Asking for critique, suggestions and advice on 3 potential plans

[Aaron Wadsworth]

Hey!

The title was a little too short in characters to allow me to fully describe the post, but in simplest terms i'm trying to ask for advice and critique of my plans - in addition to leaving a record in case I or whoever else would like to read later. Think of it as a snapshot of my learning journey at a single point, as well as a collection of (what I consider to be) interesting or informative links and info. Some information available on some sites seem to contradict others (namely FHA credit minimum requirements), but the trick seems to be a distinction between no credit as opposed to low credit, whereby minimums only count where minimums exist. Halfway through it decided to delete itself without my noticing, so please excuse me if it seems rushed towards the end.

As a quick prologue I am a soon-to-be Aussie migrant planning my move to probably Maine later this year with an 'Excellent'-ranked local credit score of 1024/1200 and a small history of SF REI near our East coast. Though my credit record is spotless and my score is respectable, I will have no US credit history or FICO score whatsoever. Now that the move is becoming a closer reality i'm looking to determine and record the most feasible landing plan. In order to do this I have a handful of questions and would like to invite critique to avoid as many mistakes as possible. Any advice given is welcome, even if not asked for - I'm likely missing many fundamentals without even realizing, and i'm grateful for any contribution either here on in a PM...Please don't be shy!

At the most general; i'm beginning my plan to liquidate everything I own starting early September following confirmation/activation/receipt of the 'visa' (a misnomer for a Green Card), get a US drivers license and bank accounts, and then follow one of these three paths. Hopefully, judgement and advice from this forum will allow me to narrow it down to a single choice so i'm very eager to hear from you all;

1 - A slow start at a small scale (cash)

a) Move in late October, applying for a bank account and small credit cards where feasible to build a credit history. 

b) Buy a simple and turnkey 3BR single-family to househack for ~ 100k in my own cash (Such as [1.i]), while transplanting or recreating my exterior cleaning business (1.ii).

c) As soon as any lender would allow, exit through whatever HELOC/mortgage on the house I could secure in order to buy a new one again in cash, and repeat until a 'normal' lending process is offered.

With only the taxes, insurance, maintenance, capital expenditures, and vacancies to account for at first and with room rentals in the area going for around 500-600/month, this seems to be a soft and forgiving method to land, and will become the backup plan regardless of my chosen path.

PROS:

*Eliminates FICO scores, lender/underwriter scrutiny, and credit history as potential barriers;

*Least risky due to small total investment;

*Least complicated process, and;

*Lowest initial ongoing expenses.

CONS:

*No leverage - Stuck for a prolonged period before continuation;

*No diversification - All eggs in one basket until refinancing;

*Effort, risk, and expense of starting a temporary small business, and;

*Loan ability throttled by self-employment.

*Capital gains and losses dictated by market trends.

1.i - Example of 3BR listing on zillow (https://www.zillow.com/homedet...). Simple, but hardly a deal!

1.ii - There's no concrete reason to self-employ in this path, but as it's the most risk-adverse it seems the most tolerable to act 'risky'. If anyone's interested, my business is (www.goulburnwashers.com)             though the business and site will become defunct post-move for both operational and tax reasons.

2 - A quick start at a small scale (FHA or conventional)

a) Begin approaching every lender I can find in Maine who offers FHA or conventional loans. A fantastic resource has listed relevant local lenders and whether they offer FHA/RD/VA loans (2.i). Under HUD guidelines, a FHA loan cannot be declined on the basis of no credit score (2.ii)(2.iii). FHA loans do not have minimum or maximum income requirements (2.iv).Rather than recreating my exterior cleaning business in Maine, i'd likely look for a full time entry-level job in any industry to find W-2 income to make myself more suitable for future loans, with a view to move to REI as immediately as possible.

b) Having found the best available lender, look to buy a cash-flowing fourplex using the lowest down payment available - I'd imagine i'd be stuck at a relatively high LVR given the lack of US credit history, which isn't great but is certainly better than buying in cash in terms of scalability. It's understandable that a lack of IRS records/current income would present a barrier to obtaining a conventional loan, likely limiting the scale of this path to <5 units. Similarly, unlike substituting international reports for FICO or using 'Non-Traditional Credit Reports' (NTCR) it's highly unlikely that any bank would consider ATO tax records for a conventional loan, given both that it's another country and the job/business has since been left in order to migrate. 

c) If possible after one year, refinance to a more generic loan in order to buy a new FHA fourplex using whatever savings have been gained in the preceding months through cash-flow and W-2 income.

PROS:

*Highest leverage of all paths available;

*Largest safety net of cash-in-bank, and;

*Increased turnaround for new projects.

