All Forum Posts by: Sasha Mohammed

Your age should have ZERO to do with this, @Christopher Valerio. I'm so sorry that's been your experience so far!

It would make more sense that you're being denied based on length of time as self-employed, income, credit, etc. rather than age alone. I'm making an assumption here (correct me if i'm wrong) -- as a RE agent, you write off most of your income? Therefore when it comes to qualifying for a loan, you don't meet the DTI requirements to qualify?

You may have better luck going with a commercial lender (don't panic, they're rates aren't THAT bad) where they qualify you based off the income generated from the property. You'll have to put a bit more down than you would with consumer financing, but as long as the property cash-flows after all the expenses/ carrying costs, you should qualify, 19 years old or not. 

Wishing you the absolute best of luck! Stoked to see young people in this industry who are hungry and diving in head-first :)

I'm not sure why you've been having so much trouble, @Amy Thatcher. sounds like you've been on title for quite some time, and you've been making the mortgage payments from your account also for quite some time, plus you can document a blood-relationship with the original note-holder... this meets continuity of obligation many times over. 

Traditional lenders should be able to refinance this debt into your name solely, so long as you qualify for the new mortgage with income/ credit requirements. They may  ask you to document 12 month's mortgage payments being paid, and a copy of your father's death cert. 

it sounds to me you've just been running into a few people who don't know what they're doing. this should be a walk in the park!

I'm with @Chris Mason on this one -- let us know when it funds!

@Daniel D. Step 1 - find a project that would garner a return. If you rehab it and plan to keep it, the end result is the same -- you still have to pay off the investor. If the rehab doesn't add enough value to pay your guy off and still be in the green, it doesn't seem like much of a deal to me. 

Most lenders won't go off of actual appraised value after only 2-3 months, they'll go off of the purchase price. so that's another factor you need to take into consideration if you're planning to go down this road. most will give actual value after 12 months, if you're lucky after 6 months. And still, you might only be able to get something like 75% of the value on a loan. does that pay off what you owe to the investor?

since you plan to keep it, the numbers you need to run are 2-fold. The acquisition cost, rehab cost, loan cost (private money guy, he'll probably want a monthly IO payment at minimum for those 2-3 months)... along with the ARV and what you could realistically get in cash-out proceeds with a refi once the project is done. THEN you need to look at how much is the property going to bring-in in rents from a prospective tenant, and will it still be cash-flowing with the loan i just took out to pay off my investor?

Already it seems those numbers are very tight, just based on your posts above. I don't want to be the nay-sayer, but it doesn't seem like this specific project is a good deal. That's not to say the way you're going about it is wrong or bad. 

If you have someone that would be willing to put up 100% of the acquisition and rehab, that's awesome! just make sure you don't over-extend, and that you have a CLEAR exit-strategy, otherwise that dude is going to foreclose and take the property from you entirely. he might not even thank you for cleaning it up for him.

@John H. -- Different schools of thought on this. No "right" answer. My thought is, if the property cash-flows with a mortgage, I would rather stretch my cash to multiple properties than to have one property super cash-flowing. 

I took a peek at your breakdown. where in the world are you finding a property for $230k that brings in over $4800 per month??? That's AWESOME! And if these numbers are accurate, who cares if you have a $1000 mortgage? the tenants are paying for it and THEN some. put down the minimum, find the lowest rate you can, finance the rest, and use the rest of your cash to find another one (or ten) just like this!

if you're spending $1000 a month to save $125k in cash ($230k minus $80k down minus $25k for repair)... it would take you 125 months to recoup your $125k if you didn't have the mortgage. (kind of a simplistic breakdown, but hopefully you understand what i'm trying to say).

My opinion, anyway. The benefit to buying in cash is that you can offer a quick close with no contingencies. Sellers like that. But if you do go this route, i would still recommend refinancing later and getting your cash back to continue investing. it seems silly to me to have all your capital tied up in one property. 

Following this thread to see how others respond. 

@Ashly B. This is exactly why many RE investors just stick to commercial loans. The higher rate is the price you pay for more creative qualification methods (DSCR instead of DTI). There are still institutional investors that will do this, not necessarily private investors, so the rates aren't HORRENDOUS (you can find things in the 5-7% range)... but yes, I hear you, a higher rate does add up.

