All Forum Posts by: David Hooper

The guys at BP always say this, and I think it's really true--if you find a deal, find a REAL DEAL where there's money to be made, share that with everyone in your sphere and the money will appear. Get out to the real estate networking meetups, or start hosting your own. You've probably had local lenders take you out to coffee/lunch, you've probably picked up a couple real estate agent mentors as well. If you're connecting with the right people, they should have had some level of success in their own businesses, and potentially have capital. Or they can connect you with others who have capital. 

It probably will help if you can partner with someone with some gray hair, and even if that just means you'll be borrowing their name/credibility at first, that's one way to overcome the "age" hurdle. A lot of great agents build a "buyer's list" of investor types who have the capital but don't have the time to get out and find deals. Exchange your time for that capital, knowledge, and experience. Bring them a real deal and you'll get the money to make the transaction happen. Be sure not to get greedy and offer to take a smaller split of profits -- it's a sign of good faith for more deals where you'll have your network of people who can provide private capital in the future. 

As @Jerry Padilla said above, you want to do renovation financing. Fannie Mae HomeStyle is probably the best loan product available, so I'd ask your LO or reach out to one of us on BP to get that going for ya! :) 

@Chris Mikkelsen-- I got 2 rentals in the Sacramento-area myself! (Rocklin & Natomas)

Straight-up cash-out would have normal tax returns, w-2s, pay stubs, bank statements, etc. requirement with DTI cap. Depending on how many other mortgages you're carrying, that could also affect qualification.

Alternative would be non-QM where if rents cover PITI then the loan is approved, minimal doc requirements (credit report, appraisal, bank/asset statements, lease agreement, few others) but your rates are non-QM (6 to 9%).

HELOC might be your better option if you only need access to the funds for a short time, but those are always ARM, and are often really difficult to get on investment properties. You've got a better shot, as mentioned above, with your HELOC being in first lien position.

Let us know what you ended up doing!

If you can get out of your current FHA loan (rate/term refi), you can look at a new FHA loan with a 3 to 4-unit property that meets the self-sufficiency test. This means that the rental income on the 2-3 additional units you don't live in have to cover your PITI expenses, and of course you're ceiling is the FHA loan limit, but that sounds like a way to get into a second property with minimal impact on your monthly cash flow when it's all said & done.

I don't know if the NFCU "VA-like" loan product would actually follow the VA loan limits in Hawaii, but if that works then it might be your best bet.

The alternative of refinancing your current home -- definitely do that NOW before you move out of the home, then you can re-instate your VA benefit and re-use it. If you do the refi and the new purchase too close together you may draw scrutiny so you want to have a legitimate reason why you decided to move after refinancing, but if you refi after you turn it into a rental you're going to be hit pretty hard on the rate for an investment vs. a primary residence. 

Please post/share what you ended up doing so we can all learn! Mahalo! 

Saw this in the recent threads so I thought I'd drop a line in. I ran some numbers -- your max LTV on a cash-out refi in TX for an investment property is 75%, and your rates suck, but you can definitely do it as long as you can show 3 months of reserves.

As above, I'd recommend you partner up with someone who has capital but no time, and you deliver on the time in exchange for capital, knowledge, and a share of profit. 

As the BP crew always says, if you can find the deal, the money will become available. You just have to keep networking, going to real estate investor meet ups, and talking to people. Learn how to find the deal, talk about it with as many people as you can who "get it," and the financing will fall into place. 

Some lenders can work in all 50 states, and will do underwriting with the debt service coverage ratio. Challenge you'll run into is that most people won't play with you for loans below $100K and your rates are going to be 6 to 9% when you play in non-QM world. If rents (minus a 5% vacancy) still cover your PITI expenses, then the loan would be approved (obviously with a bigger impact to your overall cash flow).

Hey! I have spoken to a few international RE investors in the US, mostly met through BiggerPockets. I haven't closed any transactions yet, but we've gotten 80-90% there--partly due to shifting guidelines and partly due to distance / inability to find the right property (or properties). 

Some challenges to be aware of:

- Loan values below $75K or even $150K -- lenders don't like to play with you (but some will). Fundamentally the pay-off is lower and not worth the extra effort to do these types of loans. 

- Cash-out refi seasoning requirements will vary, from as low as 3 months to sometimes much higher, 6, 9, or even 12 months [so if you buy with cash and plan to refi, you should have the flexibility to have your capital tied up or a plan in place prior].

- I advocate working with local lenders to the market you'll be buying/investing in, but in the long-run a relationship is going to be more important than the locality so working with someone who can lend in multiple states (or all 50!) is probably good.

- Big box banks are probably not the place to go. Brokers and bankers who work with various "investors" who buy the loans on the back end are going to be more beneficial, as they will have more access to special/unique programs and more experience and willingness to work with you. 

- On most of the foreign investors seeking mortgage loans, you're going to be looking at non-QM programs. That means your interest rates will be 6 to 9% and your LTV's will rarely exceed 75%.

Hope that helps!

Two years is preferred, but if you have compensating factors that can be waived. Examples: you worked in that same line of work prior to your current W-2 employment, you have specialized training/experience that makes you likely to continue in your current line of work at your current rate of pay or greater, you recently transitioned from school or the military, etc. 

Fundamentally, lenders have to answer to the big regulators that we've done our due diligence to make sure you have the Ability to Repay. Quickest & easiest is two years W-2 + recent pay stubs, but I've done self-employed at one year in (with special experience/training in the same field prior to self-employed work), and fresh out of school/training with a solid employment contract (start date, salary, no contingencies). 

If you went from being a welder to being a carpenter and you only have one-year of W-2 and you didn't go to carpentry school, that might be tough (not impossible, just tough -- your employer would have to vouch strongly for your likelihood of continued employment). If you jumped around jobs a lot in the last two years, that's probably tough, especially if there's no degree of specialization (e.g. store clerk, burger flipper, etc.). 

I don't know if it's been easier in the last 1.5 years I've been working as a lender, but it's been very doable in my scenarios. Part of it will depend on if your lender has delegated underwriting and flexible underwriters, vs. non-delegated underwriting with inflexible underwriters. As long as the lender can document a solid paper trail showing due diligence for verifying "Ability to Repay," you'll probably be good.