All Forum Posts by: Irina Belkofer

I don’t - they are too expensive for me. My clients did - investors take whatever they can get.
one of my clients financed his factory with such loan…shortly after there started the Great Recession. Bank was checking his financials every year but in 2009 they say to pay it off or refinance - within a month. It was $2M Loan 

He went to another bank and they refinanced him and he closed all accounts with the first bank. He still own the factory and the building free and clear and don’t want any financing any more.

That's one major hazard of DSCR loans - bank can call it off any time if they don't like your P&L etc

Quote from @Michael L.:

@Dennis Muno, I appreciate the feedback. I am speaking on a Heloc for a personal residence for a potential investment. I wasn't sure if it was still considered a heloc if the property was paid off and if there was a better product to use in place of the heloc.

Yes it is a HELOC - home equity line of credit. It’s good because doesn’t have any Cloding costs but it’s bad because the rate is adjustable.
so, basically it’s a credit line secured by your home - it’s a first lien on your house.
if you ever decide to get a mortgage, you’ll have to pay off the HELOC - Banks Dont like being second lien 

VA won't finance rental - you have to live in one unit. So the rent they will count as 75% of potential or existing. Everything else will qualified on your income/DTI/reserves

If 3 units rented and you live in one, then you can’t take all these expenses for tax write off…only 3/4.

I don’t think income tax will be your major concern because the price will be huge and depreciation will help with tax.

YouTube has plenty of these examples - it must be in some areas of appreciation in past because for me it looks like a black hole - one vacancy from disaster. If the property is in California- it’s highly regulated state favoring the tenants. Count in if you can’t evict tenants for any reasons for 3 years and they don’t pay - is your regular income will cover these expenses?

I've got HELOC on my home which is free and clear but I'm not sure about HELOC on rental - not every state does it.

I'm using my HELOC for short term financing needs - the rate is 7.49% and 2 years ago it was 2.29%

Quote from @Anthony Freeman:

Quote from @Muhammad Patel:

Do you have a business?  Are you filling schedule C or K1. If so this could be used a period of income.  If not then the non-qm options might help.  

My business is real estate investing. I do not have an outside entity.

I never had W-2 income - I have 2 mortgages. Lender will take your sch.C, E or K-1 - you just provide two years of tax return.
you'll need to show reserves, low DTI ratio and 20% down for investment property.

if you didn't report your income on your tax return - tests another problem ….but DSCR loan will cost you much more than conventional

Quote from @Ben Firstenberg:

The biggest pro of cash flow is, in my opinion, lower risk.. 

With an appreciation property, your rent income will barely cover the monthly expenses and mortgage. You might just break even in a good month. In a bad month, you might lose money. 

But of course, property appreciation is how you get REALLY wealthy in this game. If you buy a true cash flow property, it may be worth $250k today and $250k in 10 years. That's how it goes in a lot of these midwestern markets, for example. So you might get some great passive income to supplement or replace your W2, but you're probably not going to send your kids to private school with that kind of money. 

I get it that you don’t know much about Midwest investing? Maybe didn’t find good deals?
let me tell you one example - I bought this rental in 2021 for $110K, totally renovated with tenant paying $1700/mo.
the mortgage was $88K and seller credited sec deposit etc, so I paid st closing only $18K.
tenant stop paying, get evicted, I changed the roof (I factored it in the price - it was old), few other things and rented at reasonable $1500/mo.
my PI=$426/mo, TI=302/mo and tenants were my old tenants who rented from me before - they like newly updated houses.

now, if I sell the house now, the price is at least $150-160k - and it was bought in November 2021 with 4.125% APR ….off course, it doesn’t make sense to sell the cash cow - but if I do, I’ll pay capital gains from $40K,other taxes - after I’m getting cash flow at least $700/mo and tenants pay down my mortgage.

if you buy in Midwest for $250K - it’s already doomed deal….what kind of cash flow you’ll get? 7-8%?!? Your money will better working in HYSA now.
‘Midwest is good for cash flow 12-15% but appreciation depends when you buy….$250K is to live in - not to rent

It’s a demand and supply law, isn’t it.

The more buyers on the market - the higher the prices.
. I'll tell you by example of Cleveland- I'm here since 2008 and it was huge sale in 2009-2013. We had ROI=35-40% in pretty decent places, even 100% in East Cleveland.

Then west coast and east coast wanted to invest their money and get that kind of cash flow. I worked with investors both local and out of state. I can tell that local ones never paid the price which out of state investors paid. For our investors less than 30% is a nonsense (and I'm talking NOI - not gross ROI). Out of state investors paid cash and scoop up all the houses. Our PM=10% of the gross rent and it didn't stop them.

well, 10 years later, these out of state investors sold these rentals 5-7X of what they paid. Our local investors just get shocked about priced paid…..and our property taxes at least doubled because of these inflated values.

do you see the resemblance?

‘It’s the same with foreign investors….China doesn’t have pension accounts, real estate busted there recently, do people with money buy up everything in North America without site seen. 

Canada is already out priced - while plenty of people couldn’t buy real estate there.

SF and LA has the same problem - foreign investor just park their money and drive prices up.

I'm selling my rentals for the last year and paying high taxes, too - just because I'm moving to another state…..but my rentals still has 15% NOI unlike houses in Toronto and SF, which might not appreciate again any soon.

My house after full remodel will be listed for $99,900 so people could get a mortgage and live there, but if rented - the rent is $1250-1300. 

The same townhouse without any updates just get under contract for $71K and I bet it’s not o/o who bought it - investors!

we are counting our numbers, out of country investors count theirs….and we can’t compete with them as well as with corporations like BlackRock etc.

I don’t know if I’m pro that or contra….it’s a free country and everyone is free to invest their money …..just feel bad for people who priced out if the market - they can’t afford anything in this environment 

Interesting that no one mention that all government insured loans - FHA, VA, USDA - are for owner occupant only. You have to live in one of the units…..it's only up to 4 units considered residential and more than 5 - commercial only.

You won't close even conventional loan on 10 unit, you have to go with DSCR only or private money

Quote from @John McKee:

TD bank offers lines of credits on rentals, but the rate is about 7.5% so I only use it for short term needs or deals that pay above an 8.5% cap to cover the spread.

My HELOC rate on my primary is 7.49% and it was 2.29% in 2021.
if the rate on investment HELOC would be 7.5% - I’d open that HELIC instead of selling the house. No bank will even give me cash out refi on totally free and clear rental with $150K value