generally be in the areas described above where most of the other homeowners and landlords on the block are not going to maintain their properties to the level that will preserve home values. For Decatur in general, if you are looking for appreciation of any kind then you should definitely look for a different market. Cash flow, on the other hand, can be had for sure due to the low price point but if you want it to be sustainable you have to find the sweet spot (in my opinion) in some of the outer lying neighborhoods. You spend a little more and don't get quite as much increase in rent in proportion to the additional acquisition dollars but a solid house in a better area with a more stable working class/middle class tenant while still cash flowing is worth it to me.

Hope that helps,

Jeremy

Well it looks like I'm probably sticking with my current portfolio lender for now then. 80% of appraised value after renovation with no seasoning requirements is pretty tough to beat even though it's only 20 year am. with 5 year balloon. Worth it in my opinion to be able to get in and out and on to the next deal.

One additional thought I just had... Would it be possible for me to deed the property to my wife, let it season 12 months, and then have her qualify on her own for a conventional cash out refi based on 75% of the new appraised value? She is not associated with any of mortgages or personal guarantees and my LLC is single member so she is not tied in thru the entity either.

Just a thought, trying to be creative here and explore all my options. Would love to hear opinions on this.

Is the cash-out option you describe above the FannieMae "delayed financing" mortgage? If so, I have researched that a little bit but the biggest limitation for what I'm looking to do is as follows:

"The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV/CLTV/HCLTV ratios for the cash-out transaction based on the current appraised value)." (from fanniemae.com, B2-1.2-03)

I purchased the property for $28k and am in the process of putting about $25k into the renovation. So with closing costs, I'm all in for around $54k. Property will conservatively appraise for $80k when finished but I would only be able to pull out the $29k for original purchase and closing plus closing cost on the refi, correct? Even though max LTV is 70% based on appraised value which would be $56k?

I did make the purchase with cash so this is an option but I'd be leaving a lot of money on the table vs the commercial loan product I've been using that let's me cash out 80% of appraised value (although I'd be giving up the 30 year fixed interest rate). Also, I'd think it might be difficult to get someone to do a $30k conventional loan.

@Albert Bui , please set me straight if I'm off base on any of the info above and thanks again for your help and info.

Hey Albert,

Great info above! I'm in a similar situation as @Ken Bernstein and was hoping you could provide some insight on my cash-out refi prospects.

I currently have 5 SFRs and 1 duplex that I have bought, renovated, refi-ed, and rented out. In all cases I bought and fixed up with personal funds, private money, and credit cards and then refi-ed using commercial/portfolio loans thru a couple small local banks. They are 4.75-5.0% fixed rate on 10-20 year amortization with 5 year balloon (renewable at adjusted rate after 5 years).

I recently closed on my 7th property and I'd like to refi into a conventional loan to lock in a 30 year fixed rate as opposed to the 5 year balloon/adjustable loans that I've been doing. My question is, are the six other financed properties I have going to put me in the loan number 5-10 category for Fannie or in the 1-4 category? (Does Fannie even do cash-out on more than four?) Title is held on the first six properties in the name of my LLC and all the commercial loans are in the name of my LLC. None of them show up on my credit report but I did have to personally guarantee them.

To complicate things further, while five of the properties are on my 2013 tax (so obviously I can't deny that I have other properties), only three of the five have a mortgage interest expense line item on my Schedule E. Would that mean this next property might only get categorized as #4 (assuming they count commercial loans), even though I have actually refi-ed the others, but after 12/31/13 so no record of the loan being tied to me.

I in no way want to do anything that would be considered fraudulent with regard to the mortgage underwriting process but want to get the best treatment I can for this next refi. Any insight would be greatly appreciated.

Also, I just wanted to make sure I read your original response correctly that if I want to pull out cash based on the appraised value that I will have to wait 12 months?

Thanks,

Jeremy

Steven: Yes, I bought my first property in Nov of '12 so it sounds like I divide up my overhead expenses between my properties as I already handled my startup costs on my 2012 taxes.

Thanks for all the input. I really appreciate it.

Thanks Steven. I don't actually have my RE license yet. I'm about a quarter of the way through the pre-license coursework right now and will be taking the test this spring. The cost of the course itself is all I have to expense for my 2013 taxes. And yes, the reason for obtaining my license is to be able to look at and make offers on properties on my own. I have no desire to list properties or work as a buyer's agent.

Unfortunately no RE professional status for me yet... still working the 8 to 5 at this point. At some point the goal will be to go full time into REI but i'm just not there yet.

Any thoughts on an expense that must be depreciated over X number of years? Still just divide up between all the properties?