All Forum Posts by: Michael Dallas

Quote from @Jonathan Taylor:

@Michael Dallas to add clarity as to why rent by room strategies make it very hard for financing is most business purpose loans are sold on the secondary mortgage market and the end buyers do not buy rent-by-room on boarding home style operations on residential properties. If there isn't a buyer for this loan, lenders will not offer them as products for investors. Its not about whether the lender is lazy or not.

For your scenario, you can qualify for a DSCR loan based on the new property's income but down payment of at least 20% will be required for a straight forward DSCR loan.

@Jonathan Taylor That makes a lot more sense! As my first conventional loan on my house hack has already switched hands 3 times in 2 months. I can see where other banks would not be willing to buy that type of loan if I used rent by the room to qualify. 

I think the DSCR loan would be a great fit but I would have to bring a capital partner onto the deal for the 20% down payment.

Quote from @Ben Firstenberg:

Probably your best bet would be some kind of hard money or asset based loan. You could try a DSCR loan, but they wouldn't count your rent by the room leases, they would look at "market rents" as if you were leasing the entire property to one tenant.

For hard money and asset based loans, they only check your credit score. They don't much care about your income or personal finances. Of course, the interest rates will be higher, which may destroy your cash flow, but buying another house solves that pretty quickly. 

Good luck!

@Ben Firstenberg I have not used a DSCR loan before, why would they not look at the rent by the room rents that I have leases signed for? I am only renting to students in my town because we have a lack of student housing. The "market rent" will be much lower if I was renting to just a family. Is there anything I could do about this? Rentals here only pencil out by using the rent by the room strategy.

 Thank you so much for helping out!

Quote from @Abbey Humphreys:

First of all- congratulations on buying a house and doing it in a way that will set you up for your future endeavors.

@Ben Firstenberg is right! A DSCR loan would solve the income qualification issue. Already having tenants in place with leases also speeds up the process. What market are you investing in?

I am investing in my college town of Jacksonville, Alabama. I play baseball here and the student population is growing rapidly. The college has a real housing shortage problem with all the new freshman coming to the school. They are building 3 news dorm right now. So once these students move out of the dorm they have no where to live so I am able to charge a higher rent by renting by the room. 

@Ryan Muska @Andrew Postell @Adrian Lammersdorf-Scioll

Thank you all for the thoughtful responses! My loan was a 5% down conventional loan because I got slightly better terms with that rather than an FHA loan. I am still pretty sure in my loan contract I have to still live here for at least one year because it is under my primary residence. So do conventional loans still have as strict rules on staying the full year as an FHA does?

Hey I am currently in my first house hack. It is going great and I have caught the real estate bug! Now I want to buy another property and house hack that as well so I only have to put 5% down again. I have only been living in this current property for around 4 months.  What are my options regarding moving out of this house and into another? Thanks!!

Hey everyone I had the great opportunity to buy my 1st house hack a few months ago. While I am living here I am making around $200 after all expenses. But in reality I am making $800 because I was paying $600 in rent last year. I just wanted to put that out there because I have been able to find some good deals around me. I want to buy more property but I don't have an income that qualifies me for another loan. I was wondering if there are any loan products that allow me to use my current house as collateral for my next house. I have signed leases for the next 10 months showing what rent I will be collecting from the property. I am obviously new to this and trying to get creative while being a D1 college athlete. Would love to know what yall think!! Thanks!!

So I am house hacking my first house and I have 4 other roommates. They asked me before I wrote up a lease if he could bring a dog. And I said yes but he would have to pay a small fee. But he said never mind he isn’t going to bring one. So I didn’t worry about it when I drafted my lease that they all signed. In the lease I didn’t add a pet clause which is my fault. But I got home today and he has a dog here. He might just be taking care of it for a little bit I haven't asked yet. Do y’all have any suggestions about how I should go about this?? I love dogs but I know they will cause more wear and tear to the house along with any messes they cause. Thanks for the advice!

Quote from @Chris Seveney:

@Michael Dallas

Personally I think this is a little too aggressive

1. If you cannot refinance they give you more money.

2. You also want them to pay $25k in closing costs

3. They are losing money every month on their interest at 3.5%.

They would be better off selling the property for $200k. If there is an agent I am pretty sure their agent would not recommend this

But who knows doesn’t hurt to try, just realize sometimes when you ask for everything you turn the seller off to even consider a fair deal

 I definitely see your points, I’ll make a few adjustments before I make an offer.

Hello everyone I am currently house hacking my first house and am looking to do a seller financing deal. There is a house in my market that has been on the market for over 100 days and has received no interest. There is a tenant in the property that has a lease until next July. Which is very under market value rent which is why they have received no interest. No one really wants to touch it with the tenants already in there. So I have asked if they will consider a seller financing deal and they said they would.

What I have come up with so far are these parameters:

full list price of 240,000, 3.5% interest, 5 year interest only payments, 5 year ballon payment of 240,000, if I am not able to refinance for full amount or at all then balloon payment is extended 5 more years, they loan me 30k at 6% for renovations that is wrapped up into my interest payments, this 30k will come after tenant is removed next year, they pay my realtor commissions, and when I refinance they will give me 10k min and 15k max depending on how much my closing costs are.
I know this is a very aggressive offer but they are not receiving any interest on the property for 100 days right now. Does anyone have anything I should add or anything I know before I go through with this offer?? Thank y’all so much!!

Hello everyone I am currently house hacking my first house and am looking to do a seller financing deal. There is a house in my market that has been on the market for over 100 days and has received no interest. There is a tenant in the property that has a lease until next July. Which is very under market value rent which is why they have received no interest. No one really wants to touch it with the tenants already in there. So I have asked if they will consider a seller financing deal and they said they would. 

What I have come up with so far are these parameters:

full list price of 240,000, 3.5% interest, 5 year interest only payments, 5 year ballon payment of 240,000, if I am not able to refinance for full amount or at all then balloon payment is extended 5 more years, they loan me 30k at 6% for renovations that is wrapped up into my interest payments, this 30k will come after tenant is removed next year, they pay my realtor commissions, and when I refinance they will give me 10k min and 15k max depending on how much my closing costs are. 
I know this is a very aggressive offer but they are not receiving any interest on the property for 100 days right now. Does anyone have anything I should add or anything I know before I go through with this offer?? Thank y’all so much!!