All Forum Posts by: Jerry Padilla

@Mark Weinberg

As Eric mentioned a SFR is going to require a minimum of 15% down with conventional financing. You may find a private lender, or a portfolio lender that will allow less down. But is an additional 5% really worth the much higher rate that you will be exchanging for that 5% upfront savings worth it?

@Isaac El

With FHA you are required to live in the property? Is this your intention? Do you already own a primary residence? Going from a SFR primary to a MFR primary with FHA will be questioned by an underwriter, and can be difficult to prove that you are not just doing it as a low down payment way of gaining investment properties. If you don't own a primary yet, it shouldn't be a problem.

@Nazakat Hossain

If tenants are in place with the purchase, the appraiser will go based off of current lease agreements, regardless if they are year leases or month to month.

If you already own the property - the tenant needs to be in place for the refinance. I just wanted to clarify from my previous post, that market rent is only used for calculating with a new purchase, not a refinance.

@Tyler Corns

Well fix and flip to sell is a different story...... I know of a commercial lender that allows this type of financing, but as you know most lenders won’t touch this type of very short term financing.

Commercial rates for this type of financing I am guessing may be lower than hard money, so it is worth it to look around and see if this option would work out before trying hard money.

@Stephanie P.

I completely agree! We have an umbrella policy on our rental properties as well! It is a few hundred a year and we went the route of conventional and saved a lot more than paying the higher rates with LLC financing and portfolio lending.

@Eric Boakye

Delayed financing is done less than 6 months and you are only able to use this method if you paid cash for the property. It is the same LTV as cash out financing, but you are limited to a maximum cash out of no greater than your Initial costs to purchase the property.

Typical cash out financing is done after 6 months.

@James Hughes

Did you pay cash for the property?

You can’t cash out prior to 6 months with conventional unless you paid cash for the property and use delayed financing.

You can start the process prior to 6 months and wait to close until 6 months and 1 day.

You can source the renovation costs on these documents - HUD-1/ALTA statement at closing and the money must be escrowed to be included as you initial cost with delayed financing.

There is always commercial financing, but you will have a higher rate with this versus conventional.

@Ryan H.

That is awesome you have so much of your primary paid off already!

The HELOC, you could always wait to pull out until closing on the investment property.

When applying for the loan, with conventional they are going to look at your DTI's and will look at 75% of the rental income on the property to determine if you qualify for the mortgage.

If your income is too low to qualify than you will have to go the route of a portfolio loan that only looks at the cash flow of the property or bank statements.

@Naz Hossain

Once the renovation is done, typically you will get a tenant in ASAP so you can start generating income on the property and the lender will look at 75% of the lease agreement as income. Some lenders have overlays and require you to have a 2 year history, which can make financing more difficult. 

Do you plan on buying the property with cash or with financing? If you plan on using financing, than you will need to get pre-approved prior to making offers on properties and you can find out where your DTI's are then with the rental income on the property. For a purchase, It will be 75% of the current lease agreement or market rent on the property - (determined by the appraiser), whichever is less.

@Henry Wang

I agree with @Nicholas Covington There are many different appraisers that may be choosen for a file and we have no control on who that is. What I always recommend to clients, especially if it has been less than a year out from purchase is to keep records of the renovations done to the property and make the appraiser aware, of all the renovations done to the property. If there is an appraisal done that the client isn't happy with - and it happens, than as @John Warren recommends, you can take a look and send comps to the appraiser that you feel are more comparable to your property versus what the appraiser used to attempt to increase the value given by the appraiser.