All Forum Posts by: Sara Walters

Yes, both I and the seller used realtors. I asked my realtor why we hadn’t been told about the probate from the beginning. My realtor says she was not aware it was a probate situation until the seller missed the closing date. When she asked the listing agent why the house was put on the market before the probate was settled, the listing agent said she “thought it was.” 

I definitely wouldn’t have offered on the house if I had known it was in probate; neither the listing agent nor my agent mentioned that, they only said that the house had originally belonged to the mother who had died and her daughter was now selling it. 

Hi all - I’m in the midst of my first deal and have hit a snag. I have an accepted offer on a distressed single family home in East Texas. My realtor had learned from the listing agent that the owner of the home had passed away and her daughter, the sole next-of-kin, was the one selling it. It was a cash offer and our original closing timeline was 30 days. It’s now going on 1.5 months and we haven’t closed yet because a) the title company determined that the deceased owner hadn’t paid 5 years of back taxes on the property, and is still in the process of figuring out if there are any outstanding liens related to that, and b) the deceased owner did not have a will and the daughter’s lawyer is still working on settling the probate case. The closing date has been pushed back twice already.

With this being my first deal aside from my own home purchase, I have never dealt with probate, although I know it can be a very prolonged process. No one is able to estimate how long it will take and I am not interested in waiting around for this property for an indeterminate amount of time while other potential deals come and go. I am well past the 10-day option period to back out of the deal without penalty, so I assume I would forfeit my escrow deposit if I walked away now. Does anyone have any insight that might benefit me? Thanks! 

@Chris Mason Got it. So let's say I can qualify in my own name for the investment property and it is cash-flow positive (obviously). As long as 75% of the rental income minus the PITI on the investment property is a positive number, I believe that would add money to my reported income without worsening my debt (since the rental PITI isn't double-counted). So that would improve my DTI with each new cash-flow-positive property acquired. Is that right?

@Torrell Palmason 

@Michael Glist 

Thanks for the informative replies - I hadn't heard of Bank Statement Loans or DSCR Loans; are these just types of portfolio loans issued by individual banks? Can you get prequalified for a Bank Statement Loan the same way you'd do for a conventional loan, before you go looking for a property?

I'd assume a DSCR loan wouldn't include a preapproval since you'd need to demonstrate the actual rental income amounts from a particular property in order to get it. My nagging worry would be that if we bought a place with cash and then somehow couldn't get it refinanced through any type of conventional or non-QM loan, all of the capital and equity would remain tied up in the property.

@Andrew Postell - piggybacking off of Aditya's question above, is this the best route to take for cash investors who DON'T qualify for conventional mortgages (i.e., buy with cash, then use the rental income of the rehabbed property to qualify for the portfolio loan)? It seems like the general Bigger Pockets advice for people BRRRRing properties is to begin the entire process by getting preapproved first (even if planning to make an all-cash offer) to ensure there won't be delays or headaches during the refinancing step. From what I'm gathering on this thread, though, it seems like there wouldn't be anything to "preapprove" if the intent is to use a portfolio loan; you'd have to have a performing asset in place in order to demonstrate an ability for the investor or LLC holding the property to pay back the loan, and you'd run the risk of leaving all your capital tied up in the property if you were ultimately unable to get approved for that portfolio loan when the time came. Am I thinking about this correctly? Or is there such a thing as a preapproval for a portfolio loan before a property has even been identified/acquired?

@Lien Vuong, @Mike Reynolds, @Trevor Reed - thank you all for the insight, this is helpful! Our full PITI payment is about 24% of my gross monthly income (excluding my husband's income) so that doesn't leave too much of a margin for me to stay below the usual 28% front end DTI if I were the only one applying for a new second mortgage, but maybe it's still possible.

Mike - the LLC is an interesting thought. Yes, I had always heard that it could be hard to finance a property outright with an LLC, so I'd always assumed it would have to be done in an individual's name first and then transferred to an LLC afterwards. Did your new LLC have to demonstrate a certain amount of cash in reserves? I wonder how the bank would know whether it's an acceptable risk to lend to a business that's not yet showing its own income.

Trevor - luckily we don't have a car payment, CC debt, or personal loans in the mix, although I do have a student loan (in my name only), so I wouldn't be able to reassign that to him. Our tax status going forward will be married filing separately (for student loan purposes... complicated) so I have no idea whether that will prove more or less confusing at tax time next year. Another wrinkle is that I was debating whether it'd be a good idea to get a HELOC on our house as another source of capital, but would that also be factored into my DTI? Or is that only part of the equation if you draw on it and have a required monthly interest-only payment?

Hello BiggerPockets! I'm new to investing and hoping someone can give insight on a financing question I can't seem to find the answer to.

My husband and I own a single family home in Boston, MA, and are both on the mortgage for the house (but were unmarried at the time of purchase last year), which is a conventional 30YF. I have been in conversation with a potential investment partner in Texas, a friend of mine who is single and does not hold a mortgage himself currently, about the two of us teaming up to buy a property there (either a single family home or a duplex most likely) to BRRRR. One scenario would be buying and rehabbing the property with cash, and then doing a cash-out refinance to recoup the capital, versus buying the house with financing and then doing a subsequent refi. In either scenario, my friend and I would either be applying for a loan together, or I would apply for it under my name only. My husband approves of this venture, but has no interest in being involved himself and would not want his name on any of the paperwork.

My question is: would a lender use the full amount of my current mortgage in calculating my debt-to-income ratio, or would they say that I am only responsible for half of it, since my husband's income also goes towards that loan? I am confused about how to get approved for a new loan by myself or with a business partner when my current debts and assets are shared by a spouse who will not be a part of the deal.

I can give more details if necessary but hopefully the basic question makes sense. Thanks in advance!

Sara