All Forum Posts by: Andrew Postell

You have practically the whole year to plan but for those of you who are on the fence here's the 3 reasons why 2017 is the year for you!  3 Crucial Reasons You Should Buy a Home Before 2017 Ends

@Kyle Spinale  If the lender said "you don't qualify" after you saying just one thing about yourself then you should look for someone else to work with.  It's the lender's job to earn your business and get to know you.  They should be looking for ways to QUALIFY you, not the other way around.  Most people don't know what is needed to qualify and that's why the lender should help teach you and inform you on what to expect.  What you went through is so common in lending and it's why there's so much frustration towards banks - and rightfully so.  The short answer is that yes, talking through your entire scenario will help getting you qualified.  Your job gap may or may not even matter but it's important to talk about.  Even if you can't get prequalified for a conventional loan there are still portfolio options.  If your lender doesn't know the difference between these two loan types then find a lender that does.  Hope this helps. 

@Martin Snell you are on the right track to answer these questions. Financing is one of the most credit elements of understanding in order to prevent mistakes in SFR investing.

It is normal for a hard money lender (HML) to pay work in stages or "draws". Each hard money is a little different so some may only allow one draw and others may allow three and so forth. The basic concept here is that a contractor is not getting all the money up front for a job. The HML may allow 10% up front to help the contractor buy the materials but limiting the cash to the contractor protects you and the HML. It prevents the contractor from skipping town with all the cash (it happens). So this action is normal.

The other concept that I want you to be an expert in is the refinance rules for an investment property. If you are refinancing an investment property the two main tools that investors use are conventional lending or portfolio lending. Most HML won't even grant you a loan without a prequalification letter for conventional lending or portfolio lending if you are seeking to keep the property long term. A conventional loan can refinance your HML loan balance the day after the work is finished. A conventional loan will allow you to refinance 75% of the After Repair Value (ARV) of the home 1 day after the work is completed. But you can only refinance the loan balance or 75% ARV whichever is lower. If you do the renovation work yourself you may not be able to get that cash back for 6 months. Here's what I mean: Let's say you buy a home for $50,000. Renovation work is $30,000. ARV is $100,000. If you use the HML to buy the home and do the renovation work then your loan balance with be $80,000. When you refinance out of the HML the conventional loan can only refinance 75% ARV then your new loan amount will be $75,000 leaving $5,000 extra that you would need to bring to closing. Now gettig a $100k home for $80 is still a good deal but know that conventional is limited to 75% ARV....unless you are getting cash out.

So take this same scenario above, except this time the renovation work of $30,000 you pay for our of your own pocket. So your HML balance is $50,000. If you wanted to go above refinancing that $50k, meaning getting CASH OUT to pay back your renovation costs, then a conventional loan will make you wait 6 months. Once you start getting cash out the rules change. Cash out conventional loans still permit 75% ARV but you must wait 6 months to do it. So if the choice is between paying the costs on your own or using HML to do it, the HML route will allow you to leverage more of your money.  BUT THERE IS ANOTHER OPTION.

Portfolio lending is another option.  You mentioned that a conventional loan may not be the best for you right now and that's what portfolio lending is for.  Portfolio lending is more flexible with qualifying you.  There's always pros and cons to everything though.  A portfolio loan may have a higher interest rate, it could be an adjustable rate, or it could be a 15 year loan, etc.  So if that's the route for you then get all the terms for the loan so you know the full story before committing.  Hope this helps!

@Dev Kumar you should be speaking with different/more lenders. Most lenders who lend Lines of Credit on investment properties usually won't analyze your income in a traditional sense. If you spoke to one who said they couldn't help you please don't think that they will all say this. I would specifically ask about a "Line of Credit" and not a HELOC. A banker who isn't experience may get confused by this since most banks use HELOC on primary home products. If you use "Line of Credit" it could help get you to the right department easier. The smaller, regional banks are particularly more forgiving and in analyzing your overall financial outlook and not examining your taxable income so heavily. You may want to try a different post and use the subject line "Looking for LOC - Orlando" or something like that to get some Orlando investors to give you their Line of Credit sources. You should be able to find a lender that can help with this. Hope this helps.

@Dustin Mellor if you already have an open HELOC that you can draw against then I would say that you should feel comfortable to say your offer is a cash offer. If you don't have a HELOC and have to go apply then that would not be considered a cash offer. It could take 30-45 days to be approved for a HELOC (depending on the bank).

Also, just in case, if you wanted to do a refinance after you buy this house using a HELOC to purchase this home would allow you to overlook any "cash out" or "delayed refinancing" restrictions. If you have any questions on this aspect feel free to Private Message me.

@Marcus T. I would also provide you with the same advice.  If you have already completed your cash-out refinance and have the money in the bank then feel free to make your offer a cash offer.  A conventional loan cash out refinance will also take 30-45 days to complete depending on the bank.  A portfolio or Hard Money loan could be quicker but weight the pros and cons adequately. 

Thanks!

@Account Closed There are specific loans that will ignore your taxable income. I'm not sure which lender you would have spoken with that said that you couldn't get a loan but maybe that lender didn't have investor friendly products. You can most certainly invest in SFR properties if you wish. You can definitely find a loan if you are self-employed even if you show your taxable income at $0. Private message me if you need more information.

@Jacob A. having gone through a similar scenario recently I'll give you my thoughts.  Texas has had about a 6% increased in property values each year for the past 5 years.  Depending on your city it will be a little higher or lower but I think you can count on this property increasing for the next two years as well.  So even if you don't sell right now, selling in the next few years should still net you the same equity if not more.  There's plenty of economic forecasts that will support this.  But the ultimate question is do you have a purpose for the cash from this property right now?  If you have a purpose for this money then it would make sense to sell the property.  If not, then hang on to it for few more years.  Keep in mind that even if you cash flow a small amount you get some tax benefits from the property and you have someone paying down the mortgage.  Having a great renter that is paying a little below market might not be a bad thing.  Hope this helps.

@Chibuzor Nnaji sure thing.  Sending now!

@Stuart Chinworth prices will almost certainly not hold steady in 2017 nor come down.  Right now demand is significantly higher than supply.  A "healthy" housing market has 4-6 months of inventory.  Healthy means that all economic classes can find a home and afford to purchase the home type of thing.  Right now we have 2.4 months of inventory and inventory is decreasing.  We have had nearly these same types of numbers for the past 5 years and that's one of the reasons that we have had a nearly identical increase of 9% annually over that period of time.  These are not my observations, these came directly from the Texas Real Estate Institute which has some really smart people doing research there.  Remember, the population of Texas has doubled in 40 years.  And 90% of that growth has occurred within 50 miles of I-35.  We are in a seller's market.  That's one of the reasons it's extremely difficult to find a deal right now.  Expect this trend to continue in 2017.

@Eric Lyles you will have PMI/MI unless you bring 20% down or prepay it at closing...which would also mean you bringing more to closing. Yes, the PMI/MI is present and you should be aware of it when the time comes to analyze figures. Plenty of people still have that fee with their loan and make a good profit on a home.