All Forum Posts by: Tim Swierczek

Dustin, it's expected that interest rates will drop in the next 12 months to levels that should gain you a few extra hundred per month. This may make the math work better.

@Dustin Horner I think you have received misleading advice regarding your cash-out refi expectations.  Most investors and Realtors do not keep up with loan guidelines so they tend to tell you things that were true at one point but are no longer true.

To correctly find a lender and a lending product that will allow you to cash out refi your recent purchase you must learn the terminology that will allow you to properly ask for and determine the eligibility of cash out a loan program offers. The term lenders and loan guidelines use to determine how long you must wait to cash out refinance a property is "Seasoning," in this case, Seasoing refers to the length of ownership of the property, but lenders also use seasoning to determine the length of loan, and the amount of time you have had funds available in your bank account so you are looking at ownership seasoning.  On April 1, 2023, Fannie Mae & Freddie Mac changed their cash-out seasoning requirement from six months to 12 months seasoning.   

Here are the announcements from Fannie: https://capitalmarkets.fanniemae.com/mortgage-backed-securit...& the guideline from Freddie: https://guide.freddiemac.com/app/guide/section/4301.5#:~:tex...

This means you cannot use the appraised value to take cash out of the property for at least 12 months using a conventional loan regardless of the amount of equity that you have acquired through good negoting, or forced appreciation activities.  An uninformed person may argue with me on this and mention a guideline called Delayed financing.  Investors often call this a cash-out refinance, but a closer look at the guidelines shows you cannot get more than you invested in cash or funds that were "seasoned for two months" as your money, you cannot use a value higher than the lower of the original purchase price or appraised value whichever is lower, and you must use the cash out LTVs which are 5% lower than purchase LTVs.  The bottom line this will not be a strategy that would meet your goal.

I cannot name one national DSCR lender that currently offers less than 12 months of seasoning on cash-out refi's. It's possible you could find one but over the last 18 months DSCR lenders have switched to 12 months. My wife brokers small bank commercial portfolio loans and out of all of her options, she has only one lender who will consider six months seasoning on a case-by-case basis. You may want to look in this market, but you will need to ask for 6 months or less seasoning on cash-out refinances as you call around. Be prepared to ask at least 30 lenders to find one six-month lender. If you do find a six-month lender, ask under what conditions they will do a loan and at what LTV. I'm only aware of lenders that will do it at 75% LTV, 25-year amortization, and a 1.3 DSCR or higher. If you are quoted terms like this, you are finding normal terms. Anything less restrictive than this would be a deal and I'd stop looking.

The last reason, I think the expectation to pay off the HELOC is unlikely is the math. If you look at both conventional and small commercial portfolio loans you be limited to a 75% LTV or in other words you will need to retain 25% equity in the property. This means the value of the property will need to be worth $187,333 today to cover your original price, plus the closing costs from the refinance. This does not include closing costs from your purchase. ($133,500+closing costs [est 7,000]=$140,500/.75 [75% LTV]= $187,333).

The second way the math will affect this deal is that HELOC payments are interest only and first mortgage loans pay principle and interest, in other words, they are amortizing and your payment may increase. Which would affect your cash flow goal.

Your best option would be to look for seller-financed deals that require less down or to bring on partners who can help you fund the down payments needed to meet your goals. I'd be happy to chat more about this if you prefer, PM me if interested.

@Richard Ochoa is one of the best BRRRR investors in the Twin Cities. You should connect with him.

 I find it interesting that you list Minneapolis as an emerging market. I see it as a stable, mature market with slight but non-alarming negative indicatiors. What are your thoughts on MPLS?

@Danny Sanchez you are allowed to pay off the remaining DPA balance to move, so a DPA loan to start may be the best way to lock in today's price, and then continue to live frugally until you save enough to pay off the DPA portion, or wait until you can refi and pay it off. I agree that it's not ideal to use if you don't need it but when rates decrease today's price will look cheap and you will regret waiting to purchase.  DM me if you want to get coffee & chat.

Hey @Fong Lee nice to meet you. Reach out if you'd like to meet for coffee.

Benjamin- you are correct. I'm in MN and I invest in MN and TN currently. I have a mix of flips, buy and hold, buy and sell on contract for deed, one vacation rental, and one current apartment syndication.  I'm also a mortgage lender.

 Hi Paul,

There is a way to get a loan if you are a 1099 worker with less than 2 years, if you meet certain criteria. 

*Your 1099 position must be common for the industry. That would be true of a traveling nurse position. 

*You must personally have 2 years in the industry. You can include your time as a non-traveling nurse)

*You must show a history of contract work. This means you can't be on your first contract.

After that, you will be analyzed by the lender for income stability and trends as well as job gaps. If those all work in your favor, a lender can get you a conventional loan. Note: these criteria do not work for FHA, VA, USDA, or all conventional loans. If you have specific questions feel free to reach out to me.

@Trevor Schmitt I'm happy to network.  PM me if you'd like to meet on zoom

@Carlos Ptriawan population declines impact rural areas quickly and often are irreversible.  When you look at large metro areas where housing is already undersupply and could be reversible you are more likely to see stagnant rent growth.  Minneapolis has a huge pool of renters and you still have to remember that your competition as a landlord of small multifamilies is micro.  You don't need to be the best place you need to be better than the other landlords in your market.  Think of the old saying that you don't need to be faster than the bear, you only need to be faster than the other guy.  People are becoming millionaires investing in Minneapolis.