All Forum Posts by: Dan Schwartz

@Dave Gillie I second @Cheryl Packham. Get thee to the AZREIA monthly meeting in Tucson. The next one is Oct 11. They are $20. https://azreia.org/event/azrei...

Just listen and learn for a few months.  Walk around and talk to people.  Hear what’s on people’s minds during the needs/wants portion of the meeting. 

Good luck!

@Steve Bell good to know.  My understanding - and lenders on BP can jump in if my understanding of the rules has changed since I last considered this a few years ago - is that conventional second home loans require the owner to live there a minimum of 14 days per year, and at least 10% of the number of days it was rented out.  This ensures that it is not bought solely for investment purposes, which usually requires at least 20% down (there are exceptions there, too).  

If you intend to live at the property the required number of days per year, seek out another lender.  This one may not have much experience writing those loans.  For as standardized as the conventional product is, loan officer knowledge and experience is very important.  

My further understanding is that this isn’t a city-by-city covenant.  The terms are set nationally by Fannie or Freddie.  If you are speaking with non-conventional lenders, then this doesn’t apply.  

Good luck!

I disagree with many of the opinions here, but solely based on my local opinion experience. Scottsdale has a fair number of multi family properties (2-4 plexes) in less-than-ritzy areas that are closer to the desired nightlife. Between 2015 and 2017, when these properties were being swallowed up and converted to Airbnbs, prices (of this property type) skyrocketed to a point where only STR a made sense. Rents have risen so much in the area that the multifamilies bought in that era likely make sense on a LTR basis now, but they sure didn't in those years when the market was shifting rapidly. This was the classic example of low-income housing being pulled from the market and gentrified into Airbnbs, property by property.

It's been a number of years, and I don't have MLS data, but I'd say when we shopped in 2015 and when we shopped in 2017 represented a 100% increase in this submarket, and that was at a time when such appreciation was not common.

Just my two cents/experience.  

The 10% down second/vacation home loan comes with restrictions on how often it can be rented. Perhaps you disclosed your plans to the lender and the plans didn’t conform to the provisions of that type of loan product?

This product is called 

HELOC

ELOC

LOC

And probably more I haven’t heard about before.  

You’re looking for a line of credit on a non-owner occupied residence.  Use “non-owner occupied” in your Google search for better results.  The term will often be in the small-print lending disclosures/footnotes on the webpage. 

When you call the bank/credit union, ask to speak with the lending department.  Don’t waste your time elsewhere.  

When you get someone on the phone be clear and concise up front: “I’m looking to open a line of credit on a non-owner occupied residence in [state]. Do you offer that product?”

If you get positive results, share them on BP People are always looking for LOC sources They come and go as banks need them/have the appetite for them.

Good luck!

 Jeet, I'm not actively in the market.  Here is what I got from a local bank (Scottsdale, AZ) last year.  Since it's tied to prime, it could still be helpful as an example.  Every market and every bank will be different.

"Rate: WSJ Prime +1%, Monthly Adjustable (Currently resulting in 4.25%)

"Term/Amortization: 12 months, Interest Only

"Origination Fee: 1% of commitment (Option to renew for additional 12 months for 0.25% of commitment)

"Doc Fee: $250

"We get a few appraisal bids for each deal, but for something like this, I imagine it would be ~$500

"Assuming you got a new tenant with higher rents we could certainly adjust the LOC upward (a fairly simple administrative change on our end). If you ever got additional properties, many of our clients have LOCs secured by multiple pieces of collateral to increase the loan amount as well."

Soo...WSJ Prime is currently 5.5%, so 6.5% for a LOC of credit isn't too bad, especially when conventional rates are nearly 6%.

His comment about a renter was because the size of the line is dependent on the income of the property. Basically, DSCR like many discuss here. The renter was well below market at that time, so that's why that comment was added.

Hope that helps, or gives a baseline of what questions you might ask a lender local to you.  Good luck!

@Korey Harmon if you can grow your real estate portfolio as well as you've grown your beard by 16 years old, you should have no problems at all.

Get an independent opinion of FMV. Contract it for that price, and have a condition of sale be that everything is fixed prior to close.

If the intent is for it to be a rental, why is it your primary home?  Because of the loan covenants?  Or will you still be living in it once it is rented?  There are a LOT of different answers to your question, the simplest of which is “no.”  Until the property is held out for business (in your case, offered for rent), any improvements must be capitalized (added to you basis and depreciated).  

There are some ways around this, but they are very situation-specific.  

@Christina Merlo are any of the four worth selling to re-use the capital/equity locked up by them?  We were of the mind that we'd hang on to places forever, but the ones we've sold and rolled into new purchases wound up being extraordinary moves for us.  Just an idea.  Good luck!