All Forum Posts by: Jason Wray

There is a huge difference in lender who fund on properties that will be a LTH versus a Flip.  Most lender do not want or offer loans for home flippers.  Typically you will see a prepayment penalty which is an obvious indicator.  When you do not keep a home for more than 6 months the bank actually loses some margin in most cases.  

Fix & Flip is a true loan program which usually requires 20%-25% LTC/LTV but with higher rates and points with a shorter term/balloon. Non/QM.

Unless you are doing a 1031 exchange flips can cost a good chink of change on taxes now that rates and fee's are much higher.  If the property cash flows it makes sense to keep it and use the equity to pull some cash out and buy another rental.  There are no taxes paid on a cash out refinance but there are big chunks of taxes when you sell.  

Damein,

You can use an investment rental portfolio program, Freddie Mac or a DCSR cash out refinance program. All you have to do is just pick the best product based on the loan amount, credit score, and property type. Its always best to run pricing for all of the options to see which one has the better rates, terms and highest LTV.

Best thing to do is just have a quick conversation with a Banker/loan officer to get the pre-approval.

One idea is you can subdivide the 1 acre into 4-5 parcels turning them into divided lots of land. You can put a Manufactured or Modular home on one lot to start the process as a primary or secondary home. Once the home is recorded you can finance more mobile/manufactured homes to put on the other lots. Sell them all and create an HOA or mobile home community program and charge a monthly lot fee to service and maintain the land.

You could also sell or lease the lots and allow the lots to be used as a mobile/modular home site with a lot fee. There is no construction when you buy a new mobile or manufactured/modular home its all prefab or transport to site. That makes the project quick to start and fast to make money if you market it correctly. You would want to check zoning but in most cases it would be within rights to permit.

Reach out to @Lucia Rushton great agent and can help you with any REI in DFW.

Erick,

Instead of a heloc what about doing a cash out refinance and avoid taking on 2 liens on the primary and an open end debt.  Helocs are like credit cards they can cause more issues if something goes wrong.  I am sure like most people you have a low rate on your first mortgage but rates will come back down over the next couple of years.

You can take out the cash out and refinance for a lower rate and shortly after to lower the payment.

Raymon,

I am in Pinellas County and have noticed Citrus County is picking up in terms of home values. Having Crystal River, 3 Sister Springs and Homosassa Springs helps with the STR/VRBO options as well. If you have $80K set a side already your off to a good pace in terms of down payment funds. You only need 15% down for an investment rental and I know that there are some good deals on 2-4 Unit multifamily around Citrus County.

Have you thought about which property type you plan on tackling first or just looking for a good deal/cash flow. I was just up there with family to take the boat out to look for scallops and fish. Looks like the city has several new places to eat some good seafood spots and steak houses.

Jeremy,

When you are deciding to use a heloc for renovations or cash for down payments you have to be prepared for possible issues. A heloc is a debt obligation same as a credit card so it acts as an additional trade line, monthly debt, and 2nd lien on primary title. All of these things can be a bad thing if something does not go as planned.

First a heloc can "never" be used as a liquid reserve or act as an asset for any reason. During a purchase or refinance the underwriter will look at what the "maxed" out payment would be rather than the current payment even if it is zero or unused. This is crucial if you are using all or any funds as a down payment. It will also be looked at when you go to refinance after the work is done on the ARV and be counted against you resulting in a higher DTI.

If you have any issues while having a heloc like late payments, reduced credit score, excessive debts the bank or lender who holds the heloc "Will" close or lower the heloc line of credit to the current balance or zero. It happens all the time and can ruin a project that is just started or almost done leaving no funds to finish. Helocs and credit are monitored very heavy when you have high usage or open lines of credit due to risk.

Now if you took out cash through a cash out refinance you do not have any of those issues because you have cash in hand. That cash can also be used as an asset or PITI reserves or reserves for a purchase or refinance for underwriting. Cash is king and it can also be used to buy in bulk or get a discount on material or to win bid on earnest money.

Most cash out refinances are set up on a 30 year mortgage so the payments are usually less when compared to low first mortgage rates and a heloc collectively. Most people do not do a cash out refinance because of the lower rate on the first but 85% of people who take out a heloc refinance and consolidate it into their mortgage within 3-5 years.

If you only plan to take out $10-$15K it might be better as a heloc but usually over that is better suited over 30 years on an average fixed rate.  Rates are slightly higher but they will be back down which will allow you to refinace for a lower rate regardless.

Chandra,

You are actually in a great spot because living with Mom & Dad helps save money. Since you are getting out of college and do not own a home yet, the REI world offers many options. Even with minimum wage you can easily get into a multifamily home. Sounds like you are going to be a W2 wage earner which is great for FHA because it offers the ability to use college as work experience/seasoning. So you can buy a home as soon as you get your first paycheck.

FHA offers a 3.5% down payment options even for a 2-4 Unit multifamily. If you do not have the 3.5% your parents can help with a gift. If not you can still qualify for a "DPA" Down Payment Assistance program through the State/County you live in or a program like CHENOA. They help cover down payment and closing costs for "first time home buyers". It's a great way to get a foot in the door without having much money under your belt.

You can get a pre-approval letter from a bank/lender but make sure find one that knows your goals. Another words helps you look at the home your buying for ARV potential and other unit rents per month. You want to become familiar with real estate terms as well as banking/lending terms so you have a good grasp on carrying a conversation and avoiding problems.

You mentioned multifamily so you are on the right track in terms of income & affordability. A multifamily offers passive income, helps contribute to the mortgage payment and the other unit rents can be used to help qualify for the loan amount.

Haley,

You mentioned you are a nurse not sure if it applies but if you are a Nurse practitioner, or Nurse midwife there are programs that offer 100% financing for a new primary home.  If you live in a home now with a mortgage you could always buy new and rent it out.  If you do not own just yet its also a great way to buy a property with zero down.  The first step is to figure out what you can afford as far as down payment.

Next step is to get a pre-approval from a bank/lender and discuss your goals about building an REI portfolio. Do a little research on who are the top real estate agents in your area and find out which one you are most comfortable using. Your realtor and banker should work together and stay transparent to find you the best property.

Do not be afraid to take on a small project if it needs some minor work it may hold more value down the road.  Major projects may not be your cup of tea and may consume too much time and money at first so pick and choose your battles/headaches.  Buying turn key in certain markets may also be something to stray away from due to future market value.  We are in the middle of a turning point values are inflated and in some towns starting to come down due to the high mortgage rate market.

Keep networking here on bigger pockets because the more people you know the better.

Ali,

You can use a "Portfolio" loan program which allows up to 85% on any SFR or up to 4 Unit investment rentals. Only 15% down on any property even 2-4 unit MF rentals with No prepayment penalties. Portfolio is basically the banks private capital they offer on certain programs to help beat out the competition.

These programs also allow for the loan to be closed in an LLC if needed but may carry a rate hit. To avoid the rate hit you can simply do a "Quit Claim" after you close to change title to llc.