All Forum Posts by: Stephanie P.

R2 zoning means different things in different municipalities.  You need to know specifically if multi family properties are allowed in R2 zoning and then figure out what you need to do to buy it as a single family and legally renovate it to be a 3 unit because right now, it sounds like a single family.  

@Mark S.

Your analysis of the deal is correct in a lot of ways.  

• The loans are tied together and are near impossible to break out if you ever wanted to sell one.  
• There is a prepay and I'm not aware of anyone that is sneaky about it; it's 5 years on the portfolio product.
• You have to get appraisals on all of the properties
• There's a minimum 100K property value for each loan in the portfolio depending on the lender you use.

Those are the bad parts, but having a no income verification loan product (even if you can verify income, it can be a pain) where rates are better than Fannie/Freddie is a huge plus and with cash out to boot, it's not a bad deal, particularly considering the closing costs you're saving by doing 5.

Costs should be around 2 points plus some lender fees.  Unfortunately there's no getting around points unless you want to increase the rate to accommodate yield spread.  Doesn't matter to most lenders I know.  It's always borrower's preference.

The key with these is to get some proposals and weigh them (like you are).  If they work, then run with it.  If not, at least you know what's out there.

Best of luck

Stephanie

"Unique" house is never good from and appraiser's or lender's perspective.

You first have to make sure the renovations that were done to the house to make it feel like a 3 unit were permitted, see if any internal obsolescence was created when the "apartments" are closed off etc... and then see what the zoning will allow.  Ask your Realtor if there are any comparables with that many kitchens and bathrooms.

If I was young and single and had a house that was set up like that in that kind of location, I'd AirBnB it all day long.

...if you want to use the purchase price or appraised value, whichever is lower right?

Most lenders have a minimum loan amount of 75K and the maximum loan to value is 80%.

@Jon Colin Chisholm

Hey Jon

You won't qualify for a regular Fannie Mae loan, but a DSCR loan would work beautifully. No income verification required and with your credit score, you should be able to get a 30 year fixed in the 4's with a couple points; as good or better than Fannie rates right now.

Welcome to BP

Stephanie

Thank you Jeremy.

Rather than throw the word fraud around, I think it's best to go to the Fannie Mae Seller's Guide for the answer.  https://servicing-guide.fannie...
This topic contains information on allowable exemptions due to the type of transfer.

Unless the previous borrower requests a release of liability, the servicer must process the following exempt transactions without reviewing or approving the terms of the transfer:

A transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to

• Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property.
  
• a limited liability company (LLC), provided that:
  • the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
  • the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).

  The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae's Selling Guide underwriting requirements.
  

The way I read it, you can transfer to your LLC. Looks like the original borrower has to own a majority interest in the LLC.

Hope that helps

Stephanie

I'd do the renovations necessary and find a different PM (4 hours is too far away for turnovers for month to month tenants).  Get a good team of contractors and let them do the work.  The upside to such a great location is tremendous and you're riding a huge wave of temporary nurse positions where the housing is covered.  I say capitalize on it.

The first questions that comes to mind is this; Are short term rentals allowed in a historical home and then Are STR's allowed in the zoning that would support a historical home and lastly Are STR's allowed within the municipality where the property is located. Without proper answers to all three of those questions, I wouldn't move forward.

Stephanie