All Forum Posts by: Brendan H.

Scenario: I buy a house from a Seller for 900K, but they still owe 200K.

I give them 200K as my down payment, so they can pay off their loan.

They carry the remaining 700K back with Seller Financing.

They had owned it as a rental property.

Do they pay Cap Gains on anything? On 200K? On 900K?

Thanks!

We have an STR in Florida. Just switched to a property management company. The Mgt company is saying they are not allowed / required to share the names of the guests staying in our home with us.

Is this accurate?

@Crystal Smith Agreed here. Make sure your current home will cash flow as a rental with your father and brother renting. That can either help or hinder getting a new property.

Because you are turning your home into a "new rental" property, most lenders will only credit you with 70% of your expected rental income as you look to buy your next house. So, if your father agrees to pay you $1000/mo in rent, the lender will only "credit" you with $700/mo as "income" when factoring into your Debt to Income ratio (DTI).

Re: HELOC. These are variable rate, typically interest only type loans. Basically like a large credit card but lower interest rate. If you're going to use the $ to buy a new home and hold that new home, then look into a Cash Out Refinance on your current residence. That will give you the lowest fixed interest rate, amortized over 30 years.

If it's valued at 175K, you could get a 90% LTV loan, so 157K max loan, minus closing costs… call it 150K max loan. If you owe 125K currently, then you could take 25K cash out of your current residence to use as a down payment on your next house.

However, If you already have $ for a down payment on the next property, and you plan to buy a prop you can fix / add value, and then cash out ReFi… then perhaps a HELOC on your current primary residence would be better.

You could buy your new residence with 10% down of your current cash, use 25K from your HELOC to fix it up. Cash Out ReFi to get your 25K back, and pay your HELOC back so you aren't paying interest until the next deal comes along.

I am currently using a HELOC to remodel a house. Upon completion I will ReFi & pay my HELOC back so I am ready to strike quickly again.

But basically HELOC's may not be the best Avenue for a long term hold (down payment) because HELOC's are variable rate loans.

@Brendan Harrison … one more thing to remember.

@Ty Martell Regardless of whether you pay insurance & taxes via escrow with your mortgage payment, you should always account for these #'s. As the gentleman above mentioned, PITI will always be part of your calcs.

As a technique, if you are tight on cash, you can opt to pay your taxes & insurance on your own (not via escrow thru your mortgage payment). If you do it this way, you won’t have to bring as much to the table at closing. Lenders typically require 6 months of taxes & insurance at closing, so if you opt out of the escrow you won’t be out of pocket that chunk of cash. I just did this with a rental I financed in Denver so I could use the cash flow to pay for those expenses down the road.

Just have to budget for the tax/insurance payments on your own which is more of a pain / one more thing to

@Jason Lemus If you qualify, the second home loan will get you a better interest rate with a lower down payment than a rental prop loan. After you close, if you happen to change your mind and decide to rent it out on occasion as a vacation rental, that’s your prerogative.

Hey BP!

I have a client who just switched jobs but is looking to buy a new house. He qualified for the price point he was searching with his previous job, but now that he switched, he is getting flack from lenders.

I understand in most situations it is not good to switch jobs while house hunting. That being said, it was an incredible opportunity he could not pass up. Not only is it an upgrade in salaried pay, but he also has an equity stake in the company. It is a well known nationwide franchise, not an obscure off-brand company.

Any ideas / recommendations on lenders who may be willing to take on this type of loan situation? Fantastic cash position, owns multiple properties with legitimate equity, and top notch credit.

Thoughts?

Thanks for your assistance!

Does anyone have a good technique for putting together a presentation of their portfolio for lenders? I am not using any big CRM at the time. Are we talking spreadsheets turned into PDF's? Pie charts? I have multiple rental properties in multiple states with multiple lenders. I am also diversified about 1/3 stock market IRA's, etc. and 2/3 real estate. Also have crypto assets and am currently invested in a couple startups. Would like to be able to just input my equity and cashflow, etc. into a little package on a monthly basis to update lenders as we buy more properties.

Is Excel the best option?  Any packaging techniques in particular that lenders like to see?  Does it vary between credit unions and/or private lenders?  

Thanks for any info!

@Sean Rotbart. I couldn't get the link to work either for some reason. I have a few SFR's in San Antonio and they have been very stable rentals, even during the Great Recession. Close to Randolph AFB.

@Alex Palladino haha I’m in the same boat... my wife would never sign off on roommates. Our kiddos would likely drive any roomies insane anyway! :) Yes then, definitely recommend a small multifam. 2 - 4 units as you can still get the best interest rates and buy as a primary residence.

If you live in it for at least two years, then repeat the process, you’ll have multiple properties before you know it. By living in it for 2 of 5 years, you leave yourself the option of avoiding taxes upon sale (if you don’t want to mess with 1031 exchanges).

If you bought a 4-plex every two years as a newly married couple you’d be well on your way to building some long term wealth!