All Forum Posts by: Mike Burkett

@Jay Hinrichs @Lewis McKnight  I agree with Jay.  If you are a great bank customer, keep big compensating balances, and have a loan history with them, all banks will bend over backwards.  

If you don't have that kind of relationship or those cash balances, but you do have good credit, you are probably going to pay 5.5%-6.0% rate on a low LTV loan.

@Jose Garcia  You have little to no capital.  You want to buy more properties.  You need to get some capital.  Buy this deal and fix it up.  Sell it for $210k.  Pay the realtor their $12k.  Pay the lender his $110k and walk away with $80k+.  Now you have capital.  Do it again.  If you want to keep the next house as a rental, super.  

Let's assume you want to keep this house as a rental.  You don't have any cash.  I don't know if you have a job.  You will need W-2 income, some cash reserves, and decent credit to qualify for a 5% Fannie Mae loan.  Without those requirements, you will need to go with an asset based lender that will lend on the cash flow of the property.  Interest rate will be higher and loan amount is based on the cash flow of the property.  If you just want to pay off the lender with a new mortgage, there is no seasoning period.  If you want to cash out $1 or more, there will be a waiting period of up to 6 months from the date you purchased the property.  They are going to require you to have some cash reserves at closing too.

Rent $1,350 less PI $790 less insurance $100, less taxes $300 (estimate) = $160/mo.  This obviously doesn't account for vacancy, maintenance, or management fees.  I'm guessing BP model has added $500 of other expenses to get you to -$350/mo.  That $500/mo expense may or may not occur in any particular month.  If you don't have any cash in the bank, you won't be able to pay them.  Also, a $200,000 house should bring close to $2,000 in rent.  

Assuming you disclosed all of the lender terms above (I'm surprised he isn't requiring a % of the profit), use him to flip 2 or 3 houses.  Now you have pocket full of money and wiggle room do what you want.

Good luck.  Let me know if you have additional questions.  

@Melba Chambers  Historically 15 year mortgages have lower interest rate than 30 year mortgages.  That has not been the case in this current interest rate environment.  I've seen 15 year rates higher than 30 year.  In that case, take the 30 year mortgage and pay additional principle with your monthly payment if you have the extra cash flow and want to pay the loan off sooner. 

@Shawm Everton  @Louis German Shawm a bad credit score increases the interest rate and may lower the LTV. 640 is probably at the low end of acceptable credit score for a loan in an LLC.

Louis, you can form an LLC in 3 days. You can do it now or you can do it later. If you 4 guys are planning on doing this as a business and are buying several houses and you all want to be equal partners, just get the LLC formed now and buy the properties in the LLC. Keep in mind, properties in an LLC don't qualify for Fannie Mae loans. Fannie Mae loans have better interest rates and terms. If you qualify for those loans, you can buy a property in each of your 4 individual names and each of you would get qualified as the borrower. You would then each have a 25% undivided interest in the property. You can always deed them into the LLC after the loan closing. There is a limit to how many properties individuals can finance with Fannie.

@Gary Mandala  Welcome.  Lots of investors in the DFW area to learn from.  Look up "Real Estate" on meetup website.  There are several of them that meet monthly.  Addison and Grapevine are big ones.  Let me know if you have any specific questions about financing.  Good luck.

@Louis German Absolutely. Anybody have bad credit? If everyone has good credit, you can buy properties in your individual names or if the 4 of your are going to be partners in the LLC, you can buy them through the LLC. Lots of different ways to do it.

@Jerry Villa  Lending institutions like consistent recurring documented income.  They like W2 income.  When you have multiple sources of self employed income, it falls outside their box.  You probably better off going with lenders that only provide loans to investors. 

@Jerry Villa  If you will use the @ sign plus the user's name, they will get notified when you respond.  Otherwise, I don't know that you responded.  Just a tip.

Lenders want to pull your credit because it automatically uploads your debts. They use those debts and your income to calculate debt to income ratio. If you are confident your credit is good, you can calculate your own debt to income to see if you would qualify. PITI (Principle, Interest, Taxes, Insurance)/monthly income needs to be less than 36%. PITI+other debt/monthly income needs to be less than 45% (approximately). You meet those hurdles and you have some cash reserves, you should qualify. Ask a broker they formula they use to calculate the ratios for the rental property then you don't have to have them pull your credit until you are ready to pull the trigger.

@Charles Rogers  Fannie Mae will allow you to use 75% of the rental income on a new property and new tenant.  They are also going to calculate the principle, interest, and taxes on the property and add that to any other debts you have.  From there, they are going go calculate a debt to income ratio.  If you don't have any other income but you do have other debts, that high ratio may disqualify you.  Get a mortgage broker to run those numbers for you.  If you don't qualify, non fannie loans are available or your refinance that don't look at your personal income and debt.  

@Jerry Villa  What do you need the money for?