All Forum Posts by: Bridgette Delva

Hi @Pragati Soni what type of mortgage are you getting, FHA or conventional?

PMI with an FHA loan is required and the only way to get out of it is to refinance or you will pay PMI for the life of the loan.

PMI with a conventional loan is only required if you are paying less than 20% down payment or if you refinance into a conventional loan and do not have at least 20% equity. With conventional loans, the PMI will drop off once you have 20% equity without refinancing so it sounds like this is the type of loan you are getting. To get rid of the PMI on a conventional loan after you have 20% equity, you can request it from your lender but, by law, they must automatically remove the PMI once your equity reaches 78%.

I am not sure why you would have to pay more in fees when you increase your down payment - that doesn't make much sense to me.  What is the basis for the fee, is your mortgage broker charging you points?  I'm wondering if they want to charge you fees because they want to change your loan type.  It would seem as though your interest rate would improve by putting more money down.

Sorry, I need a little more info to make sense of this; maybe this is common but not from my experience (although I am not a broker). 

@Tony Cruz okay good to know you have a market. I definitely think you need to save up more but it still goes back to what type of rehab your property will require and your monthly operating expenses.

Reserves are more of a personal assessment of the level of risk you can afford to take. Some people are okay with only having a one month reserve saved while others may prefer 6 months. You may decide to be right in the middle at 3 months. But to calculate that number you need to understand total monthly costs (mortgage, taxes, insurance, PM fees, anticipated repairs, and other operating costs) then decide how many months you want to have.

Just remember that reserves are just that, reserves and they would need to sit in an account, probably an interest bearing account, and remain untouched. This is not to be confused with how much money you need to save for a down payment or for rehab costs for your property.

Hi @Donta Busch what is the reason your credit is not excellent?  This plays into the best strategy to increase it.  Is it because of collections or charge offs?  Too much debt? Late payments?

Collections can be addressed more quickly through negotiations and lump sum payments (we've done this in the past). Could take 2-4 months but it's effective and drastically increases your scores.

Too much debt is easy since you just pay down the debt quickly to decrease your DTI ratio.

Late payments are the most difficult of them all because they just require your basic father time - to a potential lender, you need to demonstrate that you can pay bills consistently on time for an extended period of time since your last late payment. Paying on time for 12 months may not dramatically increase your credit score but it give the lenders a qualitative indicator that you are on the right track and have some history.  

I suspect your traditional lender is trying to fix the problem of late payments but will wait for your confirmation.

Hey @Joshua Mercado I'm not sure how long you've been flipping pallets but your tax return is the next best thing to proving income for non-traditional or unpredictable income streams.  That would mean, however, that you'd have to claim the sources of income and pay taxes.  I'm not a lender but they may also look at your bank statements to demonstrate a pattern of income so that could also support your income verification.  Essentially, they'd consider you self-employed so those are two ways that I know of for proving income.

Alternatively, you could look into finding a hard money lender but they'll cost more than a traditional mortgage and require that you have more reserves that traditional mortgages.  Plus they won't lend you money unless there is significant return for them.  The plus side is that most don't care about your credit or income source but your experience level may play a role.

Hi @Tony Cruz, a few comments and questions for you consider.

Have you identified your target geographic area? $13K is a nice reserve but it's not much for the California market and when considering down payments, potential rehab costs and the actual amount you need to have on reserve for your investments and your personal funds that won't go very far. Hard money loans are generally not going to fund you 100% of the deal and they aren't cheap so you still need some capital (usually 10% or so) to get a hard money loan AND the deal needs to be substantially attractive in terms of ROI for the lender.

What types of investments do you want to make? Single family, multi-family, commercial, long term, short term, buy & hold, fix & flip, BRRRR, etc.

What level of experience and comfort do you have in the your preferred type of investments? That could help inform your choice of whether or not to seek a partner.  For example, if you have the experience but not enough capital, you could seek a partner who has the capital; if you have the capital but no experience, you could seek a partner who has the experience.  Having a partner certainly helps allocate risk but if you feel comfortable with your experience and have sufficient capital, you may not want a partner for the next deal.

Do you currently own a home?  If not, you could possibly look to house hack your first property to get lower down payments but they'll want you to have secured income and stability as a basic requirement.

If you haven't already, I would recommend you spend your furloughed time getting really specific about what type of investments you want to make, your investment strategy, identify the cost of entry for your target market and then determine how you can build or acquire more capital to start investing.  

Unless you already have a stream of passive income to fund your lifestyle, I don't think starting real estate investing with $13K and a 688 FICO score is going to be a ticket to financial freedom (although I'm sure it has been done).  The exception is that hard money lenders may not care as much about your FICO score as they do about the validity of the deal you have identified or the opportunity to generate a return on their money.

@Stephen Spradley we would slap some shiplap up and call it done. Not sure if you have it in your budget but shiplap could solve all of your problems and offer a modern, clean look to brighten up the room.

Hi @Katie Miller, a $1MM gift would be the perfect boost for our existing real estate investment strategy! We would take $500K and purchase 4 fix & flip SFH properties in our target market to generate a near term return and some capital to invest in multi-family rentals. We would use the other $500K to BRRRR 4-6 properties in our target market for long term cash flow and fuel our BRRRR cycle of investing!

Okay I understand. BRRRR may still be attainable with a FHA 203k loan in which you borrow both the purchase price and the rehab money as part of your loan. There are very specific guidelines and processes for this type of loan so you'd want to research this for more info.

If you are buying local to where you live, driving for dollars is an effective way to find off-market deals for under market price - this takes time and results aren't guaranteed but it's where you can find your next gem and build your experience with analyzing deals. Look for the boarded up, un kept, vacant or run down properties then start writing your offer letters or knocking on doors. 

Going back to BRRRR, you could still pursue this if you seek out private loans like from friends, family or co-workers.

Hi @Connor Campbell sounds like you're off to great start with building your capital. A few questions for you:

Do you plan to househack?

Why do you want to target a 6bd house specifically? Why not a small multi-family?

Have you already researched the type of funding you'd like to get? For example, with a FHA loan, you may only need 3.5% down and you can buy SFR or multi-family (4 units or less) with this type of loan.

Hi @Joshua Farren we have found that as we are starting out, it takes time to build relationships with Realtors, PMs and Wholesalers to a point where they'll come to you first with the hot deals.  If you are buying local to where you live, driving for dollars is an effective way to find off-market deals for under market price - this takes time and results aren't guaranteed but it's where you can find your next gem and build your experience with analyzing deals.  Look for the boarded up, un kept, vacant or run down properties then start writing your offer letters or knocking on doors.

If that is not your preferred method or you are not local, you could look for the aged listings, build your analysis and make offers.  Bottom line is that you have to make offers and you can't rely on a "team" that doesn't exist yet to bring your next deal.