All Forum Posts by: Kevin Romines

Mortgage bankers tend to have more programs available then the banks and credit unions. Keep in mind that each of the three are regulated differently and that contributes to the various programs available by each one. It may seem that I'm splitting hairs a bit, but it can make a huge difference at times. 

Talk to the realtors that close a lot of sales in a year, they know who closes efficiently and fast without a lot of head aches, their closings depend on it. You wont find the online companies in their mix of who they work with?

As mentioned above, go to your lender and get pre-approved 1st. This will entail, making application with the property address being listed as TBD, but you and the lender can have a meaningful conversation regarding all aspects of your loan request and your credit profile. This also give you and the lender the opportunity to explore all loan options, as there are many. Once you have the program nailed down based on your purchasing goals and your credit / income / down payment profile, then go shopping.

In my area, inventory is lacking, so homes are being competed for by many buyers. Realtors will not accept offers from anyone that is not pre-approved, your area may be the same?

I wish I could help, but my programs start at a million and go to 5 million all 50 states? I will see if I can find you something and PM you?

Your FHA mortgage has MI on it. Consider refinancing to a Fannie / Freddie mortgage at 80% LTV cash out. Get 40K from the refinance, then use that as your down on the rentals in NC. Your payments on the student rental should be close to the same that you have now, considering your getting rid of mortgage insurance and now you will have 40K to pick up 1-3 more rentals in NC. This will increase your overall net cash flow and give you more tax write offs (depreciation) among others. You will still be getting the mortgage pay down via all your renters and can always use a 1031 whenever you decide to sell.

I'm not sure what property management would be on a student rental, but its possible you could make enough from all the properties that you could now put the student rental in property management and free up your time. More net cash flow, more free time, more write offs. Build proper reserves and all is good from there. 

With careful research, you can find both hard money and private money that will lend 100% of the purchase and 100% of the rehab if you have a deep enough discounted deal? 

You complete the rehab and then refinance the property to a conventional loan. You typically can get 80-90 LTV or loan to value when you refinance within the 1st year. If you have truly got a wholesale property and rehabbed it, then you should easily get the underlying loan and any money you put into the deal back out of it through the refinance. Then you just rinse and repeat. If you PM me, I can fill you in on the list of hard money lenders that will fit that scenario?

@Rich Hupper, I would say the answer to that in general is yes. When we look at a client, we are looking at all the assets that they own and will accumulate in the near future. We can never tell how much a person will be sued for in a given situation, however we can determine what they have in assets. So based on their assets, that would be the starting point. Don't forget that your wages are an asset. If you have 20 years until retirement and your making 50K wages a year, in Washington state, your wages can be garnished up to 25% of your gross. Some states allow up to 45%. You cant discharge a liability judgement in a bankruptcy, so the only way you get rid of it is to pay it. If you have 50K for 20 years and 25% garnishment, then you have $250,000.00 just in wages to protect. That's not counting your other assets?

When considering an umbrella policy, typically the 1st million is the most expensive (120 -360 a year) after that each additional million is less expensive. Consider all your assets, including wages and time to retirement. Also count any retirement accounts (the money is creditor proof while in that account, but not once it comes out) add everything up and then consider the type of job / career that you have, is it risky, do you drive a lot? Buy the amount of umbrella coverage that is higher than all your assets combined and also geared toward covering any risky events that you might encounter. Liability coverage is cheap compared to defense costs and a judgement that takes years to pay off?

Insurance is always about an insurable interest. That means once you sell the property to them, they have an insurable interest in the property therefore the insurance would need to be put in place by them. You can require specific limits of liability coverage and you should also make sure they are insuring it for replacement cost and double check the amount of coverage to make sure you agree it could be rebuilt for that amount if it should get destroyed in any way?

You should require that they list you as both an additional insured and a certificate holder. As an additional insured, you will be listed on the policy and protected from a claim just as they would be which also includes legal defense costs. As a certificate holder, you will be notified should the policy terminate or lapse for any reason. 

You should also do as the banks do on mortgages and put verbiage in contract that states if they allow insurance to lapse or terminate, you as the lien holder / mortgagee, will place insurance (forced placed insurance) on the property at their expense. You can pull up a deed of trust through any county and get the big lenders boiler plate verbiage for this section. 

I hope this helps?

Its really straight forward. Foremost has a vacant policy that will allow you to do a rehab on it. Communicate with your agent that you will be doing a rehab, give them the scope of the work, they will need to get it approved through the underwriter before the policy goes into place. The shell of the home is the main concern for Foremost, so plan on doing the exterior work of the home 1st. 

On this policy you can get liability, theft, and vandalism coverage which you cant get on a builders risk policy. The minimum earned premium is $250 so either plan on staying on that policy long enough to use up the $250 or you will be charged the remaining if you sell. If you are going to flip it over to a landlord policy after the rehab with Foremost, I have heard that they will waive the remaining amount of the $250 min. earned premium. I would ask your agent about this as I have never asked to have that waived or heard of that until recently.

They will do the personal lines policy even in an entities name, there are no limits o the numbers of policies you can have with them and they will schedule properties up to 35 homes per policy, so better rates and service fees. I also don't believe they have a dangerous breed restriction. There is a lot to like with Foremost. 

I can understand your wanting to get a rental property for a low down payment and then converting it 100% to a rental property, but as you described it, if it wasn't authorized in advance by the lender, I wouldn't pursue it? That said, I was an 18 year vet of the mortgage industry before I made the change to insurance in the last 5 years. At the time that I was last in the industry, the requirement via the loan documents for an owner occupied property was that it must remain owner occupied for 1 year. After the 1st year, you were free to rent it out. 

Most lenders will allow you a hardship change of status if something unforeseen and unchangeable were to happen within the 1st year. That means that you have to communicate with them about the situation and get their authorization. They do have means of checking and they in fact check to assure that you are owner occupied. In the worst case scenario, they could call the loan due as payable in full and start foreclosure proceedings. They could recommend that you be prosecuted for loan fraud? Would that happen? No one can say with any accuracy, but its the kind of thing you really don't want to mess with. Right now its an ethical question, down the road it could be a legal question?

My suggestion is ride out the 1st year and then rent it out and then go take out another 4-plex loan and do it all over again. If you want to get a rental with no money out of pocket, that can be done as well through a hard money lender that will lend 100% of acquisition and rehab if you are able to buy the property at a low enough price and they use the ARV method of looking at things? Then once you are done with the rehab, refinance it to a Fannie / Freddie without mortgage insurance and do it all over again. Not a single time will you need to owner occupy the property. There are lenders that will do this if you know where to look.

Decide, what is it that you truly want, then set about finding your answers and lenders and parties needed to make that happen, all above board and without getting into ethical, moral or legal questions.

I write foremost policies for vacant and rehabs. They can go vacant up to 5 years no problem. To do a rehab, you still use the vacant policy but be sure to give the scope of work to your agent. Plan on doing the exterior work 1st as the main concern for Foremost is the shell of the home being secure from the elements and intrusion. As @Lynn McGeein mentioned, you can get vandalism coverage on this policy. You can also get liability and theft which you cant get on builders risk policies. Their minimum earned premium is $250.00 so plan on staying on that policy until that amount is used up. As for them waiving the rest of the unearned premium if you flip the policy over to a landlord policy with them, I'm not sure about that, but I bet they will do that? Its worth asking?

Also remember that they do not have limits on the numbers of properties they will insure for you and they will do properties owned by an entity (LLC / INC) as a personal line policy. There is a whole lot to like as far as investors are concerned.