The question you have to ask yourself is: is it a deal-breaker?  Is it more worth it to continue investing (assuming you're using the c/o proceeds to buy more properties) or keep your current investments at a low rate? Most of this game is leveraging/ managing debt. I can't answer these questions for you, you just have to run the numbers. 

going to commercial and then trying to go back to conventional will give you the same results as what you're running into now. unless your income changes (doesn't seem that's the hold up), or unless more accurate comps pop up between now and then. But you also risk rates rising between now and then as well.

@Daniel D. it would probably be more appealing to your investor if YOU put the down. That way you have some skin in the game. 

I'm still a little confused as to what your question is here, but if you're looking to rehab properties without utilizing your own funds, I would GUESS (unless you're experienced or have an experienced rehab team) that 2-3 months is probably not a long enough window to complete the project, let alone get a cash-out refi and pay off your "investor". 

** If the project completed with a cash-out refi would not profit enough to pay back your investor, then it probably isn't worth moving forward with that project, and i would look into another property with higher returns. Don't get stuck on one property, run the numbers and make sure the juice is worth the squeeze. **

There are plenty of lenders out there that specialize in such rehab projects, and will lend you not only funds for acquisition, but also rehab funds. and they'll give you the time needed to finish the project (12 months, or longer). Plus, that's what they specialize in, so you have a bit of a safety net in that you're not jimmy-rigging a deal together with an individual investor. 

Hope this helps!

or to piggy-back on what @Andrew Postell suggested -- if not LO Assistant, you could look for a Processing position. That would get you tons of hands-on experience on the back-end side of the business... and could potentially get you some income along the way. 

you may have better luck with a construction lender, depending on where you are with the project. it's not a good look to be halfway done and then ask for money, but it's not impossible. Looking into lenders who are comfortable with ground-up construction in this case would be the first place i would look. Don't even mess with conforming lenders, it's a waste of time. 

if you have permitting in-hand and already own the property, you could probably get a 12 month loan with no prepayment penalties to finish your project. rates may be high, something like 8%-10% or so, but it would give you the liquidity to finish, and you could pay it off with the proceeds from the sale of the flip.

ask about cross-collateralizing that flip, too. may give the lender more peace of mind when you're out of cash and need to borrow. 

Just getting creative. 

You can try @Alex Bekeza, he may have a lender that can help you. 

@Keith Miller i think the toughest part about the scenario you outlined is 2-fold: 

1) the air bnb income is not stable income (as far as lenders are concerned), and most lenders won't give you credit for it at all. There are a few out there (a few) that will, but you'll have to show at minimum a 12-month history of that Air bnb income, and even still they may cut it down and only give you credit for market rents in the area. We all know you're making way more in airbnb income than market rents, it's just a pill you'll have to swallow if you continue this route.

2) if you plan to live in the new property, you'll have a difficult time finding a lender who will NOT qualify you with income and DTI. SOME, however, have really awesome bank statement programs or P&L programs... that's what i would look for FIRST if i were in your shoes.

IF you can, my suggestion is to finish your current project, make sure it's all permitted properly and the county is cool with zoning, etc. and then get lease agreements with long-term tenants. forego the airbnb for a short time. I cant suggest lying to a lender, ever, because it's illegal... but if you can get lease agreements for those units, then the lender should utilize those rents received on your DTI for the new property. They still may cut it down to 75% (fairly typical) or pin it up against market rents, still; but at least you'll be able to use that income to qualify for your next purchase with a conforming lender and swoop those shiny low interest rates and payments.

Hope this helps!

@Irene Hunter most conventional lenders won't lend to an LLC, only in your personal name. What you chose to do with it after the fact is not up to the lender (ask, though, in-case there is some acceleration clause i'm unaware of). once the loan has closed and the property is owned, you can move title to an entity. there would be additional costs/ fees, but you'll be hard-pressed to find a conforming lender to close in the LLC.

With that said, there are alternative financing options to conventional loans that WILL allow you to buy with the entity. You mentioned you may be looking into a flip -- there are rehab lenders that will allow you to close in an LLC, and in-fact may prefer you do it that way. AND they'll lend you not only the funds to purchase/ acquire the property, but also funds for rehab, too!