All Forum Posts by: Kevin Romines

My experience is that if any part of the manufactured home is still part of the structure, it will then be considered a manufactured home with an addition. This includes removal of the entire home but leaving the metal frame foundation, it would still be a manufacture home with an addition as far as financing is concerned. 

Here are the guidelines that I found on it?

Manufactured homes that have an addition or have had a structural modification are eligible under certain conditions. If the state in which the property is located requires inspection by a state agency to approve modifications to the property, then the lender is required to confirm that the property has met the requirement. However, if the state does not have this requirement, then the property must be inspected by a licensed professional engineer who can certify that the addition or structural changes were completed in accordance with the HUD Manufactured Home Construction Safety Standards. In all cases, the satisfactory inspection report must be retained in the mortgage loan file.

Fannie Mae allows for accessory units in their financing. I have determined if it make a difference if the primary unit is owner occupied or is a rental? I could ask my underwriting staff on that one? But the accessory units are allowed. If its deemed a duplex by the local zoning authority, then financing is pretty straight forward at that point. 

See Fannie's comments below:

 B4-1.3-05, Improvements Section of the Appraisal Report. In response to lender questions, we are updating the Guide to clarify the policy on accessory units. Lenders may deliver a one-unit property with one accessory dwelling unit; multiple accessory units on the same property are not permitted.

Okay, so lets break this down into the 2 main parts that we need to deal with. 1st lets start with the foreign income. Below are Fannie Mae's guidelines on the topic. 

Foreign income is income that is earned by a borrower who is employed by a foreign corporation or a foreign government and is paid in foreign currency. Borrowers may use foreign income to qualify if the following requirements are met.

* Copies of his or her signed federal income tax returns for the most recent two years that include foreign income. * The lender must satisfy the standard documentation requirements based on the source and type of income as outlined in Chapter B3–3, Income Assessment.

Note: All income must be translated to U.S. dollars. If the borrower is not a U.S. citizen, refer to B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements, for additional information.

Next, I need to know the specific set up the property. How many units all on one parcel? What is the age of the Mfg. Home? Is the MFG. home a single or double wide? Has it been installed per state codes? Depending on how many units per the parcel, it can be viewed as a SFR with an accessory unit, it can also be viewed as a duplex, tri-plex, or 4 plex?

So long as its not 5 units or more (commercial) then you should be fine in getting it done on a Fannie Mae loan. The worst case scenario, we submit with the appraisal order, a notice for the appraiser to give the Mfg. home no value on the appraisal. It can be done given certain parameters? 

@Jake DeAtley In the past, prior to the hot market of today, you could go out the MLS or other sites and find properties more abundantly, that would cash flow from day one. Not that you cant do that today, with some research you still can, but they are harder to find and less plentiful than before, a lot to do with the current hot market.

To cash flow, you may have to pick up a property that needs updating or maybe even a full rehab. By buying at a discount due to the work that needs to be done, then adding that value, you will find it much easier to cash flow well, on the other side of the project.  You might even find that the project exceeds the 1% rule and gets to a 1.25% to as high as a 2% rule?

The BRRRR methodology can produce great results. If you haven't flipped or rehabbed a property before, I would stay with a very cosmetic flip to start. Get you feet wet and learn a ton along the way, then keep expanding on that knowledge and experience on each project from there. In the end, you will have much more cash flow and a nice built up equity position, versus just trying to buy it rent ready.

I would explain to the seller that once the fact about their property is uncovered, from that point forward, they must disclose it if it still materially exists. This will in fact reduce the value of his building and affect future sales prices. You cant force him to renegotiate, but you can shine light on the situation. If he sells it in the future and doesn't disclose it, then he is potentially liable to the buyer and the tenants and anyone else that a fire may affect. 

Sometimes shining a little light on the subject gets movement. 

I used to be a Farmers and Country Financial agent. Yes you can get insurance without disclosing it. You may even claim no knowledge of it, but its questionable if the carrier will pay the claim or would have an obligation to pay it? 

If you don't find the investor that you need, I have a HML lender that will do 90% of the purchase and 100% of the rehab with rates in the 7's. So long as you have document-able experience, which it sounds like you have. Why partner up?

Hey @Tony Wooldridge

Just so you know, you can get what is known as delayed financing on your property once you have completed the rehab. The delayed financing allows you to get cash out up to the original purchase price of the home, plus closing costs. You can do this from the day after you pay cash for a place up to 6 months. After 6 months you can get a standard cash out refinance up to 75% LTV of the new appraised value. Thereby allowing you to get all or most of your cash back out of the deal all at Fannie Mae rates. Rinse and repeat and do it again.

