All Forum Posts by: John Ford

Hi Fred. A bridge loan is a pretty common loan that investors and companies use to cover short-term (under a year) cash needs. One of the good things about using a private money lender is that they have far fewer requirements about income and credit history. They're more real-estate savvy than traditional banks and will base the deal more on the securing asset (your current house in this case) than your personal finances.

Given your situation –having two free-and clear houses and buying a property cheaper than your current home– I'd bet most private lenders would be more than willing to make that loan. For them, it's pretty low-risk as far as bridge loans go. The only major risk is that your current house doesn't sell for enough to pay off the loan.

Most likely, they will put a lien on your current house so that you can't sell it without them getting paid off. The interest rate will be a lot higher than a traditional bank mortgage. But any payments, if any, will be interest-only. But you might be able to get a lender to postpone even interest payments until the end of the loan. Lookup private lenders in your area or make another post "Looking for private lenders in New Jersey" and give some a call to see what they can do for you.

Sorry about the taxes but it sounds like overall, "it's a good problem to have". Have you looked into private money bridge loans? Basically the idea is that you would take out a short-term loan to buy the new house and pay off the loan once you sell your existing house.

With you being currently overseas, this is the only way around the residency requirement I see. If you have a dependent that can take occupancy, that may be enough personal use to prove intended occupancy and satisfy the VA underwriters. Also, when you sign the VA loan docs, you're only signing an affidavit that you *intend* to make the house your home and move within 60 days. If you walk out of the closing attorney's office and get a call that you just inherited Grandma's awesome house (or some other circumstance change), you're good to go and free to change your mind and move elsewhere. There is no set length of time that you must actually live in the home as long as that was your true intent at the time of closing.

My homes have been part of my investment strategy although not really an active part. I bought and lived for 11 years in a rough but up-and-coming part of town. But based on the location, surrounding neighborhoods, and developments I knew were coming, i knew I'd gain a lot of equity with time. Because the physical location was awesome, I absolutely loved living there. I treated it like "my house", not an investment property, but I knew it would be a rental someday. 11 years later, the surrounding development is finished, I've gained $200k in equity based on solid comps. I'm trying to decide whether to refi to pull cash out, or refi while leaving the equity in and let it cashflow more than $1000k/mo. (Actually, going somewhat against the BP grain, I've pretty much decided on leaving the equity in, for now, and going with the CF.)

Meanwhile, I recently bought another "my home" house across town in a neighborhood with not quite as bright a future as the first but still with lots of potential appreciation and planned nearby development that is going to change the neighborhood in a major way. It's another rough but up-and-coming neighborhood and the location is good. For now this is my home...but I know some day it'll be just another of my rental houses with great cashflow.

Thanks for the answer, Marco. I know that's my cost basis for tax depreciation. But for something like cap rate, it seems I'd use something relevant to either the value today or the amount owed. I'm probably not asking the right question.

I'm particularly interested in ways of comparing holding the house as a rental vs selling and using the equity in other deals. In that light, it seems what I originally paid for the house is irrelevant (other than having determined my PITI). Or at least, it's a bit skewed. For example, I can't plug that amount into the calculators and get accurate numbers because the amortization is all wrong.

I recently converted my previously owner-occupied home to a rental property. But I don't know what numbers to use to analyze how the house is performing. 

I paid 189,900 for the house in 2005 (about 192,000 including closing costs, etc...)
I currently owe about $152,000 on the house
The house would appraise at about $350,000 based on recent comps

So if I wanted to analyze the performance as a rental...cap rate, for instance, what do I use as the cost? Is it what I still owe, my equity, the fair market value, something else?

In Atlanta, the Atlanta Business Chronicle is a good place to look for news about projects expected to affect the city.

Wish I'd thought of it six months sooner and I might have. But since I'm about to close on my second house on with a VA loan (with residency requirement), I'm pretty sure getting a HELOC on my current house would be fraudulent as I clearly don't intend to keep it as my residence.

Jason, I think it's a matter of where people are. As a brand new investor looking to do my first "real" deal, I think my comfort level is staying as close to "home" as possible. By which I mean using banking/lending products I'm already somewhat familiar with so I can focus on the things that are new to me: getting plugged into the local REI community, finding/analyzing deals, managing a rehab, contractors, etc... As I gain experience, I'm sure I'll be looking to branch out into more profitable products. But for now, I'm just looking for the easiest way to get my first deal done and hopefully not lose a ton of cash in the process. If I make a profit, bonus!

Thanks for the answers. I do have other liquid assets I could potentially use to do a deal. But it being my first rehab, I'd like to have way more cash available than I think I'll need, for when Murphy shows up. I do understand that after the fourth mortgage, things change. I fully expect my score to be in the 700's in a couple of years.