All Forum Posts by: Jared Bouzek

Scott Hibbert It's really going to come down to your mindset. From an investment perspective you wind up with one of two problems with that kind of property. You either tie up a lot of dead equity in the property and decrease your return and efficiency on the capital or you pull out as much as you can and run cash flow negative on the investment. Either way you are making a choice of which to sacrifice. Aside from your desire to potentially return to Boulder, people in your shoes might consider selling and putting your equity to work in a couple of other properties depending on how much you net. Ultimately you have other things that you value but it is something to think about.

Scott Hibbert Welcome to Bigger Pockets. $650k is quite a rental property. What do you project your gross rents to be once you have all of your tenants placed?

@Shawn Loftis I'm dealing with this exact scenario. I have a client purchasing a single family home with a separate ADU. The insurance company is requiring two separate policies. One to cover each building. As far as your question on who is liable, I agree with @Matt M. that you should speak with the Division of Insurance. If I can get away with posting a helpful link, it will be right here: https://www.colorado.gov/pacific/dora/ask-question-make-complaint-division-insurance

Talk to @Chris Mason. Problem solved. :)

@Kent Slawson First of all welcome to Bigger Pockets. I went through a similar transition as you a couple of years back. 

On the financing side, Conventional will be your best option with regards to rates & terms. I would see no benefit to using hard money and then converting to Conventional unless you have a property that is in such poor condition that it won't qualify for Conventional financing or you're doing a sizable value add and want to maximize your LTV quickly. Also, when you say apartment complex, I should note that residential conventional financing is for 1-4 unit properties.

Another thing to think about on your career transition is that moving to a commission position will make it difficult for you to qualify for two years for Conventional financing. Lenders want to see a history of income when you have an income type that can be highly variable. The only way to shorten that two year timeline would be if you could show a prior history of success in a similar position. So if you plan to leverage with Conventional financing, I would recommend you do that before you make dramatic changes in your employment that will impact your ability to qualify.

@Zach Bagby Generally if you can connect the dots between what you studied in college and the work you are now doing, lenders will view your college experience as work history and you can qualify with your income once you have a couple of paystubs. 

The 2 years of work history requirement is misunderstood quite a bit because it mainly applies to variable types of income such as self-employment, large commission income, bonus income, etc. Standard W-2 employment isn't scrutinized quite as hard.

@Zach Bagby Welcome to Bigger Pockets, and good luck getting started. If you have specific financing questions, feel free to post them and we can give you a primer on how to get started. Also use your search tool to look through specific topics on the forums. There is already a ton of great information available.

@Matt Jones Welcome to Bigger Pockets, and good luck getting started on your new venture.

@Holly Scott Will the private lender be attaching a lien to the property in 2nd position behind the HML? I'm assuming they would, but it is a private lender so they follow their own rules.

The reason I'm asking is because if they don't, the only lien on the subject property will be a $200k HML on a house valued at $285k. If that is the case, you can Rate/Term refinance the HML without any seasoning because your LTV is $200k/$285k = ~70%. Then you have to get the HELOC to pay off your private lender and primary HELOC. I would definitely do your research to determine who will do a HELOC on an investment property above 70% LTV before you go down this road because you could get yourself in a bind. You may be willing to leave your primary HELOC funds in the deal but I don't know your arrangement with the private lender.

Another thing to think about is qualification because you mentioned using AirBnB. One of the benefits of getting a mortgage when purchasing a rental property is that you're not required to have leases in place. They will underwrite using the rental income from the appraiser's market estimates. On a refinance, you need to supply one of two things to count rental income: tax returns showing the past rental income or the current leases. Because you will have neither of these available, you will need to be able to qualify without using rental income from the property. That's one of the unresolved issues with conventional financing and AirBnB at this time unless you have a history of successfully using AirBnB on that property.

@Holly Scott Of the $250k in total costs, how much is financed and how much would you bring in cash? Also, is the financing a lien on the property you want to refinance or are you pulling from a HELOC on another property?

No matter what way you slice it, your max LTV to refinance a SFH investment will be 75% with Conventional financing. The question is what timing you will be able to get it done in.

To get beyond the 75%, you would need to find somebody who could do a HELOC for it on an investment property which can be hard to come by.