All Forum Posts by: Eric Villafana

***Update*** I reached out to a few other lenders. I was pre-approved by a lender who services their own loans for the life of the loan. They also counted 75% of the rents received from the home in MD, as I understood was standard practice. The were also much more understanding of the fact that the depreciation taken on the taxes is purely a loss on paper.

Since they service their own loans, I don't believe they are bound as tight to lenders who sell their loans on to Freddie Mac or Fannie Mae.

Thanks again to each of you for your replies.

-Eric

***Update*** I reached out to a few other lenders. I was pre-approved by a lender who services their own loans for the life of the loan. They also counted 75% of the rents received from the home in MD, as I understood was standard practice. The were also much more understanding of the fact that the depreciation taken on the taxes is purely a loss on paper.

Since they service their own loans, I don't believe they are bound as tight to lenders who sell their loans on to Freddie Mac or Fannie Mae. 

Thanks again to each of you for your replies.

-Eric

@Carl Fischer

Outstanding info. Thank you for taking the time to run through some options. I'll send you a PM with some specifics.

Good evening. Has anyone used a loan against their 401K or Thrift Savings Plan (TSP is 401K for government and military) as a down payment toward a Flip.

TSP will allow a loan against your balance with a 2% interest rate. The best part is that the interest paid is to yourself. There are two types of loans; General TSP Loan (12-60 Mo) and Real Estate (up to 15 Yrs).

The real estate TSP loan can only be used for a primary residence. However, the General TSP loan can be used for whatever you want.

Thoughts? Experiences?

Let me know! 

I look forward to some good info.

-Eric Villafana

Good evening. I posted this same question in the Mortgage and Financing forum and received some great insight from the lending perspective. I'd like to get some feedback from those with an extensive knowledge of real estate and taxes and how they can effect my future ability to purchase an investment property, and even more importantly, a primary residence. I'm active military and plan on purchasing a primary home at each duty station then turning into a rental upon departure to the next.

------------------------ORIGINAL POST---------------------------------------------------------

I was recently in the process of gaining a pre-qualification for purchasing an investment home (buy and hold rental).

Our starting target range ~$100K. I spoke with a lender who was referred to me by my real estate agent and he pretty much told me that I have zero chance of financing an investment property for the next few years.

The primary reason given is that my 2016 tax return shows a loss of ~$10.9K on a rental home we own in Maryland.

I'm fairly certain that I miscalculated the depreciation on the house. We moved and began renting it out in August. The depreciation from August should only be about $4.5K but when inputting the date of business use, I put the purchase date (July 2014) versus the date we began leasing it. That resulted in the depreciation being counted for the entire year ($11.1K) versus just a quarter of the year.

There are a couple questions I have.

1. If/when I amend my return (pretty certain I should), should I also look at adjusting the other expenses originally claimed (Specifics below):

Advertising: $150

Auto and Travel: $108,

Cleaning and Maintenance: $2,363

Commissions: $2,600

Insurance: $ 306

Mortgage Interest: $6,572

Repairs: $360

Taxes: $2,051

Depreciation: $11,131

Other (replaced washer/dryer): $774

-----------------------------

Total Expenses: $26,415

Bottom line from my Schedule

Rents Received : $15,430

Total Expenses : $26,415

Deduction for loss : (-$10,985)

-------------------------

If I amend and take out all things except for the taxes, insurance, commission and the correct depreciation, I would show a profit:

Taxes: $6,572

Insurance: $306

Depreciation: $4,444

Commission: $2,600

----------------------------

Total Expenses: $13,922

Bottom line after proposed amendment

Total Rent: $15430

Total Expenses: $13,922

Profit: $1,508

I know this is a long post, so I appreciate and and all help. I tried to ask these questions to the mortgage broker, but he seemed less than interested in the matter. What are some of the second and third order effects of amending the return? Would I put myself in any worse of a position or would I possibly improve it?

Thanks in advance,

Eric Villafana

Thank you for all the replies and insight. The home in MD is a VA loan. That's the home that has been a rental for the past year. The primary residence we reside in now (San Antonio, TX) was financed with a conventional. The financing we were seeking for the additional rental which would also be in SA, was also a conventional loan. Everything happens for a reason, so we will see how things go moving forward. One additional question I have is of this scenerio with the taxes will also prevent us from purchasing a new home at our next duty station. I sure hope not .

I'm also told that the entire mortgage payment has to be applied to my DTI and that no part of the recieved rents can be applied. When using a conventional for our current Residence in TX, they applied 75% of our monthly rents to my income. That's not happening in this situation. The broker is taking $2,500 right off the top of my monthly income and claims it's due to to loss reflected on the MD home. If there are other reasons, I'm not sure what they are. He didn't ask me about any additional debts other than the two homes, nor did he ask about reserves. I almost felt as if I was being quickly dismissed. The only documents he requested were my taxes and the signed lease. I asked him about whether showing a profit this year would better my chances. His answer was that it was "a loaded question". Strange experience.

Happy Sunday!

I was recently in the process of gaining a pre-qualification for purchasing an investment home (buy and hold rental). 

Our starting target range ~$100K. I spoke with a lender who was referred to me by my real estate agent and he pretty much told me that I have zero chance of financing an investment property for the next few years. 

The primary reason given is that my 2016 tax return shows a loss of ~$10.9K on a rental home we own in Maryland.

I'm fairly certain that I miscalculated the depreciation on the house. We moved and began renting it out in August. The depreciation from August should only be about $4.5K but when inputting the date of business use, I put the purchase date (July 2014) versus the date we began leasing it. That resulted in the depreciation being counted for the entire year ($11.1K) versus just  a quarter of the year.

There are a couple questions I have.

1. If/when I amend my return, should I also look at adjusting the other expenses originally claimed (Specifics below): 

Advertising: $150   

Auto and Travel: $108,    

Cleaning and Maintenance: $2,363   

Commissions: $2,600   

Insurance: $ 306

Mortgage Interest: $6,572

Repairs: $360 

Taxes: $2,051

Depreciation: $11,131   

Other (replaced washer/dryer): $774  

-----------------------------

Total Expenses: $26,415

Bottom line from my Schedule

Rents Received : $15,430

Total Expenses : $26,415

Deduction for loss : (-$10,985)

-------------------------

If I amend and take out all things except for the taxes, insurance, commission and the correct depreciation, I would show a profit: 

Taxes: $6,572

Insurance: $306

Depreciation: $4,444

Commission: $2,600

----------------------------

Total Expenses: $13,922

Bottom line after proposed amendment

Total Rent: $15430

Total Expenses: $13,922

Profit: $1,508

I know this is a long post, so I appreciate and and all help. I tried to ask these questions to the mortgage broker, but he seemed less than interested in the matter.

Thanks in advance,

Eric Villafana

We are looking for referrals for a good handyman and/or general contractor that we can keep in file in preparation for any needed repairs in our Maryland rental home. Any and all recommendations are welcome. I don't have any specific need at the moment, but I'd like to be prepared when the need arises. Things I can predict are drywall touch-up, paint, caulking, etc.