All Forum Posts by: Shaun Weekes

This has nothing to do with covid. Your lender unfortunately messed up. It sounds like you bought the home with a HML and you're now doing a refinance under six month. If that's the case the max you can get back is the purchase price which was 90k. Cash out loans are available under 6 months if you have financed the purchase. If you would have waited 6 months you'd be able to get 70% of the new appraised value no questions asked. Lesson learned and you're still in a strong position to repeat.

I hope this helps and have a good one.

1 Vote

Originally posted by @Bhanu Kuna:

Hi Everyone! Hope everyone is safe and healthy.

I recently came across an REO property that would take all my cash to buy(55k). The ARV of the property would be be 150k conservatively.

Since all my cash would be used for the acquisition I'll need to get financing for the renovation portion of the BRRRR process.

Is money for renovation still easy to come by in Philly? Will the fact that I won't have any cash left work against me during the underwriting process?

If this is an SFR then you do have the option of doing a Fannie Mae homestyle loan. Speak with a Broker or Loan Officer that does a lot of rehab loans etc. You shouldn't need to buy cash, but it's makes it easier much easier to negotiate. You could also take out a HML and use those funds to do the rehab depending on the scope of work. If you have a 401k or IRA or some type of reserve besides the cash that can be used for reserve purposes and an UW will accept these funds.

You have a lot of options and just make sure that have done all the homework. Work backwards from the ARV down and you'll be fine.

1 Vote

Originally posted by @Mary Jay:

Originally posted by @Shaun Weekes:

Originally posted by @Mary Jay:

Hey guys,

So I was talking to my mortgage broker today and he said that my debt to income ratio will be better if I sell my paid off property.

Its rented and brings in $550 per month in rent minus taxes/insurance, so I net about $500 per month.

He said that on my taxes it shows as negative income of $130 or something like that.

May be because of depreciation?

How is it possible that paid off rental that brings in 5K per year is negatively affecting my debt to income ratio?

Thank you

It depends on how much you write off on your Sch E. I wouldn't sell a property that is cash flowing that much but that's just my opinion. A cash out refinance or HELOC depending on what you would use the money for makes much more sense especially if you're looking to build your portfolio.

Thank u so much !

Can I take out Heloc on a rental ?
or with rentals the only option is a cash out refinance ?

You can execute both options.

0 Votes

Originally posted by @Mary Jay:

Hey guys,

So I was talking to my mortgage broker today and he said that my debt to income ratio will be better if I sell my paid off property.

Its rented and brings in $550 per month in rent minus taxes/insurance, so I net about $500 per month.

He said that on my taxes it shows as negative income of $130 or something like that.

May be because of depreciation?

How is it possible that paid off rental that brings in 5K per year is negatively affecting my debt to income ratio?

Thank you

0 Votes

Originally posted by @Jessica Flint:

I have five investment properties and I'm fairly new to all this. I'm slowly building my portfolio using the BRRRR method and also my own passive income, along with cash investors. I don't want this pandemic to stop progress too much. I understand it will somewhat. I've been using this time to do A LOT of reading and learning about investing and property managing. I haven't had any problems with renters paying. My question is how much should I calculate for reserves? Can I consider my HELOC part of that reserve? What about my 401k? Or should it be hard cash in the bank? I'd rather use my cash for my next investment:)

Fannie Mae has a detailed section on cash reserves, and this is a great place to start. It will detail what is and isn't a cash reserve and how much reserves are needed for investment properties.

I would say at least have what they require and more if you feel comfortable. I believe because of the corona virus that reserves like 401K, IRA or anything attached to the stock market you know can only use 70% as opposed to 100% Also, private lenders, portfolio lenders and HML will have their own criteria for cash reserves. This is just for Fannie

Example: If you have 100K in your 401k you can use 70K towards the cash reserves needed for your specific loan as opposed to 100K.

I hope this helps.

https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-4-Asset-Assessment/Section-B3-4-1-General-Asset-Requirements/1736867481/B3-4-1-01-Minimum-Reserve-Requirements-08-07-2019.htm

0 Votes

Originally posted by @Christopher D.:

Anyone else having trouble getting a decent deal on a refinance right now for rental properties?

