All Forum Posts by: Brittany Minocchi

Yep! I do them regularly, as long as there was enough rehab completed to justify using the appraised value over the purchase price. If the properties are in NY, you might run into issues there though. 

Yep! 

Not all lenders require a lease in place, especially for a purchase vs. a refi. However - if it needs rehab in order to be livable or has any sort of deferred maintenance, it won't qualify for a DSCR loan. You mentioned that the ARV wouldn't be significantly higher once the work is completed, so it sounds like you may just be talking about cosmetics, in which case you should be fine. :)

Conventional financing won't be an option for a property that needs rehab UNLESS you plan on living in it. 

For strictly an investment property, you'd start with a bridge loan (fix/flip or fix/hold). These usually have a term of 6-12 months and are interest-only. The lender will finance a portion of the purchase price and up to 100% of the rehab. As a new investor, you could need anywhere from 10-25% of the purchase price to put down, as well as reserves (x number of month's worth of payments available in your bank account). You will need to find the rehab to start, then request draws as work gets completed on the property to reimburse yourself. Once rehab is completed and before the balloon comes due, you'll refinance into a long-term loan if you plan to hold, or you can sell the property. DSCR loans are popular for this because you can get around the 12 month seasoning requirement that a conventional cash out refinance will require.

Hopefully that helps a bit, feel free to reach out if you need me to elaborate on anything! 

Hey Xiang - 

If the property is free and clear, a DSCR cash out refinance is probably your best bet in order to keep it in the LLC. You'll see better rates and terms with a cash out refi vs a line of credit on an investment property, and many (not all) lenders want the property to be titled to an individual and not an entity. Depending on credit, LTV, etc rates in the 7s for a cash out are pretty common right now, whereas you'll likely see a line of credit run somewhere around 9-10%+.

Hey Erwin! 

Are you planning to do an FHA rehab loan? Will the property need rehab in order to be livable, or do you just mean cosmetics when you say rehab? FHA appraisals are on the strict side, so depending on the condition of the property, a "regular" (non-rehab) FHA loan may not be feasible. FHA loans are 30-year mortgages....it sounds like you may be thinking you need a fix and flip/fix and hold type bridge loan and then plan to refinance into a longer-term loan, but those types of bridge loans are for investment properties, not owner occupied.

You will need to get your credit pulled, but the affect the pull has on your credit score should be minimal. It tends to have more of an impact for folks who have scores on the lower side, but even if you do see a drop, it should recover within a few months. I wouldn't go applying for auto loans, credit cards, personal loans, etc. while you're applying for a mortgage - THAT will drop your scores. DTI will be a factor whenever you're applying for traditional financing, so your income will need to support any debts you take on. (I keep saying traditional financing because there are investor loans that DON'T look at DTI, but you can't use those loans for properties you are occupying).

Also worth noting that if you want to refinance and pull cash based on the appraised value, you'll need to wait until you've owned the property for at least 12 months for conventional financing. 

7s with no points for the most part, but it ultimately depends on LTV, loan amount, FICO, your investment experience, how long you've owned the property, whether its a single family or 2-4 units, whether it's leased....not all lenders care about everything I listed, but just some things to consider!

There aren't many, but yes. Be prepared for higher rates and/or fees on those types of loans. Feel free to reach out! 

I can't say for sure without more specific info about the properties, investment experience, occupancy %, etc....but I'm happy to take a look at this for you and see if I can find a lender willing to lend under those parameters, or as close as we can get! You mentioned in another comment that one of the properties is a 5-plex...that's considered commercial, so it would need to be done separately from the 1-4 unit properties. Feel free to reach out! 

One very important thing to note is that you won't have access to ALL of your equity. You may have $62,000....but you won't be able to use $62,000. You'll also want to figure in your new HELOC or mortgage payment into your cash flow numbers and make sure you're still good.

if it's currently worth $300k and your payoff is $238k: 

Let's say you look into a HELOC and the lender goes up to 90% LTV. That means 90% of the value will be used to determine your loan amount, so $270k. Now deduct your outstanding mortgage - you're left with $32,000 of accessible equity. If you did a cash out refinance, you'll max out at 75-80% LTV, reducing the amount of equity you can pull even further and closing costs will be higher. HELOCs have variable rates and are interest-only payments at first, then the balance is amortized. A 10-year interest only draw period is common. They are second position liens, so they don't have any impact on your existing mortgage. A cash out refi is a fixed rate, but is a lump sum loan that will replace your current mortgage (and your current interest rate).

If you can qualify for conventional on your next property, I wouldn't refinance your current one because yes, your rate will be higher. Refinancing isn't free, so you'd also need to look at your break-even point. The second property will require 5% down with conventional since you aren't a first time home buyer. If your DTI, credit and down payment are all solid, that's the route I'd take. Plus, PMI can potentially drop off of that loan once you have enough equity.....not the case for your FHA loan.