All Forum Posts by: Jason Wray

Hey Ty - What I mean is when you buy a home and pay all cash there is no title seasoning or 'Wait" to pull cash out. Usually you have to wait 6 months to use a new appraisal and take cash out. Delayed financing allows you to take 80% LTV out right away no wait. The Bank/Lender does not use the new appraisal value they use the purchase price plus any receipts to show renovations.

I just wanted to pass that along so you had a back up plan if you needed access to some cash sooner.

When you go to refinance it if there is equity to pull cash out you can use a DSCR loan which will allow you to close on an LLC. You can also use a True bank portfolio program and that will allow the LLC close.

Keep an eye on value or look into renovations to get the ARV up with as little funds as possible. As soon as you can pull enough cash out based on a 75% LTV opt to do a DSCR cash out refinance.

If you go the DSCR route income is not used so as long as you have a 700 Fico or above you both can be on the loan or close in an LLC. That will fix the 50/50 split...

Emmanuel,

If your loan officer did not set up accurate/enough months held for escrows tax/Ins the new lender will do an escrow analysis and require the sufficient amount. You can reach out to a few insurance agents to see if you can get a lower quote for the home owners insurance. You might also want to check for any Homestead, Save our homes or tax exemptions you might qualify and check the deadlines to apply for the tax exemption.

Last resort reach out to the county and apply for a new tax assessment or appeal your current one due to inflation/other.

You might also want to call your Loan officer and their Branch Manager and find out how the ball was dropped on insufficient escrows being held at closing. If this was not the case you may have just had an excessive Insurance and Tax increase for 2024. I would still try the above.

@Jane Marshal   

The person on the mortgage only carries the debt obligation if you are on title you are "both equally" liable for claims to insurance. Being vested on title/deed means you are a owner of the property. Mortgage means you are only listed on the debt obligation but title also shares the burden in default. Unless the property is being held in an LLC or later switched.

Having a mortgage on credit can be a good benefit because a mortgage can make up for 40% of your credit score. Having a mortgage paid on time usually at the 6 month mark offers a boost to your Fico scores.

Again you have a shared down payment 50/50 so you are equal in terms of equity. I would understand if you set up your partnership as a 51/49 but anything more than that just because of a mortgage on credit is a little much. If you have or will be setting up an LLC the LLC/partnership takes the loss which is carried over to the personal tax returns 1040's.

Do you plan on doing "Delayed Financing" after you pay all cash?  If so you can take out up to 80% of the cash with "No title seasoning" same month.

Dino,

Having $50K is enough to get into more than just one REI property so you are off to a good start. You also have W2 income and employment seasoning which means you can qualify for a mortgage with good to fair credit.

In 2024 more programs will be available to make buying a Primary, Secondary, or Investment rental much easier. You only need 15% down for an investment purchase and that includes 2-4 unit multifamily homes as well. Michigan has some good buys, Indian, Ohio, Florida, Tennessee and Oregon.

These markets have a good sale price factor along with a high ARV potential. Most of these states SE also offer great STR options due to the warmer climate. I would say focus on the ARV potential and do the math up front to factor in ARV costs versus final ARV/LTV.

Reason I mention this is the goal in most cases is to take cash out of your rental as soon as possible to buy more REI properties. Banks & Lenders will Cap you at a Max LTV of 75% of the new appraisal amount. Just be careful of what you do to the property because cosmetic upgrades do not add value.

No, Banks and Lenders want shared risk so you not only need cash for the down payment they also want to see reserves. Typically 3-6 months PITI payments as a reserve but it does not have to be liquid cash. It can be 401K, IRA, Life Insurance with cashout value, etc.

Down paymen can come from business partner, Spouse, Family and closing costs can be partially covered by a sleer credit Max 2%.

Ty,

How are you running your numbers in terms of toal purchase price, down payment.

Rates are not at 6% for an investment property unless you are putting 30% to 40% down. If this is a Primary home you can get a rate for under 6% with credit above 720. On an investment you will need 15% down minimum so at a sale price of $161K your mortgage P&I would be around $941.80 that based on a 7.75% 30 Year.

What are the common rents of that market?

If you shared the down payment then split should be 50/50 unless someone is putting in work or sweat equity. Having a mortgage in only one name is a benefit to you both going forward. Its not a reason why someone should have a higher equity stake per say.

Spouses and Investors should split purchases between themselves equally to avoid both being on all. This is due to the Fannie/Freddie rule of only allowing 10 properties max reporting to credit. Not owned overall but only 10 on credit so its wise to do that back and forth method if possible.

Once you hit your Max 10 or Max DTI you will then start using Non/QM loans like DSCR, Bank Statements, 1 Year 1099 program etc. You can also put 5 or more of them into a commercial loan which does not report to credit once you hit 10 or more. At that point you should have an LLC or partnership created.

Then at that point you may want to reach out to a good real estate CPA and get their help and advice. Eventually to buy more properties you will do a cash out refinance to pull out cash. During that phase it would be a good time to talk strategy to ensure equal cash out based on appreciation or ARV and how it will be a shared on the next project.

Adoney,

Good write up and that’s a plan for sure now you just need to take the next step. As far as your job you can get qualified with a W2 job with one full year W2 and currently employed year to date paystub. You need 2 full years of W2 income for a 'Part time" job so if your working security on the weekends if you have a W2 for 2022 and getting one for 2023 you can use that income as well.

FHA would be your go to program because it offers more wiggle room on its W2 income guide lines. FHA rates right now are lower than conventional but the MIP versus PMI can make a little bit of a difference. But not too much of a difference where it will break the bank or jack the payment above the other.

Having $13K is a good chunk of change I would advise seeking out a seller or property that will offer a seller credit. Seller credit can be asked up front to help pay for closing costs since $13K is right on the line once you get up into the $300K range. On a primary you can get up to 6% but not likely in this market 2-4% is common.

If you can find a 2-4 unit it will help since the banks/lender can use 75% of the current rents or common rents of the market to help qualify.  This can help get into a bigger loan size in most cases and ensure cash flow or you living 'Rent free".