I've got a 3 bed / 3.5 bath condo in a popular beach town in San Diego. Incredible long-term, cash-flowing performance as a long-term rental property (no vacancies ever!). Also, I've got near-perfect credit and really good W-2 income. On the down side, all 4 units in the building are now tenant-occupied, which I know lenders do not like. Also, this is one of four mortgages in my personal name (all four rentals are cash-flow positive).

The property is worth about $840k and I owe about $408k on the current mortage (7 years into a 4.25%, 30-year, fixed rate mortgage).

I'm looking to refinance for two reasons: (1) take advantage of historically low interest rates and eliminate the PMI that was built into my old rate; (2) take out $200k+ in equity so I can to be in a better position to buy more rentals in another area in case the market goes down. I'm looking to stick with a 30-year, fixed-rate mortgage, and believe I can do all this while leaving 25% equity in the property, which will allow me to break even every month on cashflow.

I've spoken to friends of mine who recently refinanced at 3% APR or lower. One of these was for a rental property in the same town as mine - they locked in their rate at 2.99%.

However, my mortgage broker is telling me banks will only go up to 60-65% LTV right now (I'd only be able to pull out about $100k, which would give me back my initial capital and is better than nothing), and the best he can do is a 3.99% rate (would not really help that much in reducing the interest rate).

I feel like I am getting into this late, and banks are averse to anything that might look like risk given the uncertain state of the housing market going forward, but this seems excessive to me, given the property's "A" location and perfect rental history.

Anyone else running into similar issues, and if so, any advice? I ran into this in late-2007 when purchasing my first property, and was still able to finance at favorable terms, although it was difficult, so I am optimistic.

You might have missed the first class flight last month when rates where crazy low but at 3.99% you're still getting a massive deal. Not to mention MI will be gone and you're getting out 200k plus. Don't wait, execute this deal and look for another deal with the same great rates. You'll have the cash!

1 Vote

@Edward Eloma

I think it depends on how much money you have and what vehicle you're keeping your money in until it's time to buy again. Once you figure this out you can then say to yourself I'm going to put down x amount. Work backwards to figure out how much you're going to put down.

0 Votes

Originally posted by @Alejandro Garcia:

Hi!

I just recently got an offer accepted for a duplex in Los Angeles using an FHA loan and this would be my first property if I get it! My plan is to renovate, get some tenants in the extra unit and house hack it!

I am extremely excited but find myself asking myself "What now?". We are in a 60 day escrow period as that sale is contingent that the owner's find a new home and the residents of the back unit vacate.

So what is there for me to do during the escrow period? What should I look out for? And what would be a good thing to start planning and/or working on?

Any help would be much appreciated!

Make sure that you have the following ready for your Loan Officer and Realtor

Make sure the rate is locked
Keep your paystubs up to date and handy for the loan officer
don't apply for any other credit or anything that will affect your scores or DTI
Make sure the home inspection and all home related items are completed.
Make sure all Realtor FHA disclosures are fully executed
That should be good and congrats on moving forward.

1 Vote

Originally posted by @Destiny Mccoy:

@Shaun Weekes $120k (hopefully more)

A HELOC in this situation is fine and since you only need about 25% to 30% LTV (Loan to Value) it should be quite easy to obtain/qualify for.

Once the rehab is done you will go to your bank or loan officer and do a cash out refinance to pay off the HELOC. Then you'll have the HELOC ready to purchase another property since its revolving debt.

There's many details in between so make sure you do all your research before working on your second property.

Take care and good luck.

0 Votes

Originally posted by @Destiny Mccoy:

@Shaun Weekes Had it for about four years. I think its worth about $70k (maybe more). It currently rents for $950. Its just outdated. It has a new roof; paneling needs to be removed; new doors; updated bathrooms; some landscaping; outside paint job. It probably only needs about 25k-30k if that

What do you think the value will be after the home is rehabbed?

0 Votes

All Forum Posts by: Shaun Weekes

Shaun Weekes has started 33 posts and replied 1673 times.

Post: Problem with cashout refinance

Post: Renovation Loan in Philadelphia

Post: Question about qualifying for a mortgage

Post: Question about qualifying for a mortgage

Post: What qualifies as cash reserves? HELOC? 401k?

Post: Cash-Out Refi on - Lenders Asking >40% Equity and 4% Rate???

Post: USING FHA AGAIN? HAVING 2 FHA LOANS?

Post: Under Contract for a Duplex in Los Angeles...What now???

Post: BRRRR on a Property With No Mortgage

Post: BRRRR on a Property With No Mortgage