Portfolio lender in NYC

[Julia Green]

Hi all, Hoping someone could help me find a solution for a friend of mine. I have been spreading the good word of real estate investing and recently got into a conversation with an old friend of mine. He is self employed, 2 kids and wife and makes about $75K a year. He is now in a vicious cycle of working like a madman to pay back taxes and coop fees. Well here’s the crazy part: 15 years ago when he moved to NYC he bought his West Village condo cash. It’s probably worth close to 3 million now! He paid $1.2m. He does have a $100K mortgage at 7.5% but has been having a tough time getting a lender to do a refi. He’s paying $3000/month in fees and another $1050 for mortgage. I think that’s nuts and there must be a small bank willing to do a cash out refi on a property like that even with this dept to income ratio in the 60s. Thoughts?

[Jason Lee]

Is this a co-op or a condo? You mention both forms of ownership. Are the back taxes real estate or income? If it's a co-op it doesn't matter what any portfolio lender will allow, the co-op will limit the housing debt-to-income and your friend's total debt-to-income (they would include back taxes owed too when looking at his liabilities) in what they will allow for a refi or cash out refi (the board would have to approve it). If it's a condo, I'm still not sure what his options would be with 65 housing DTI. I'm pretty sure lenders in NYC don't want to go over 40%. Also, it appears the bulk of the expense is the maintenance or common charges and those won't change (they'll only go up). Really not sure what the point of the cash out refi is unless the tax debt is significant (and accruing interest and penalties) as his monthlies would still increase. If his income fluctuates (which is pretty common for most of the self employed folks I know) or the building implements special assessments (most do at some point), your friend could really find himself in an even tougher spot.

I'm sure his 3mm apartment is pretty nice, but it's really costing him too much based on his current income. He could sell it, downsize into a 2mm condo paid in cash with no mortgage, with monthlies of around $2500, pay off his debts (depending on what they are), and get his housing DTI to 40% or less... and sleep better at night.