All Forum Posts by: Jay Hurst

 @Michael Nelson    Do you have current financing on the property or did you purchase/rehab with cash? 

 @Jay Jones  what state is the property in?

 The "magic" you are mentioning IS adding back the depreciation upping your income. what @Michael Plaks is saying is 100% correct in that your INCOME to be used for the debt to income would be exactly the same in this case because if not paper loss is shown (the deprecation) then there is no loss to add back, so you get credit for the income. No different. Now, I am a lender so I know how it effects your debt to income but not a CPA so not idea which approach is correct from a tax perspective but it will not have any change on your DTI.

 @Robert Jones   I am assuming this is a for a primary residence correct?  If so, the first step as you have found out is finding a LO who understand tax returns and how to calculate self employment income. it is simply not hard and it continues to amaze me how so many in my profession have no idea how to do it. Kind of mind blowing considering there worksheets/calculators that will do it for you!  It is right here: https://content.enactmi.com/documents/calculators/2025%20%28...

AS mentioned above you will need to send your 1120-s and your K-1 (all k-1's if you happen to have more then 1) as wells as your personal returns. You will see on the form I linked the 1120-2 portion:

As you can see you are able to ADD back into your K-1 income non recurring losses, Depreciation, depletion and Amortization.  If your business bought a vehicle and you deprecated all at once  that is going to be a significant decrease in taxable income , but as seen above you can add it back for your income for the loan.

In addition, if you have any debt on your personal credit report that you can show that the business has  paid the debt for 12 consecutive months you can exclude that debt payment from the debt to income ratio. Other wise, it is being counted against you twice, once on the personal level and on the business level because you profits have been reduced by those payments. 

Now even doing all the above might not be enough income and if that is the case that is when bank statement loans can work. But, I always try to get my borrowers to qualify for conventional because the terms are better then on a bank statement loan.   

 @Samuel Coronado  

We have a 2 step program that we fund out of balance sheet that allows you to pull out cash before 12 months, and then refi into a conventional loan. You get the best of both worlds in that way: No seasoning to pull cash out AND the conventional rate/costs and no pre-payment penalty which are all better then DSCR loans.  

 @Christopher Sarter-Soto When you are looking to leverage any property (but especially your primary home) with a variable rate product you need to understand what your payoff plan is. In this case I assume it would be the refi portion of your planned BRRRR.

In that case you need to understand your refi options on the BRRRR before you purchase. You need to understand loan to value and seasoning requirements before you buy based on your ARV. Too many people do not think ahead and borrow 100k but can only pull out a much smaller number to pay back or have to wait longer then they expect. If/when that happens you have to account for the additional interest that the HELOC is costing you a month, and all of sudden the deal you think is so good suddenly is not as profitable as you modeled.

 I do not. We fund them using our own money so can make our own rules so it would not be a broker product. 

 @Angelyn Avignon   I house hacked a duplex in 2000 before it was called a house hack. Even at that point it was hard to get "cash flow" meaning that the tenant from one unit rent would pay for the entire mortgage payment plus insurance/taxes with money left over (the cash flow). at least in a desirable, secure area of town.  BUT, you have to live somewhere right?  So if you entire payment is hypothetically 2k a month, and you can get a tenant to pay 1500 a month your payment is now 500 dollars a month.  You are now paying 500 dollars a month to live in a 1500 a month place. Not bad!  and you get the tax benefits of owing a home, and of being a landlord. And you now own real estate that will hopefully appreciate and when you move out will potentially provide cash flow. 

I hear from a lot of would be house hackers who do not understand that the paying for the whole mortgage and generating cash flow with today's pricing, rates with a low down payment is just not possible and keep renting. but, that is missing the forest for the trees. Paying less, while at the same paying towards equity and the other benefits are still much better then the alternative. 

We have a 2 step program that we fund out of balance sheet that allows you to pull out cash before 12 months, and then refi into a conventional loan. You get the best of both worlds in that way: No seasoning to pull cash out AND the conventional rate/costs and no pre-payment penalty which are all better then DSCR loans. We do not lend in Missouri however if the property in is MO.

@AJ P. You want to make sure you understand "seasoning period" in this case. Seasoning is just an industry word for waiting period. Most programs are going to have a seasoning period on when you can pull cash out using the new value. Conventional is 12 months for example, while most DSCR products are 6 months, and some with 3. But, rates/terms tend to get worse with shorter seasoning periods. You want to make sure your lender understand this as lot do not and you will waste a lot of time if you are trying to borrow more then what you purchased the house for.