All Forum Posts by: Mason Jeffries

Hi @Lauren Breiner,

So you want to place a LOC on your portfolio of rental properties?

HELOCs on investment properties have become ALMOST non-existent these days. If you had a ton of equity in your portfolio, than maybe you could convince someone but the reality is in todays market, no one wants to have a bunch of second position loans on their books. Which is why they suggested moving your first liens to their books as well. I don't know that I would call that common, but I understand the risk factor for the lenders.

I can look into this a bit for you and let you know if I find anything that may work for you.

What do you plan to use the funds for? There may be other alternatives.

TN has a few great markets for this. I personally have experience in the smokies but I know a few people who have had success in other areas.

Quote from @Kevin Luttrell:

@Mason Jeffries Great idea on water softener/purification. Our well water sucks. What kind of system did you get / company did you use for that? 

Originally our well water was contaminated. Lets just say I found out the hard way. In the smokies we use King Pure Water. They installed a water softener/ filtration system for us, and a UV light to ensure its clean and safe. They provide all the equipment as a rental, which we pay 50/ month for. Then as the salt begins to run low, they come out and fill it back up. That's about 60 bucks every few months. 
Well water is not free, and I couldn't sleep at night without knowing 100% that the water remains clean and safe.

Great question @Paul Wolfson

Here is mine for a 3/3 smokies market

Water(well - monthly maintenance of water softener/ purification) 50

Electric - 250 average

Pest control - 50

Comcast 1 gig internet - 125

Cleaning - 150 per turn

landscaping - 50

Property Taxes - 50

Insurance - 145

Price labs - 20

Hospitable - 25

QuickBooks - 30

Touchstay - 100/yr

Updated photos 1000 twice per year

Supplies included with cleanings

Budget for misc. legal, property decor updates, minor damages, and other things throughout the year.

Quote from @Michelle Le Mere:

So, the bank I am talking with said I would get a loan for 90% of my home value, so 90% of 224,000 would be $202,000.  I would take the 202,000 and pay off the 120,000 mortgage leaving me with $82,000 left to then use to either buy a bigger house, or 2 rental houses.

 Your understanding of this is incorrect, but not your fault. Your lender has failed to explain this properly to you.

A HELOC at 90% Loan-to-Value means that you can access your remaining equity up to 90% of your homes value. 90% of 224k is roughly 202k as you mentioned, but you already have a first lien mortgage of 120k, which means you have 82k available to access in the form of a HELOC.

What you described above is a cash out refinance, where you would get a new mortgage for 202k, pay off the first mortgage and have 82k left in the form of cash, not a loan. Those are two different scenarios.

You need a new lender.

Call your local health department and ask that exact question. They are the ones who approve septic's and will have a definite answer for you. Adding to what everyone else is saying, as long as it is habitable space (finished floors, walls, and ceilings, heated and cooled, smoke alarms, egress) your probably fine to add some bunks. My rule is two guests per bedroom +2. Guest comfort is important. Just because someone can cram 20 people in a house, doesn't mean they should.

@Samuel Buttram

If you plan to rent out your primary, and your last couple years of tax returns for you and your SO show a net positive income, than its still possible depending on your price point. There may be some other options available to you, but they may not be very attractive. Going to alternative loan products such as bank statement loans, DSCR loans, etc.. will require more down payment, higher loan costs, and higher rates. Although it could potentially get the job done. A HELOC might be an option now, but you still have to qualify for that too based on income.

Regardless if you are W2 or self employed, lenders want to see that your income is likely to continue, and increase. Your lender should have helped you put a plan in place for you to increase your buying power and achieve your goals. Feel free to message me if you need someone to walk you through this.

@Mike Turano This is the unfortunate reality that we are all facing right now. I know STRs will cash flow with 25% down if your into that. Same with MTRs. Are you firm on the BRRRR strategy?

Yes. At first glance, I didn't see a budget for the renovation in the numbers. Maybe I missed it. Tons of things to look out for:

Make sure this property is zoned for two family dwellings. 

Is there enough parking? Is it on a corner lot where you can possibly add another driveway?

Is the plumbing in the basement adequate for another bathroom and kitchen or will a Saniflow or similar system be required?

Make sure all basement bedrooms have egress windows.

Is it currently finished or unfinished? Be sure to waterproof the basement professionally. Don't listen to anyone that says otherwise.

Can you divide the backyard with fencing?

How will the utilities be divided?

I renovated mine myself because of my capabilities and it still cost roughly 50K.

@Solomon Price I was under contract to buy a property that was under Red Awnings management. The guest reviews of the property reflected poor management in more than one way.