All Forum Posts by: Daniel Sprague

If the purpose of the cash out has to do with acquisition of more real estate, that Will affect your Debt to Income Ratio.  This is why if you state that the purpose is to buy another piece of R.E they ask for the purchase agreement/property address... so they can factor in R.E. taxes and estimated insurance, along with possible principle and interest obligations.  If (like most people) you are not under contract, and simply want access to it for future needs they should leave it at that, and not require anything else besides a letter from you stating you aren't under contract.   The point is at "time of application" the bank needs to underwrite the file correctly, and if you are purchasing another piece of real estate the liabilities associated with it need to be considered.   There are also more generic reasons (listed above) that have to do with the Patriot Act and making sure the lender "understands" their customer.

You need to go have a calm chat with the city.  They should approve a conditional rental license as long as you are actively trying to sell the home.  I have seen this happen multiple times.  Then you can legally rent it out while trying to sell. 

Your issue is that you are not going to get another permanent rental license so you have to market the sale to an owner occupant in thethe unit without a license who can rent out the other two.

Welcome.  If you have any financing questions I am more than happy to offer advice.  Feel free to PM me.

Thanks,

My suggestion would be to purchase the property yourself to avoid financing issues, and quit claim deed the ownership to an LLC shortly after.

You will not get a secondary market loan (Freddie or Fannie) if you are trying to purchase as an LLC. You need to take advantage of the long term fixed rates you can get with a secondary market loan when you are beginning as they become harder to obtain as you grow.

I am not suggesting the LLC because there is an incredible need for it, especially if you aren't going to have much equity, but rather as part of the process.

I have always believed if you don't do things correctly when you are small, you will not do them correctly when you are big.

This conversation doesn't really even get to the heart of why you may want an LLC to protect what you may have accumulated in wealth so far in life non-real estate.

Thanks,

I think it is a great idea.  I wish I would have started with this strategy.  As long as you owner occupy you will be good to go.

You will have a large upfront mortgage insurance premium, and will deal with lifetime mortgage insurance (unless you refinance or payoff), but those are the only two negatives I see.

Let me know if you want to chat more.

Take your own advice here:

4. Should I run away as fast as I can from this

I don't even know what the numbers are and I cant forsee this ending well.

Hey Zach,

I actively invest in Mankato.  Feel free to reach out to me. 

Mankato can be tough due to rental license restrictions.  This has the affect of keeping prices pretty high (along with rents), so there are positives and negatives. 

That being said there deals are out there, you just have to be ready to act same day.  If you get in front of a deal you cant hesitate if it meets your standards for condition, cash flow, etc.

Mankato is an expanding town, with good leadership and good prospects for jobs, etc., which all take a lot of sweat off the brow for landlords, but that comes with a hot real estate market which drives prices up.

Good Luck.

Hey Joe,

You are correct.   I am going on a decade working for a large bank, and yes credit worthy borrowers get punished in downturns as the bank tightens policies.

The funny thing is banks seem to never learn from the past. Even with the new Dodd-Frank and TRID rules in place banks are stripping away overlays, and trying to lend more and more money. Don't get me wrong, that's what they are in business to do, but I know of several banks lending up to 100% LTV on homes in what seems to me to be an inflated market.

Take advantage of it now, and you will have the HELOC for the next 10 years (typical draw period) to use when the next great opportunity comes along.

I like that you plan for the worst and expect the best though. 

I am going to avoid it as long as my bank keeps offering me the financing they have offered on the last 4 deals.  I am buying correctly and refinancing the properties to use that equity so hopefully I never need to use the home.

The only reason I see having the HELOC as an option would be a cash purchase of a flip or something which I have never done.

The key is having the money at the ready even if you are never going to use it.

Yes, but its more on principle than a rule.  I don't know, there is just something about coming home and your house isn't a part of the business.  It gives you a "nice feeling"

As I type that I am almost puking because I am a "burn the ships" guy willing to take risk.  What I said above sounded like a Dave Ramsey quote.