All Forum Posts by: Jonathan Taylor

@Erin T.

I was in a similar situation with my ADU in NELA but with different results.

First, C of Os were not issued until the 40s, properties built before that may not have a record of a C of O that have not changed floor plan/footprint since original construction.

 I have three units built in 1930 in NELA and only was reissued a C of O after extensive renovation. This was because we did a value add and was part of the plan. Not a requirement for owning. 

You can search your house for an RSO certificate (registered rent control unit) or go to El Monte assessors office and search the hand written plot maps based on APNs. This is what we used to show we are grandfathered in. These hand written maps are usually not on the website and we were able to stitch together the story of our property in terms of when the additions were build and approx foot print.

As for demolishing you main house, were you looking to do a JADU (attached) or ADU (detached)? Unless you have documented safety or building code violations (called code 91 violations on LADBS site), that doesn't make sense. When we converted our detached ADU, contractor nor inspector looked at the other units.

What I can see as a requirement is electrical and plumbing. If you are adding an ADU, you'll need to install a 125 amp panel, which is not condusive with old electrical panels or knob and tube wiring, which is very common in our neighborhood. We had to do that.

@Allen Nelson looks like you got the message about the above comments on not paying for a house you don't own. 

In response to lending. Although the order is backwards, you can do a DSCR loan and refinance up to 75% of the new appraised value at 3 months seasoning.

Since your bought the house for 100k, spent 15k, assumed reappraisal would be 170k, you can cash out refi at 127,500 if you are okay waiting 90 days. 

@Adam Soyak your loan officer is referring to Fannie/Freddie rules for conventional lending. It went into affect for loans submitted on or after March 7th.

DSCR aka business purpose lending has as little as 90 days seasoning as @David Lambert stated. These loans are the tools that most of my flipping clients use to scale quickly. 

70-75% LTV with some lenders allowing up to 85% Rate and term, but the catch is the property has to debt cover. With the high rates most dont debt cover so you are limited by the DSC ratio on the cash out amount.

I agree with @Tyler Warrick. Brokers are your best friends in this type of lending situation for the above mentioned reasons. You have many options and considering the info in your post, this doesnt sound like you would have a hard time getting the best non Qm rates. 

Side note, if the property you mentioned was your primary and you are now converting it into a rental, as long as you lived in the property for at least one year, you can legally convert it without refinancing.

@Julie Chai Thanks for the clarification. I do those loans all day so I am very familiar with DSCR lending. I was more curious on the 15% down since none of my lenders leverage above 80 LTV on purchases.

@Julie Chai that sounds like a conventional lender as DP percentages are based on unit count. I could be wrong but share a bit more info so we can see if the loan product is solid

@Kush Khandelwal happy to provide advise and help you where I can. What is your goal with the refinance?

@TaRa Mehta MTR is not a lending structure. LTRs are the standard, anything less than long term is short term. Basing a refinance off of a 6 month lease would qualify as short term. There are lenders who lend based on STR rents but this is market dependent and is case by case.

The best way around this, is using the appraised rents, called a 1007, for long term rents and qualify based on that number. With higher rates I am not seeing properties debt covering at 75% LTV but you can get as high as the numbers allow.

In terms of vesting, commercial loans can vest in personal name or LLC, there isnt a rate difference that I have seen. If you are using a conventional loan, these loans only allow personal name vesting but require tax returns, DTI calcs, Income verification, etc. Both are solid options, but rates may be slightly higher for commercial loans.

@Luke Maas The crucial aspects of lenders are communication, accessibility and knowledge of the lending landscape. The lending market is changing much faster than it has before covid so having someone who knows this and can adapt is clutch. 

I am biased as I am a broker but working with a broker is valuable in its own right. We have a strong pulse on the market and can advise in as well as close loans. 

I lend in KC without issue so happy to answer your questions regarding your project.