All Forum Posts by: Vaughn K.

Originally posted by @Tyler Wagner:

HI @Vaughn K., it sounds like to me that private money would be the way to go until you can provide tax returns. And then of course, when you get a place fixed up, get all of your money back when you get the bank loan going. 
I am a real estate agent in North Idaho, if I can be of any service to you, send me a message and I can also connect you to some private money folks here as well, 
Thanks, 

Tyler 

 As I said in my PM I found somebody for private money, but it would be nice to have one more tool in the tool box. The house I just got under contract will possibly be right on the edge of the minimum finance amount even after I've made some improvements, and I will certainly be able to refi with a bank statement loan company faster than with a traditional lender as they need at least a few years of docs that all show what they want to see. So even if everything is up to snuff next year I'd still need another full year after that, whereas the bank statement or cashflow lenders would give me a 30 year fixed right now.

Originally posted by @Tom S.:

@Vaughn K.  Vaughn - Sofi asked me for either a paystub or a bank statement.  I provided a paystub, an they said 2-4 days to get back to me.  Then they responded about 30 min later I was approved.

 Hi Tom,

Thanks for that. If they'll do bank statements that may well work for me then, I'll have to check into that further. 

Originally posted by @Steve Vaughan:

Originally posted by @Vaughn K.:

Originally posted by @Steve Vaughan:

I'd much rather do a proper lease  with option to buy.  Proper LOs do NOT involve 'down payments' or purchase credits. 

 I agree that a lease option is the "proper" and legal way in this situation... But I wouldn't say they need to exclude a "down payment" or purchase credits. It all depends on the situation both parties are in. There are ways to do it, and if the seller needs a chunk of change, or the buyer wants to know they're getting somewhere with building up hypothetical equity if they exercise, there's nothing wrong with working those types of things out. It's situation by situation.

A proper lease option is what I was referring to.  

Just change your verbage from down payment to option consideration and purchase credits to closing cost assistance and you won't get in mud as a disguised sale.   

Any agreement with language that says down payment and purchase can easily be confused as being seller financing. 

Oh yeah, totally. I did put credits in quotes, but probably should have put "down payment" in them as well. You must use the proper legal language in the agreement of course. But in practical terms they're the equivalent of the down payment and monthly principle payments. 

Originally posted by @Steve Vaughan:

I'd much rather do a proper lease  with option to buy.  Proper LOs do NOT involve 'down payments' or purchase credits. 

 I agree that a lease option is the "proper" and legal way in this situation... But I wouldn't say they need to exclude a "down payment" or purchase credits. It all depends on the situation both parties are in. There are ways to do it, and if the seller needs a chunk of change, or the buyer wants to know they're getting somewhere with building up hypothetical equity if they exercise, there's nothing wrong with working those types of things out. It's situation by situation.

I've never been in the situation, but have seen several other people with tons of experience who say that current mortgage holders NEVER actually call the loans. Also, can the person kick in enough down to pay off your mortgage? If they can you can pay yours off.

Anyway, another way to structure it where that issue doesn't exist at all is a lease to own contract. You can be very flexible in how you write the terms, but they can involve a down payment, higher than regular lease payments, and a "credit" from those 2 things when they're finally ready to officially purchase it by exercising the option. That way there's no official mortgage, you retain ownership and tax deductions until they exercise, and it's not a foreclosure if they can't pull it off, it's just a regular eviction still. Pros and cons, but worth looking into.

I was looking into buying raw land awhile ago and figured out a few things. One is that most banks don't usually mess with them. A good agent I was talking with gave me a brokers info who had specialized in raw land stuff as he had a few lenders who would do it. I'd suggest finding an agent who seems to specialize in selling a lot of raw land and ask them who they know of who does this.

Alternatively, if you have enough down, private money lenders will often lend on raw land if the down is right. You'll be paying higher interest rates, but that's just the way the cookie crumbles. Other than owner finance that's pretty much what I figured out when I was looking into it.

You can probably get away with doing something like Paypal or Square, but if you get caught they likely won't be happy. Honestly, the best way is to just run up the cards buying things you need to buy, and keeping all your cash coming in in the bank. I don't know how much you can shift from cards to cash that way, but with my business I can often "convert" card to cash at $10-15K a month if I wanted to. If you're going to use it for rehab stuff I don't see why you couldn't just buy all materials on the card, pay contractors on the card, etc in the first place. On a big bill a contractor may charge you a fee to pay via card possibly, but it shouldn't be any worse than converting it any other way.

They're JUST barely getting going again, but you might want to look into "cash flow" loans. HomeExpress and Sprout Mortgage both do those types of products, although it's a little more dicey than it was pre Covid. That probably wouldn't work for a flip per se, as they're generally intended to use for buy and hold rentals... But if you could essentially do a buy, renovate, rent, and then sell it instead of hold it, you could probably game the system a bit. Those types of loan products look more at what the rent income will be, and if it will cover the mortgage. Also sounds like you have a spouse, so perhaps their income is enough to qualify for something with a more traditional lender or a hard money lender.

Everything said in here more or less covers things. Basically you either have to have that much cash saved, or enough down as float money to do a hard/private money situation. I'm in the middle of doing my first private money deal right now actually. The guy I'm working with had some of the better terms of anybody I talked to for the type of stuff he does, but also if you can build a real relationship those guys can REALLY hook you up. Experienced flippers can get 100% funds for a lot of their deals after they've done several with the same person and they trust them.

But the situation I'm working on is kind of a perfect example of a BRRR type situation. I'm going to buy something with my cash down, there's probably $20-30K in value to create with fixing things up, you can then refi back out at the new higher appraisal after awhile, and I should end up with none of my original down payment in the property anymore, but it will still be showing the 20-30% equity. If I really pull things off well I might get MORE cash out at the refi than I put in on the initial down payment. This leaves me able to move to the next deal. That's the power of the BRRR method. If you have the funds to be doing 2 or more properties at once you can basically constantly be working on a project.

But as the guy above said, once you hit certain limits you tend to have to get commercial/portfolio/etc type loans which generally require a bit more down. There are ways to fudge the numbers a bit, like buying quad plexes as up to 4 units is considered "single family" by lenders still. This increases your maximum number of units before you run into this issue. There are a lot of weird ins and outs, many related to arbitrary lending standards or laws. It is what it is, you just have to learn them and try to work it as best you can for your situation. 

Originally posted by @David M.:

@Vaughn K.

No, I heard QM loans were shutdown with COVID.  You'd have to find a local bank that would carry the note.  Remember, if the lender can't re-sell the mortgage on the secondary market they lose their liquidity.  So, the secondary market has to start accepting that criteria again.

Sorry to be a naysayer.  I hope things work out for you.  Good luck.

Well, they WERE shut down. However HomeExpress opened up for shop again a few weeks or a month ago, and Sprout Mortgage is juuust starting now, but not even 100% sure on their underwriting standards. So those secondary markets have got going again, just with higher down payments and some other tweaks. Both would actually be totally fine for me with most of their terms, except they only want to do houses $150K+. So for anybody else reading this right now, those options ARE back on the table if they work for you.