All Forum Posts by: Stephanie P.

It depends is the answer to a lot of your questions.  There are a lot of products out there for you and the path you take depends on your financial situation and then your goal.  Do you want cash flow or to pay it off early would be the first question I'd ask.

I'd look at local banks first to see if they have a commercial division and check out their terms. Not sure SBA would be an option, but maybe. Then I'd check brokers to see if you can get a DSCR loan. They have 30 year fixed terms with prepayment penalties, but rates are crazy low right now with no income verification.

All the best and congratulations on your success.

Stephanie

@Sam Trulli

If you really want to be a successful real estate investor, stay in school and learn a trade.  You've already got two years down, so complete the next two.  Get a degree that matters in this field like accounting or even digital marketing and then take just a little more time and learn how properties work.  I can't tell you how many real estate investors waste money on things that they could do themselves (minor carpentry, electric or plumbing can cost a fortune).  Learn those skills along with the business side of things and you'll be unstoppable.

Some suggest you move out.  I say stay home as long as you can and continue to save.  Help your Mom and Dad out with the bills and chores around the house and carry your own weight with food, bills etc..., but don't contractually obligate yourself to a lease or a mortgage until you've gotten your school out of the way.

One girl's opinion.

Congratulations on your current successes

Stephanie

If they're rented out, you should be able to use 75% of the rental amount toward your income.

Asset based loans or DSCR (Debt Service Coverage Ratio) loans are not the same as hard money loans although you typically don't need income taxes or paystubs for either. Asset based loans use the guarantor's credit to establish risk and the monthly rents for income. Most DSCR loans have decent rates right now, so there's no real need to refinance them if the numbers work, however, most have a prepayment penalty of anywhere from 1 year to 7 years (depends on the lender)

If you qualify for a conventional loan, that's the place to start your investment journey, but if you don't qualify for one reason or another (and there are several) DSCR loans are way easier and close faster in general.

I'd use the HELOC first (spoken as a person who does hard money lending for a living). It's a lot cheaper. Use the HELOC, complete the purchase and the renovation and then get a DSCR loan for any long term financing needs, replenishing the HELOC to use again.

Stephanie

Tracey

I'm not sure what kind of loan you're getting, but here's what I know.

• Any loan is really a math problem. You obviously qualify so the real question is what is the intended use of the property and how much is it going to cost. 
• All of the things you listed above pertain to owner occupied properties so if you can afford to live there then do it.  If you can't, then don't.  Eventually, if you want to rent, you have to know the market rents and if the property will be affordable.
• I don't know of any lenders offering an 100% owner occupied financing right now unless it's a Chenoa second behind an FHA first mortgage, but that's not an 80/20 but FHA and Chenoa are for owner occupied loans.
• The 1% rule is for rentals.  If you're going to live in the property, just make sure you can afford it and yes, you'll have 2 mortgages, 2 payments with 2 separate payments increasing your debt ratio, but you won't have a massive down payment
• A multi unit property that's going conventional would require a down payment of 15% for 2 units and 25% for 3-4 units
• What do you mean when you say you're looking at an 80% loan to cover the mortgage and 20% to cover the closing costs?

It's really not a huge risk to have 2 mortgages on a single family home if the numbers work.  Either they work or they don't and that's for you to work out, but it sounds like you're severely under capitalized for this venture.

Hope that answers a couple of your questions and gives some guidance.  Best of luck

Stephanie

@Caroline Gerardo is 100% right on this topic and I can't believe an actual experienced builder/investor would suggest that any of 12 items listed would impact value more than a couple thousand dollar condition adjustment.  Any discrepancy of value in this instance isn't the appraiser's fault (and believe me, there are plenty of instances where appraisers are at fault), but inexperience and probably putting gold teeth in a dead horse.

All of those items listed previously are nice and MAY make the house sell faster, but to think they're worth 90K is way off base.  Get someone else to do your valuations based on your specs and plans AND comparable sales before you break ground and save yourself some money and aggravation.

Stephanie

@Corey Dussault

One of the things the underwriter will look at is the plausibility of you living in a multi family home after living in a single family property.  Most people go the other way, so have a solid and true explanation (that isn't I want to increase the number of units in my portfolio using owner occupied financing).  A job change and this property is closer to work or if the multi family is larger than the single family you currently live in would be good things.  

If it's owner occupied, you're probably going conventional, so most of the guidelines are pretty straightforward. 6 months reserves, decent credit. No need for landlord classes and if it's not rented, they won't give you credit for any income the property may generate. If you're using FHA, remember there's a self sustainability requirement for properties that have 3 or 4 units.

Best of luck

Stephanie

@Dallin Hernandez

Welcome to Biggerpockets

Most lenders, conventional or portfolio, will require 6 months on title and for the property to be stabilized before you can refinance it into a long term loan product. Stabilized means no construction and occupied. From there, it's a normal loan. If you want conventional pricing, then you have to go through the entire process with credit, income and of course title and insurance. If you don't qualify for conventional for one reason or another (usually income) then a DSCR loan or Debt Service Coverage Ratio loan would be the next best thing. There is no income verification (meaning no tax returns or paystubs) and the loan is based on the property's income along with the guarantor's credit. Long term (30 year fixed) with rates these days typically in the 4's with a couple of points.

Stephanie

Right. You can't exceed the conventional loan limits or you go to Jumbo pricing. If you can get a HELOC to make up the difference, then do it. That's a good way to go.