All Forum Posts by: Anthony Scarlata

@Jason Hirko Thank you for the explanation, I figured it was going to be like that.

For a typical BRRR how do people refinance? Are they relying on the equity gain from rehabbing to be above 20% equity threshold from the cash out refi to qualify as a "rental" and then also count the 75% rental income they gain from the property towards the DTI that a conventional loan requires you to meet? And then that basically keeps them from doing BRRR infinitely because eventually their DTI will cap out?

Or does the industry of inbetween conventional and HML (what would I look up to find these companies?), look past conventional loan DTI requirements? My biggest problem is that with my first mortgage and now the 2nd mortgage I'm hovering in the high 40% for DTI. I can't move out of my current property into a new one to count the rental income because I just got it as my new primary residence. And don't have 20% down payment for the properties I'm aiming for. I'm trying to get past that hurdle because my strategy allows my cashflow to be incredibly high and overcome the bad rates until I refi out of them.

It indeed looks like I -will- have to go rehab route, but I'm still unclear with the few things that I asked. Thank you so much for all the information! I think this is the last round of questions I have haha.

@Jason Hirko Thank you for the reply! Let me try re-explaining. I am already in an owner occupied property. I want to get a 3rd property for renting, but I can't buy another place because of my DTI and because I wouldn't have 20% down in the first place. I'm trying to figure out how to leverage a HML to be able to get my foot in on a rental property, even if the rates and costs aren't ideal. Losing some money is better than not making any money. And because of my "room to room" renting strategies, I end up coming out more ahead while I establish a bigger portfolio.

And also to address your second point, let's say I did buy a rehab and I can force the equity immediately, how am I able to refinance out of it because the new traditional loan that I refinance with would go past my available DTI. IE: the mortgage goes to, $1,000/m but I only have $100 left in my monthly debts to hit a 45 or 50% DTI ratio.

Thank you so much for the in depth reply! Sorry for the confusion in my primary post.

Hi all, new to the forums but not entirely new to the game. However I did make a lot of mistakes on my deals so am now really trying to learn a lot going forward. I've never refinanced so please bear with me.

I have 2 properties that I househack (I only live in one of them househacking, and room to room renting in the other) through traditional loans and have been househacking for several years. I'm 25 so my regular career is only now starting to become successful and I'm at a point where I want to save and earn money instead of blow it all so I'm starting to work on the RE portfolio.

Now my DTI is at it's limit, so I was thinking of acquiring more property through HML, rehabbing, hold and rent. However, I've never rehabbed before so it's a bit riskier for me and the *real deals* are very hard to come by in the area I'm interested in. I figured I'd cut some corners and just go through with turnkey deals until my RE portfolio grows and I make more connections. My reasoning is because me and my wife will be in this area and can directly manage househacking, it's less stress and hassle on our end and we end up still coming out ahead because we can househack each house we have earning a considerably higher cashflow than traditional renting. We have a good strategy for househacking and I've had 0% vacancy rate and 0 evictions in 5 years (and I'm sure I just jinxed it now!).

So my primary question is, what is the most beneficial way and what exactly would the process be of using a HML to purchase a turnkey property and then I'm guessing, refinance out of it later down the road to pay back the HML? Traditionally using a HML to rehab a house and refinance out of it, you would still have a good chunk of equity in the house allowing you to take on the traditional loan in the first place and completely pay your HML back. But even that brings up a question.

How do you refinance a BRRR to pay back the HML when refinancing would go way over your DTI?

With the strategy I want to use, I feel like this might not be feasible with how little I want to put down. And even if I put down the 20%, I don't understand how I could refinance out of it. For the properties I'm interested in, I can only afford 10% down. I'd love to put only 5% down, but I'm not sure if I'd need more to be able to refinance later?

Example:

Purchase price $100k

HML will fund up to 75% LTV - $75k

I put down 10%, $10k.

Lender finances $15k (which means I need to have $70~ available in my DTI pool)

I have 85% equity in the house once it's a done deal. From here I don't know what happens, because after 12 months of seasoning when it comes to a refinance, how can I refinance if my DTIcannot afford the new refinance, which would be Refinancing at 75% LTV, so they give me $75k cash (or is it 75% of the 85% equity I have?), I give that to the HML, but my equity goes down to less than 20% that's required for a rental property? I'm not entirely sure, my brain is starting to hurt a bit from the confusion.

Any suggestions for how to make this work?

Thanks all in advance for the replies!

Hi all, new to the forums but not entirely new to the game. However I did make a lot of mistakes on my deals so am now really trying to learn a lot going forward. I've never refinanced so please bear with me.

I have 2 properties that I househack (I only live in one of them househacking, and room to room renting in the other) through traditional loans and have been househacking for several years. I'm 25 so my regular career is only now starting to become successful and I'm at a point where I want to save and earn money instead of blow it all so I'm starting to work on the RE portfolio. 

Now my DTI is at it's limit, so I was thinking of acquiring more property through HML, rehabbing, hold and rent. However, I've never rehabbed before so it's a bit riskier for me and the *real deals* are very hard to come by in the area I'm interested in. I figured I'd cut some corners and just go through with turnkey deals until my RE portfolio grows and I make more connections. My reasoning is because me and my wife will be in this area and can directly manage househacking, it's less stress and hassle on our end and we end up still coming out ahead because we can househack each house we have earning a considerably higher cashflow than traditional renting. We have a good strategy for househacking and I've had 0% vacancy rate and 0 evictions in 5 years (and I'm sure I just jinxed it now!).

So my primary question is, what is the most beneficial way and what exactly would the process be of using a HML to purchase a turnkey property and then I'm guessing, refinance out of it later down the road to pay back the HML? Traditionally using a HML to rehab a house and refinance out of it, you would still have a good chunk of equity in the house allowing you to take on the traditional loan in the first place and completely pay your HML back. But even that brings up a question.

How do you refinance a BRRR to pay back the HML when refinancing would go way over your DTI?

With the strategy I want to use, I feel like this might not be feasible with how little I want to put down. And even if I put down the 20%, I don't understand how I could refinance out of it. For the properties I'm interested in, I can only afford 10% down. I'd love to put only 5% down, but I'm not sure if I'd need more to be able to refinance later?

Example:

Purchase price $100k

HML will fund up to 75% LTV - $75k

I put down 10%, $10k.

Lender finances $15k (which means I need to have $70~ available in my DTI pool)

I have 85% equity in the house once it's a done deal. From here I don't know what happens, because after 12 months of seasoning when it comes to a refinance, how can I refinance if my DTI cannot afford the new refinance, which would be Refinancing at 75% LTV, so they give me $75k cash (or is it 75% of the 85% equity I have?), I give that to the HML, but my equity goes down to less than 20% that's required for a rental property? I'm not entirely sure, my brain is starting to hurt a bit from the confusion.

Any suggestions for how to make this work?

Thanks all in advance for the replies!