All Forum Posts by: Tyler Hodgson

@Wendell De Guzman I agree! I think that LOs are great for newbie investors, and I also think it is great for hot markets that are potentially nearing peaks. I completed my first two deals this year and both are semi-LO deals. I love this strategy, and I will continue to search for LO-type dealsuntil I build more experience and I see a large dip in the market. Once there is a huge dip then I will build my long-term retirement portfolio.

23/24 and in college when I started getting interested in investing and started learning and researching.

25 when I bought my first house with VA Loan (living with roommates)

25 when I bought my first two SFR rental properites

and currently still 25. Probably no more deals this year, but looking to do 2 or 3 more during 26.

To be honest, commercial deals are not my specialty, but I will give you my opinion based on my experiences.

My first instinct would say not to risk the higher interest rate ARM when you have these properties locked in on 30-year fixed rates. Rates are at historical lows right now, and are bound to increase. However, your situation is unique.

• You currently have 8 SFRs in your personal name...you are nearing the FNMA cap of 10, so you are getting close to needing portfolio lenders.
• You want to get to 40 doors in the next 4 years...again the FNMA cap of 10.
• Getting all of the loans and properties into an LLC is great. This greatly limits your personal liability and protects you. Also, by getting these properties (and mortgages) out of your name you will be eligible to start taking FNMA loans again.
  • Here is how I see it working - Buy 8-10 SFRs through conventional FNMA financing, then bundle them up and move them over to the LLC and finance through this bank. Then buy another 8-10 throgh FNMA financing, bundle those up through the bank once they are stable and cash-flowing. Rinse and repeat, until you have your 40 doors, or 50, or 60....
• How does your cash flow look on these properties on 20 year amortization? First 4 years at 4.98%, but let's assuming increasing interest rates and bump that up by 1-2% every 4 year increment. Run the numbers; if it works, it works.
• Closing costs seem reasonable
• Prepayment penalty - how long is that penalty in effect for? The full 20 years? Maybe you can negotiate this to lower your risk a bit.
• LOC sounds good for allowing you some quick financing for new deals. Again, I would get new deals on FNMA loans as long as your are eligible for FNMA loans. Then look at bundling them into the LLC when the time comes.
• Regarding selling any properties: ask the lender how you would handle this. Somehow the loan is secured by the properties, so if you sell one does this trigger a due-on-sale clause? If you sell one do you just have to payoff the loan portion pertaining to that property? Does prepayment penalty come into play? I'm curious how the lender is setting up the Note on this deal and if the note is secure by the properties.

I would love to hear the progress you make on this deal, and your learning experiences from it. In a couple years when I hit 10 units I will be looking to do something like this. 

Forgot to ask, is this a primary residence or investment property? If it is an investment property then Texas50a6 rules do not apply, but normal FNMA cash-out rules would still apply. My 3 key points above will apply for primary or investment.

Hello Ayman, I'd love to help you out if you are okay with working with a lender who isn't directly in Houston. A couple key points to consider: 1st - when did this switch over to conventional from hard money? Do you think the value has changed much since then? 2nd - since you did a cash-out refi from hard money to conventional there is a 12 month seasoning period before you can cash-out again. 3rd - since you property was recently listed for sale you are now capped at a 70% LTV if you do a cash-out refi, unless you wait 6 months from coming off market. "Properties listed for sale in the six months preceding the disbursement date of the new mortgage loan are limited to 70% LTV, CLTV, and HCLTV ratios (or less if mandated by the specific product, occupancy, or property type – for example, 65% for manufactured homes)." - Per FNMA guidelines I hope this helps!

Hi Jordan,

I'm in a similar situation as you. I am an accountant and a loan officer for a small, local mortgage company, and I currently have my primary residence (with roommates) and 2 rental properties here in the DFW area. I've been funding my 20% from savings, and plan on building up to my 10 Fannie/Freddie properties over the next couple of years. 

Regarding the line of credit question, I'm not really able to help. But I am interested in hearing the answer of someone who may know. My best bet is we would need to just hit up a bunch of local credit unions and see what their lending policies are.

Are you looking to finance 100% with the line of credit? Then refi in permanent mortgage?

I have considered doing some new construction rentals with a construction loan (you draw sort of like a line of credit), then refinancing into a permanent mortgage once the tenant is in place. 

I think what you are asking is if you have a loan with you and your wife (co-borrower), and later you apply for another loan, will the current loan only count as 50% of the debt to you for your qualifying DTI on the new loan? The answer to that is no. If it pops up on your credit report it is your debt, and you are 100% responsible for it. Any conventional lender will count this in your DTI. ***Side note, with rental properties and business income this is different, the companies gains, losses, and debts will be multipled by your participation percentage. For example my girlfriend and I are 50/50 on both of our rental properties, if I go apply for a new loan by myself I can count my 50% participation and not hers. Unfortunately this doesn't work out with primary residences*** If you want to avoid it in your DTI for future deals and your wife can qualify for the refi on her own it may be worth having her do the refi solely in her name. FYI you may run into some issues going from the loan and property in both your names to just her name. I hope this helps.

2-year win streak for DFW! 

I use Quickbooks Online for my books. Currently I have 2 rental properties and I love how I am able to use class/property tracking for every transaction to properly record my transactions based on property. When I pull a balance sheet, income statement, or any other report I can easily see the breakdown of each property and the totals.

To me it is worth the $30/month and will only become more valuable as a scale and grow larger. It is nice learning the processes and perfecting while things are small and manageable!

You may still want an accountant or CPA to help you setting up your books properly (such as property basis and correct journal entries for depreciation). I'm an accountant and testing for my CPA exam now, so I already had a good grasp on how to use the software and how to do my own books.