All Forum Posts by: Mike H.

To me, of all the areas I've looked, the best places to invest seem to be Texas, Indy, Las Vegas (for pure cash flow and product only - not sure I like the economy to actually invest there), and Georgia.

But I still come back to the financing. Texas seems to have the best investor financing of any state in the US. Combine that with the superior landlord laws (evictions in 30 days?), great economy, low property taxes (2k) and to me its a no brainer where I'd be going if I thought I could make out of state investing work.

Texas has to be one of the best investor states in the country. And although I'm not there yet, looking at the cap rates for multifamily there, it seems that apt complexes are big time money makers there too.....

One reason I keep toying with idea of investing out of state is that financing has become so difficult for me here in Illinois. I'm over the 4 property limit and I'm almost over the 10 (I have 2 spots left).

I have managed to get a few portfolio loans through but those lenders have all stopped doing those loans now.

I don't see an exit strategy if I want to keep adding more houses here.

Whereas in places Texas they have lenders still doing portfolio loans so that would allow me to keep adding more homes. And texas always seems to be a great market for housing.

Unfortunately, I'm still going to have the same problem with financing there. I don't know that the local banks will want to lend to someone from out of state.

Its always something......

My previous post might not have been as clear as possible. Its not a HUD loan. The HUD reference was to the HUD settlement statement from the initial purchase.

Yea. My mortgage broker is trying one last thing but they just won't budge. Its amazing that I keep coming back for more. At some point, I just want to quit and tell these banks that I hope all their foreclosures go down the toilet in price.

Its amazing that the banks sit there and say that there is no loan demand out there. What they mean to say is that their guidelines are so nonsensical that even their own underwriters don't know they exist - as evidenced by the fact that my file went through 2 reviews of underwriting plus a final round to get me to final conditions (3 reviews) and none of them had said this was an issue. Only the "final final" review before my clear to close did this become an issue. I was little 2 days away from my closing.

This one is painful.

I'm really losing faith in being investor. I've got 14 houses now and may just sit back now and limit myself to 1 a year or so. At some point, the aggravation and anxiety just isn't worth it to me anymore.

Thats exactly my point. History may show that investment properties default more. But history is also schewed by the crazy loans that were given out too. 0 money down on inv property that has net cash flow of negative $500 per month. One exit and one exit only was to sell. If not, guess what. Its coming back.

What they should do is go back and see how many houses at 70% LTV or better that were making $300 a month or more in net cash flow came back.

Thats what the rule of thumb is today on most investment properties. You aren't getting a loan unless you're 70% LTV or better. And if you're at 70% LTV, then you're making $300 a month or more - or else you're not investing......

I would bet anything that the investment properties that fall under those guidelines came back far less than the OO houses.

Its just a matter, yet again, of banks not having any common sense in the factors they're using to determine risk.
Keep in mind, this was the same bunch that rationalized sub prime loans.

Here was there logic for the subprime mess. "We know you don't qualify for a loan at 7% because we don't think you have good payment indicators. But we'll give you a loan at 11% just the same. Somehow, we think you'll actually be able to afford that." HUH?????

So I will never be one to believe that banks do anything for a valid reason. Moreso, they're inclination is to act like sheep.

Just need to get one bank with a little initiative and some common sense to re-visit investment loans and realize that inv properties bought in today's market are going to make for the best paper that bank will ever write.

Yea. I have turned up quite a few stones. I found one really small bank. They were real conservative/smart in their lending and they've tightened up even more with their guidelines. But they did one for me 2 months ago. Just not sure how many they'll do going forward.

That being said. Does anybody wonder why these big banks aren't doing investment property loans nationally?

Doesn't it make more sense to lend on a property at 70% LTV for a house that is cash flowing $300-500 per month. And that you can reset your rates every 5 years to limit your rate exposure?

Isn't that a much better loan than what the banks are doing today? 30 yr fixed at crazy low rates at higher LTV's with zero cash flow.