I will PM you the hard money lender recommendation. 

@Tony Wooldridge I am a conventional lender that specializes in working with a lot of investors. We don't do the hard money loans currently, so I refer the loans out to the hard money lenders directly, however we are going to be set up to write some of the hard money loans soon, so will update everyone when that happens. For now, I'm happy to refer the borrowers to the right lenders. 

The reason that it needs to be an Sub S corp is that Fannie Mae feels that with an LLC being a pass through type of entity, its virtually the same as you or a sole proprietor. Now, the rest of the world knows there is a difference from you the private person and the LLC entity, however Fannie Mae has rules that just don't work with the LLC in the same way it does the Sub S corp.

See Fannie Mae Guidelines below:

See below from the reference guide for FNMA multiple financed properties. If they own 25% or more of the LLC or partnership then it would count.

Type of Property Ownership to include in Financed Property Count:

 Joint ownership of residential real estate. (This is considered to be the same as total ownership of an individual property).

Note: Other properties owned or financed jointly by the borrower and co-borrower are only counted once.

 Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner

of the corporation; however, the financing is in the name of the borrower.

 Obligation on a mortgage debt for a residential property (regardless of whether or not the borrower is an owner of the property).

 Ownership of property that is held in the name of a limited liability company (LLC) or partnership where the borrower(s) have

an individual or combined ownership in the LLC or partnership of 25% or more, regardless of the entity (or borrower) that is the

obligor on the mortgage.

 Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined

ownership in the LLC or partnership of less than 25% and the financing is in the name of the borrower.

 Ownership of a manufactured home and the land on which it is situated that is titled as real property

Type of Property Ownership NOT to include in Financed Property Count:

 Ownership of commercial real estate.

 Ownership of a multifamily property consisting of more than four dwelling units.

 Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner

of the corporation and the financing is in the name of the corporation or S-corporation.

 Ownership in a timeshare.

 Ownership of a vacant (residential) lot.

 Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined

ownership in the LLC or partnership of less than 25% and the financing is in the name of the LLC or partnership.

 Ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).

If your going to get into the the buy and hold game and your currently flipping, then your in a perfect position. My suggestion would be to purchase using fix & flip money from a competitive hard money lender. I have a few that I know will go 10% down, they will fund 90% of the purchase and 100% of the rehab. 

Once you have it rehabbed and have owned it for 6 month or more, then you can get a cash out refinance up to 75% LTV of the new appraised value, to get all your cash back out of the deal using a Fannie or Freddie loan. Now your in a position to rinse and repeat your way to 10 financed properties with Fannie Mae.

Once you get to 10 financed properties, open a Sub S corp (it must be a Sub S, it cant be an LLC) and take a couple of the properties and go get a commercial or portfolio loan refinance on them in the corps. name. Even if you have to guarantee the loan, so long as the loan is in the corps name, you then do not have to count those properties in the 10 financed property rule with Fannie Mae.

Because of this, you now have 2 open slots with Fannie Mae and can now buy additional properties and refinance them with a Fannie Mae loan. You can keep aging the oldest loans out and move them to commercial to open up slots with Fannie Mae for additional refinances at the best possible terms. You can literally buy as many properties as you could ever want, doing it this way. 

Best of all, the properties should cash flow very well because you bought them at a discount due to the rehab that was needed and now have created value and get top market rents. Do you want to increase that even more? If so, do a 2 or 3 year lease option instead of renting the property. You get an option fee up front and a premium on the rents even more so then top of market rents. Yes you have to replace the home every 2 or 3 years in some or most cases, but you can 1031 exchange the property, paying no taxes on the deal because all the money goes forward into the next deal or multiple deals. You will really build a cash flow machine by doing that.

Best of all, what did it cost you out of pocket to unleash this great machine you created? It cost you 10% down on only the 1st deal, plus closing costs. Each time you refinance to get your money and maybe more back out of the deal, rinse and repeat your way to retirement.  

Hard money purchase and rehab / refinance to a Fannie Mae cash out / refinance when at 10 properties to a commercial or portfolio lender in your corps. name / rinse and repeat to as many properties as you could ever want. 

It sounds like you have a good handle on the 2 basic options? If the reserves are going to be an issue, get a partner or just wholesale it?