CONS:

*Employment verification, credit history, and IRS records non-existent - multiple positive judgement calls from lender needed;

*Delays before scaling allows full-time REI;

*Maximum limits to property units and value - 4 units and ~$809,000 for a fourplex (2.v)

2.i - List of some Maine lenders, with whether they offer FHA (https://mainehousing.org/progr...)

2.ii - Information regarding how to get a no-credit-score mortgage (https://www.lendingtree.com/ho...)

2.iii - FHA loan without a credit history (https://www.fha.com/fha_articl...)

2.iv - FHA loan requirements + No income minimums (https://time.com/nextadvisor/m...)

2.v - FHA loan value limits by unit size for Maine (https://www.lendingtree.com/ho...)

3 - A quick start at a moderate scale (DSCR or private) This is my current focus of research as at 25/06/22 and any contributions, suggestions, critiques, or references are worth their weight in gold to me.

a) Find ten wholesalers who are focused on or who happen to find Maine multi-families, with a view of analyzing each <16 unit building that gets mailed to me. (2/10)

b) Find twenty lenders operating nation wide or in Maine who offer Debt Service Coverage Ratio (DSCR) loans or private money. (3/20)

c) Purchase one <16 unit multifamily with whichever available credit type is most appropriate (3.i) - either moving to the address on closing or renting something cheap in-town depending on whether or not the lender allows owner occupation.

d) Move to full-time REI, or part time if cash flow does not support growth.

e) Exit plan would depend on cash flow, regional trends, and the characteristics of the loan and future financial market and cannot yet be assessed properly. Likely exit would be a 1031 exchange after the 3 years seasoning most DSCR loans I've viewed have to avoid prepayment penalties, assuming better deals or terms at that date.

PROS:

*Fastest or immediate transition to full time REI;

*Fastest network of specialists;

*Most tenant diversification, reducing impact of vacancy/lateness, and;

*Smallest competition given characteristics of niche.

CONS:

*Small number of properties fitting criterion may impact ability to find target property at the right time;

*Niche lenders with niche criterion , and;

*Low reserves given relatively low LVR and necessity of property size.

3.i - Foreign National Datasheet for a broker stating that no US credit is equivalent to 680 (FICO, I assume) for DSCR loans (https://wholesale.thelender.co...)

iV - The Silly Section: Partnerships, owner financing, USDA loans, foreclosures, and international investment. (Not active plans, but valuable discussion points all the same)

Partnerships:
I've considered partnerships in order to work with a person with a FICO score/IRS record who could take the loan. It's quite attractive as a prospect but for the sake of those future partners I would love to prove myself locally in these US deals before asking anyone to rely on me as a partner. I imagine someone I've never met from overseas asking me if i'd sign on loans that they want and shudder - I shouldn't then want to make that imposition on others. This is an extremely flexible space in future, and after having demonstrated myself capable upon arrival i'd be ecstatic to find local partners for future projects.

Owner Financing:

Though not exclusively sought as a plan, i'm as open to the sky to the idea and will ask every wholesaler or seller I contact about its' possibility.

USDA Loans:

At first where I live and work will be one and the same. In future i'd love to live somewhere that qualifies for USDA loans - though everywhere but Augusta, ME that satisfies my targets for investment and therefore living in the short-term are ineligible (4.i).

Foreclosures:

I don't know even nearly enough to seek this as a venture. Given the lingering financial impact of COVID and current economic conditions it seems a very worthwhile thing to learn about for later investment and will likely form the bulk of my near-term purchases following these first ones, and may well be my predominate activity throughout 2023.

International Investment:
The idea of liquidating all personal and business assets whilst keeping my 4/2 sharehouse in Aus and househacking a small cash-bought SF in Maine is an appealing option, after all income/expenses/allocations however it would negatively cash flow $2.50/week assuming a stable currency rate.

Though principal paydown is a valuable wealth-building tool, my desire for cash flow in addition to a lot of trapped equity in Australia's fairly rigid/monopolistic/regulated financial market (and an unavoidable double-taxed hit on eventual sale[4.ii] for which i'd not utilize a 1031 exchange[4.iii]) makes this an unattractive option.

4.i - USDA loan qualifying region map (https://eligibility.sc.egov.us...)

4.ii - Foreign Earned Income Exclusion (FEIE) thresholds (https://www.americansabroad.or...)

4.iii - Challenges with international 1031 exchanges (https://atlas1031.com/exchange...)

If you've read this far, thanks so much for your attention. Any and all suggestions, critiques, questions, references, and facts you might think are relevant are wonderfully appreciated and may well be the deciding factor in which path ends up being taken. I hope at the minimum that this post at some point can at least help someone, and I hope to be able to post a follow-up thread by years end updating on what the chosen path was!