If the owner occupant loses their job, the bank is getting their house. If an investor loses their job, their investment properties aren't going anywhere - they're the only thing the investor has thats generating income...... My primary might end up going back. But not my investment properties. :-)

All the other deals were done the same way. My aunt lends me the money to close and we draw up the mortgage/note separately. I've never had any broker or lender ever suggest this is a problem in the past. Its a rate and term refi of an existing mortgage/note. What does it matter how I closed on the property? I'm not asking them to do cash out now? How did all the other banks do this before? The most recent one was May 2011 and they had no problem with it.

What we really need is for local banks to start doing commercial loans on investment properties (SFH) again.

I know some states are still doing these types of loans. But here in Illinois, our local banks have completely abandoned their portfolio lending.

Any chance there's a national lending entity out there thats doing portfolio loans today?

I'm refinancing a rental property right now under fannie's 5-10 guidelines. I'm over 3 months into this crazy refi and just when they're about to issue the clear to close, I get blindsided by some crazy issue.

Does anybody know what kind of argument I can make to overcome this lender's issue?

I bought the property with my aunt's money and had a private mortgage/note drawn up and recorded. My aunt wired the money to the title company at closing for the purchase. She also rolls in some of the rehab costs into the total loan amount.

So I paid 67k for the house and the loan was made for 88k. I put in about 25k in rehab.

Here's the issue: Because the HUD from the purchase was recorded as me paying cash and not with a lender on the HUD - even though the mortgage and note were dated on the purchase - the lender is now worried that this was a cash out refi with my aunt and they can't do a refi rate and term with me now.

Basically, they're suggesting that the HUD shows me paying cash. My aunt's loan to me was a cashout refi. And now they're gunshy on pulling the trigger to close. The lender is having "a meeting" today to decide.

Everything else is golden. My numbers met all the guidelines. The house even appraised out at 150k so I'm just under 60% LTV which is tremendous given how appraisers are really sticking it to us here in Illinois.

Is there anything I can point to that would help ease the lender's concerns? I've done 6 of these with my aunt's financing and have NEVER had anyone suggest her loan was a cashout.

For the most part, nobody cared what her loan was as long it was a recorded mortgage and they were refinancing her loan rate and term.

The worst part is that I have another house under contract that I won't be able to close on if this refi doesn't go through to free up my aunt's financing.

Suggestions?

Fannie Mae actually changed their requirements recently for cash reserves. They now only require 2 months of reserves for each property plus 6 months for the property you're buying.

Now whether that guideline has filtered down to the lenders or not, I don't know. But hopefully it will at some point.

I'm just wondering when some big institutional investor is going to wise up and start their own niche lending firm to do blanket/portfolio loans for investment properties.

There is no competition and they could get much better rates. But what they should really add as a requirement is cash flow!

Am I the only one that questions how these clueless bankers are running their business? Risk of an investment property has less to do with LTV than it does to do with pure cash flow. If I'm losing $200 a month on a house, then it might default if something bad happens (lose my job, tenant eviction etc). If I'm making $400 a month and something bad happens, that house isn't going anywhere. I'll give up my primary residence before I'd give up the income generating house.

I understand LTV is somewhat important. But if the banks would look at the defaults on investment stuff, I'd bet anything that the ones they got back were from speculators whose houses weren't cash flowing much or were negative.

I use Screeningworks and, while it was easier to get going (i.e. no physical visits), it is also a lot less accurate for some things like names.

I use it mostly for evictions and have caught a couple of people because of it. It doesn't give any detailed credit info either - just good, bad, and no score. But typically, thats good enough for me.

I don't know that I would penalize the tenants because of the product you're using. If you're really concerned, try running the other name and see if that has any negative activity on it. Then you'll know for sure whether its just a screeningworks issue or she's trying to pull a fast one.

I don't see too many tenants willing to do 2 months and find a co-signor. Not if they've actually got ok credit.

btw: I'd also advise not putting the sister on the lease anywhere. Tell the tenant its ok, but don't put her on the lease. In Illinois, you're obligated to serve any adult over 18 if you need to do any eviction. If she's not on the lease, then you don't have to have her served - just in case.