All Forum Posts by: Brad Sneckner

Well, "how" you COULD do it is a very different question from how to entice your family to agree to it... Depending on how the trust is written, who's trust it is, etc. it's usually not too difficult to transfer the property to a family member. You can often do this without triggering a reassessment of value too, depending on the use/occupancy of the home. 

If your family is trying to obtain a fair market price, you could potentially just buy the property from the trust and avoid many of the selling costs associated with selling it on the open market/MLS (agent commissions, photos, marketing, etc.). I've also had clients buy the property for a pro-rated amount based on trust beneficiary status when this is happening due to the passing of the trustor.

For example: Fair market value of the house is $500k, owned free and clear, and you are one of 5 beneficiaries of the estate. You apply your $100k worth of inheritance toward the price and just buy the house for $400k paying $100k to each of the other 4 beneficiaries (overly simplified math obviously, but you get the idea).

There could be important legal aspects to any particular trust that I'm not accounting for as well obviously, so I would still suggest consulting a real estate/trust attorney at minimum. 

@John Underwood No, you are correct. 10% down is required on 2nd homes, per Fannie Mae guidelines. There COULD be some private lender that allows 5% down but I would be very surprised.

@Zachary Harr You will have lots of options still with 10% down, and as you increase your down payment from there, your rate and terms will just get increasingly better. Though putting an extra $10-12k towards buying down the rate will make a much bigger impact on your payment than putting that same money towards the down payment, and thus increasing your cash flow. 

Hey @Kevin Thomas! I have a couple of thoughts... First of all, I think a duplex purchase is a fantastic option to kill two birds with one stone, those two birds being 1) A home for you and your girlfriend to live in, and 2) A property with great long-term investment potential. 

In regards to choosing a particular market, it really depends on the specifics of your personal situation. Where you each work/commuting needs, family/friends, length of time horizon, etc. I think the OPTIONS that this strategy would provide you in the future are that you would be able to own a property with increased cash flow in the future. The more units the better, but with current interest rates and rent levels, it's really hard to make a 3-4 unit property work on an FHA loan due to the self-sufficiency test requirement. A duplex will provide you with a home AND income, which helps you to set yourself up for the next purchase as long as you're diligent to save that extra money rather than upgrading your lifestyle.

It's not a bad idea to explore the fixer-upper option either. I would just say it depends on how much excess cash you have/earn monthly and how handy you are with doing some of the upgrading yourself.

In either case, I have helped many clients carry out both of these strategies in the Southern California area over the years. Happy to offer thoughts or answers on any specific questions you might have, just tag me so I get the notification. Good luck sir!

Hey @Shaival Patel, yeah it really just depends on what kind of financing you're trying to obtain. The best terms are typically going to be on a conventional loan as long as both you and the property qualify for conventional financing. There aren't really any special guidelines for STR vs. LTR. But to Doug's point, if you are wanting to borrow as an entity that is a different scenario, and will need to be financed with private financing.

I'd actually really like to connect with one as well. Keep me posted if you find one!

Nice property @Jacob Ortiz! You've got a great long-term hold asset there! 

@Myles Taccini

Yes, you'll need to have a 12-month lease, not month-to-month.

Hey @Myles Taccini

There are some variations in how lenders calculate things, but more so out of misunderstanding guidelines typically, not as an arbitrary decision. As a local lender, I've got a pretty good handle on the rules for this scenario since I've helped many clients do this exact thing. Here's what you'll need to know:

First, the rents on your current place WILL be discounted at a 75% rate. So you're looking at $1800 in qualifying rental income to offset the $2300 monthly obligation. The good news is that this will actually hit you as a reduction of income rather than a liability (helps with the ratio).

Second, you'll want to make sure they will allow you to use multiple leases for that rental income calculation on an SFR. Some lenders do not like renting each bedroom out separately and will want to see a single 12-month lease with all the tenants listed on it (maybe you do this temporarily and then revert back to 3 separate leases after closing...)

Lastly, you will NOT be able to use rental income from the new property's additional bedrooms in qualifying. At least not on a conforming mortgage. You'll be able to collect that money obviously, but it won't count on the mortgage app as income to help qualify. That said, with good credit, depending on how much you plan to put down, it sounds like a $500k approval should be doable based on some rough calcs in my head.

Hey @Justin Montani, congrats on your forward-thinking strategy of owning real estate. That will continue to serve you well for many decades. 

I think sometimes many loan officers start to get a little carried away in thinking of themselves as the arbiters of real estate strategy and finance. It's important for us to remember that we are (or should be) an ASSET to an individual in helping them accomplish their own goals, rather than simply telling them what they should do. Sure, I share my opinions as well, and give them the "if I were in your shoes" suggestions. But ultimately, it's their life/money/dreams and I am here to serve them. With that being said, I think you should have a lending partner who will be an ally in helping you figure out ways to grow your portfolio. If it's not possible right now, then they should be offering some thoughts and ideas of how you can be moving towards that end goal. 

I agree with @Katherine Blazer and @Eric Goldman. (Maybe it's a lender thing...?) haha. 

"Opportunity cost" has got to be the most undervalued and least considered aspect of real estate investing. Once you have an "opportunity" to purchase a performing asset (or anything for that matter) there is inherently a cost of NOT buying that thing as well. You miss out on additional cashflow, additional depreciation write-offs, future net worth, etc. Seems a high price to save a couple hundred bucks a month. Depending on the numbers obviously.

P.S. @Kerry Baird You must have that comment copied in a clipboard because you post it all the time! haha love the compiled list of HELOC options. Thanks for sharing so freely!