All Forum Posts by: Jason Wray

If he owns more than one property they will require reserves for each property so in many cases the cash out will not suffice.  

Sure, in most cases you have to present 3-6 months PITI reserves but you do nto need to have a bank statement. You can use another account 401K, IRA, but it would make sense to open up a bank account so you have a checking account.

Lisa,

Have you considered selling and moving out of California to a state where home prices are realistic and taxes are a fraction of Cali taxes?  It's tough if you have a big family and they need to be around children, grandkids etc, but its still an idea.  Pull out some cash and use it as a down payment on a home in another state.

Rent the home and still put in an ADU - but I would get a second opinion because an ADU should not cost $250K. There are new companies that sell ADU's as prefab like "Tiny Homes" website they are in most states.

It might make sense to have a Banker review their options for a HELOAN or a cash out refinance.

Yes, You can pull out a higher LTV if you go Portfolio and they cross collateralize your other propertie(s). Typically if you can show reserves and each property has enough equity it will be treated as a refinance/cash out. I would avoid a heloc as it carries too many issues and rates are higher on helocs versus a portfolio cash out refinance.

Heloc is generally set up on a 10, 15, or 20 year amortization while a cash out refinance offers a 30 year - lower rate & lower payment.

These prorgams will want to see full doc income most DSCR's will not offer junior lien and will require each property to have sufficient LTV's/Equity.

Jim,

Like a lot of markets buying in November/December and January can prove to be a buyer's market. Nationwide most investors regardless of cold/snow want to sell their properties in order to avoid a few things. DOM - Day on the market - nothing attractive about a property that did not sell in 2023 rolling over to 2024. You also have annual taxes and Insurances, HOA ect, that sellers want to avoid having to renew and pay.

On the other side of this you have weather which can cause more issues when showing a home. Does a home in the snow present itself or have the same curb appeal not likely. You also have to take into consideration most shoppers get a little hesitant to go window shopping if it’s cold or snowing. So based on those real life scenarios you can find a better deal or a seller who now has wiggle room on price verse 3-6 months prior.

As far as buying in cold weather/snow you may have a hard time evaluating roof damage or other issues with foundation.

Brooklyn-

There is good money in that line of work as long as you are good with numbers and understand the markets. Hopefully you will have a starting salary in the form of a W2 income versus a 1099 income. I mention this because getting into real estate investing can be tough with 1099 income only. You typically need (2) years of 1099 income to qualify unless you use a Bank statement loan or DSCR.

I would also consider getting your real estate license its not hard or very time consuming. Taking that test will allow you to become more familiar with the everyday language and terminology. Plus you will come across more deals or pocket listing you might be able to jump on in terms of good deals.

As far as a 40 hour work week and investing its "Easy" you schedule your time wisely work, life balance, and REI searching at night. Putting in a couple of hours each night before bed to market watch and do your property research. But in most cases if you use a "Seasoned" real estate agent and have a good Banker/Loan Officer we do the work for you to remove the stress.

There are a few banks that offer Heloc's but in most cases it might be worth it to look at a cash out refinance. Most investors choose a HELOC either because of a low first rate or they only need a small amount of cash. If you are borrowing over $20K it might make sense to look at a cash out refinance. Mortgage rates are coming down and will be much lower in the end of 2024 and into 2025.

Taking that into consideration you can simply refinance for a lower rate in 12-24 months after taking out the cash. A HELOC is a debt obligation and cannot be used as an Asset or PITI reserve required for buying another investment property.

Cash out refinance is set up on a 30 year amortization where a Heloc is set up usually on a 10, 15 or 20 year which can cause a higher payment even with a lower rate.  Some Helocs have prepayment penalties as well and on a cash out refinance there is none or you can opt out.  

Plus a Heloc is volatile meaning the credit limit can be reduced or closed if there is any change to your credit, DTI or Debts in general. The bank holding the HELOC monitors your credit each month and if the scores drop below their minimums they will close/freeze the usage or even reduce the limit holding your balance in some cases over the limit which can crush credit scores.

Credit Unions usually do not offer DSCR loans you want to use a NON/QM lender or Bank. DSCR is not a QM mortgage so most credit unions do not offer that type of debt service loan.

If you can qualify using income I would suggest using a portfolio cashout refinance or just a conventional refinance.  

Raju,

DSCR loans carry a broker fee since they are a NON/QM style loan. Even if the Bank/Lender is Mini-C they still have to make their 102-102.5 bucket. What that means is your going to end up getting hit with a 2-2.50% origination fee. When you factor in the other closing costs title, escrows, days of interest and hard costs, you are close to $8K (total).

You should not be paying $8K in points though that would be excessive even with Non/QM. Keep in mind this is a type of "No Doc" loan so its not a cheap route to go DSCR. If you are on a work visa they might be hitting you with foreign national which could cause other rate hits.

In my opinion it’s not a bad idea for two reasons - one it never hurts to jump into a pre-approval and make sure that you are 100% covered from all aspects. It give enough time to correct anything that may pop up which could be credit not just scores but trade lines, dispute, something reporting in error etc. Plus it allows you to have an in depth conversation with the a banker to talk about all of your options.

Discuss single family versus 2-4 units talk about your income qualifications as well as other units rents as an option to expand on the purchase price. Discuss other markets and have enough time to evaluate cash flow/ROI perspectives. Most approvals are good for 120 days but can easily be refreshed and always good to have the approval letter in hand in case something promising present itself.