All Forum Posts by: Christopher Morin

Yes sorry, post edited.

@Jerry Padilla

 I'm assuming your talking conventional Fannie May w/ investment property.  Minimum credit score requirements apply (680). 

@Angel GraciaYou will need PMI with less than 20% down as well (very detrimental to cash flow), but some PMI companies require minimum credit scores as well. Right now my lender is saying their PMI company requires a 720 credit score. I personally think they may not be looking hard enough.

Some lender's deal strictly with primary residence homes and are unfamiliar of requirements for investment purchases, or the considerations that investors often care about (minimizing down payment/maximizing cash flow).  Always fact check your lender and make them explore all possible options.   5 days before closing is not the time to find out that they omitted the fact that you need 6 month payment reserves, or that you could have pursued another loan option for better return.  Good luck!

I could be mistaken, but the VA has a Construction Loan, not a Rehab loan. You may be thinking of the FHA rehab loan, where you can wrap renovation costs of up to 110% of the purchase price into the loan. There are drawbacks however, and it certainly isn't cash as multiple draws, estimates, and appraisals are required throughout every step of the process. Usually the interest rate is higher, and the 203k loan also requires PMI until the end of time. Additionally, both the FHA and VA loan are for primary residence purchases only, so no flip/investment purchases.

@Joe Villeneuve , what a creative and interesting method to free that cash that is otherwise tied up. Clear benefits, and certainly with it's risks as well. I imagine clear communication with your lender on what they will approve on a refinance is necessary, and a property that can cash-flow enough to cover the HELOC debt service so that the lender doesn't see your total expenses > income. You do lock up the equity that you'll need for the refi though in the new place, so you can't free all the cash.

@Sarah Grise  I think I understand your concern, but if the goal is to increase cash flow beyond what you have currently with the 2 x rentals, then just a hard look at the before-and-after numbers. If Joe's strategy frees the cash in the HELOC, and the end result is that you are able to purchase other properties and create more cash flow total than your current 2 rentals do, then you have a good deal and you should do it. If you can't find properties with the cash that give you higher cash flow, then don't.

It's definitely a leap of faith to take a good, solid thing out of play trying to find an even better one.  As long as your ducks are in a row though, I think you'll be okay.

After some searching, found an incredible amount of information of the subject from @Bill Gulley

http://www.biggerpockets.com/forums/83/topics/167048-lease-options-safe-act-and-dodd-frank

Brian, good to know and thanks for the insight. I assume you mean licensed as a MLO and not a realtor?  The concern would be that you are selling a buyer who you haven't properly qualified as able to make his payments?  Because of Dodd Frank and also the truth in lending act? Still learning. 

Sorry to revive the thread...

@Brian Gibbons 

I like the term transaction engineer a lot... What do you use to differentiate your offers in the sub2 vs Lease option when presenting them?  I understand the gained advantage in the sub2 by holding the deed and more flexibility in selling, vs being limited by your option price, and that in most cases you'd rather have the seller choose the sub2 instead of the lease option.  And that in the lease option a goal is to get your monthly payment down to the mortgage amount (or close to, and probably pay the mortgage company directly), but how to do you incentivize the seller when he's deciding between the two?  Would you offer equity up front in the sub2 deal as opposed to a non-existent or low option price in the lease option?  Or maybe your lease-option terms still levy a responsibility on the seller for major repairs?

Putting myself in a seller position... if you present both and are going to cover my mortgage and it's still in my name either way, why would I sign you the deed when I could just have you sign an extended lease?

I want to zero in on this that you said... "They're not exactly hidden gems, right now I'm just looking on the MLS and driving for dollars fairly close to my current location."

If the deal was a deal right off the MLS, it probably won't be there long. You either need to be faster to the punch (relationships with listing agents who know you are an active investor, passing you properties before they hit the MLS) or hit the motivated sellers (which could be the properties listed on the MLS for a long enough time that the seller wants out).

The right purchase price and down payment will turn a lot properties into cash cows.  Submit offers that make it profitable, you seem like you have a good understanding on analysis to do that.

As far as your guy dismissing the foreclosures and distressed properties... well I could be wrong but I think a fair amount of people on this site would disagree.  Just be conservative in your reno estimates and adjust your offer accordingly.

A wise man once said "haters gonna hate." 

Some people assume they are experts and that if they can't do it, then it's just not possible.

I know nothing about the Columbia market but I would get a second opinion.  Your landlord may have experience in a few areas but maybe he isn't so wise when it comes to below market RE acquisition. I wouldn't be so quick to say the market is dead without doing some hard analysis on a few properties yourself, find the successful investors and where the niches are at, and start making offers.

If you take this property sub to then you are inheriting that overvalued mortgage payment.    The debt service is too much and will kill your cash flow for any sort of rental.  That's before the seller asks to get something for their nonexistent equity.   You could try and refinance once you own it and pay the difference in the original mortgage in order to make cash flow, but your appraisal might come in undervalued. 

Think about what your offer price should be as an investor... much less than the 70k ARV. Sounds like the only way to make this a good investment would be a short sale, which your seller wont want to do (credit = tanking before purchasing a new home) and likely wont qualify for financial hardship.

Sometimes the numbers just dont work.