All Forum Posts by: Brittany Minocchi

I personally am a fan of cash flow over appreciation. We buy primarily in C class neighborhoods that are cheap to get into, cash flow well and we can fix up pretty easily if/when we need to. With higher end rentals, it'll cost more to buy and more to maintain. Just depends on what your goals are. I've thought about doing the same as you mentioned - selling and buying something in a better area. It doesn't make sense for me for a couple of reasons: I'd be almost doubling my current interest rate, reducing the number of income-producing properties, and reducing cash flow (because there is NO WAY I'd make the same on a higher-end property than what I am right now). All just to have a property in a better area, which is not a good enough reason for me. Now if you can pull the equity, hold the properties and use that equity to buy more properties with a lower entry point/maintenance cost and high cash flow, that's how people scale quickly. 

If you wanted to diversify your portfolio and throw a STR into the mix with the plan of having something paid off you can use personally at some point, that's another path you could take.

As for the down payments - 20%+ is the norm for DSCRs right now. There are a couple lenders that advertise 15%, but saying you can do something and actually closing the loan (assuming you can even hit your coverage ratio) are two different things. If you want to chat more about financing options or you have any questions, I'm always open to chat. Happy 4th! 

Hey Cole! 

Jason is correct. To purchase a single-family investment property you’d need at least 15% down, more for multi-family. If you rent your current home and purchase another home, then 5% is a possibility.

If you’d be open to a short term rental in a market that you visit often, you could do a second home loan with 10% down. This won’t fly on a long term rental though - you have to intend to occupy the property for at least part of the year. 

Quote from @Kelly Jenrette:

@Brittany Minocchi, this is for a conventional multifamily property. 

Another question that just popped up for me is about credit inquiries. I heard that if you have multiple of the same type of inquiries on your credit report it won't affect your credit score. For example, if I choose to go with another lender, my credit won't be affected because they're basically the same type of company. Do you know if this is true?

Okay, gotcha! If it’s conventional multi family then 25% is the norm. 

There is different information floating around out there and to be honest, none of us can really know for sure….the CFPB (the big guys that make the rules when it comes to mortgages) states that people shopping for a mortgage have about a 45-day window where all mortgage inquiries are grouped together as one, but I’ve also seen sources state that the window is 14 days. To be safe, I personally tell people they likely have at least 2 weeks, possibly longer. 

Credit pulls when shopping for a mortgage don’t have the effect on a score like consumers think it will, especially if you have excellent credit. It’s expected that you’re going to want more than one quote and you’re not penalized for it. You might see a decline of a few points at first, but your score should bounce back. If you’re applying for mortgages and credit cards or some other form of credit, THAT is a different story. 

If you’d like a second opinion on your loan estimate, I’d be glad to take a look for you. Your rate seems a bit high (but I don’t know what credit score they were using to qualify you) and origination fees aren’t always charged. 

Lenders are not all created equal. They vary in terms of what they charge to do a loan, what they charge for a certain rate, the programs they offer or whether they approve your application in general. Lender #1 might calculate your income differently than lender #2, which affects the amount you're approved for and/or your DTI, which in turn could affect your rate. Lender #1 might want a 700 FICO on the same type of loan lender #2 will take 680 on, so you could get approved or denied based on the guidelines or overlays of each lender. All of this and I'm not even including what I'd argue may be THE most important thing: level of communication. You can get offered the best rate in the world, but it doesn't do you any good if the lender takes 3 days to return a phone call, text message or e-mail and you don't close your deal.

The first question that popped into my head: is this for a conventional multifamily investment property? If not, the fact that you have to put down 25% is a good example of an overlay. Fannie/Freddie require 15% down on a single family investment and 25% on a multifamily investment....so if this is for a single family and the lender is requiring 25%, that's an overlay. So, you could go to a different lender and they might only require that 15%. 

A lender can add additional requirements or make it harder to meet the criteria, but they can't make it easier. If Fannie/Freddie say you need 15% on a single family, the lender can require 20% if they want to, but they can't allow 10%. 

Add in nonQM loans and that's a whole different ballgame. Hopefully that helps! 

Very popular strategy for BRRRRs. Investors will buy a property that needs work, rehab it, rent it, refinance into a DSCR loan and use the cash out toward another property. This loan type uses the potential income of the property to qualify you instead of employment and income documentation. The lender wants to see that you bring in enough rent to at least cover your principal, interest, taxes, insurance and association fees. Plan for somewhere around 70-75% LTV (depending on your credit and a few other factors), a bit higher of a rate compared to a conventional loan and a prepayment penalty. Some lenders want to see 90 days seasoning on the title, others 6 months, others a year.

Hey @Courtnye Nicole!

It's definitely possible depending on what market(s) you're open to. I invest in and am local to Canton, OH. All of my properties were purchased for less than $50k (this was a few years ago) but they did need some work, although it was mostly cosmetic and nothing that would prevent someone from immediately occupying the property. Are you looking for cash flow or appreciation? These properties aren't heavy on appreciation, but cash flow is great and that's what we shoot for. 

I was in the same boat as you with being anxious about the debt and all the what-ifs. Make sure the numbers make sense. Will rents cover your mortgage? Are you planning on self-managing or using property management? Are you cash flowing enough to cover yourself in the event you have a vacancy? When the inevitable repair comes up, do you have enough in reserves to cover it? The debt doesn't seem so bad when you see that it's allowing you to get returns you'd never see just leaving that money sit in your savings account. Feel free to reach out if you ever want to chat :) 

If you're planning on living in it for at least part of the year, a second home loan would be a good option. You can rent out a second home, but you have to intend to occupy for at least part of the year. This is more commonly found with STRs. If you think there's a good chance you'll rent it out as a LTR, you could pay "cash" with the equity in the farm via a HELOC or cash out refinance.

Which route you should take depends on what rate you currently have. If it's lower than you'd get with a cash out refi, it's probably a better idea to do a HELOC. Draw enough to purchase the PA property, and do either delayed financing or a cash out refi on that property if it needs any sort of work. Loan type at that point would depend on occupancy - you could do a second home, investment, or something like a DSCR loan if you don't want your employment/income/DTI factored in. You've got a few options.

That was a LOT of info and your head might feel like it's going to explode.... so if you have any questions or need something explained, feel free to reach out! Happy to help. 

Quote from @Anthony Isgro:

@Brittany Minocchi

@Susan Chagalian

Thank you for reaching out.

here are my numbers: Property value according to tax assement 1,400,000 comps on MLS ~2,000,000. Loan balance ~290,000 Credit score 775. HELOC wanted $400K

the Problem, property is in Hawaii.

Any thoughts?

 Looking into this for you - I'll be in touch!

Quote from @Beyonce Davis:

The first home I bought was with my brother , I helped with the downpayment and he covers the mortgage payment as rent. We are both on the title and the loan but since he covers the payment I have had some lenders exclude this one house but there was one that refused to. 
I have been following a process where I buy a home and live in it for a year then convert to STR and I have acquired 3 homes this way. So technically I have 4 mortgages in my name. In the last 4 years, now I'm facing some roadblock acquiring more. How have anyone else handles this obstacle without high interest, high down pay

Your debt to income ratio will be a determining factor with traditional financing. In order to get past that, you're going to need a nonQM loan that doesn't factor in DTI, employment or income, like the DSCR loan you mentioned. Rates for DSCR loans aren't always that far off from a conventional investment loan, but they do typically have higher costs associated with them. These loans are a bigger risk for the investor, so the tradeoff is higher fees and/or rates. You just need to look at the deal as a whole and see if it makes sense for you and your goals. 

Hi @Chibueze Nwadigo

Jay is correct in that the guidelines did recently change from 6 to 12 months on a conventional cash out refi. However, there are nonQM options that will allow shorter seasoning periods depending on the situation. Feel free to reach out to discuss.