All Forum Posts by: Elizabeth Grahsl

Great! I'm so glad it worked out. :)

I agree those rates are crazy. May have been some kind of atypical structure like 90% LTV or LTC or a credit issue of some kind. I work for a regional bank in TX, and while we do out of state loans there has to be some kind of local connection. But most bigger regional banks or national banks will do a RE loan anywhere in the country. You might try getting a quote from one or two big banks like Wells Fargo or Chase just to see what they offer. I'm sure in the northeast even local banks lend across state lines though.

For reference, we would offer the following on this type of loan:

1% origination fee, 80% max LTC/LTV

20 year term/amortization

4.75% fixed for 5 years or 5.0% fixed for 7 years (floating after at Prime + 0.50%)

We also offer 15 year fixed loans on non owner occupied CML RE at 4.99% and all sorts of other slightly different terms for whether the amortization is 15 years versus 20 and whether the rate is fixed or floating.  But the above is probably our best bet for a buy and hold property like this.

If you want to go out 25-30 year amortizations, or when you want the rate fixed for more than 5-7 years, that is when the rate will start to tick up toward 10%.  But 12-15% starts to be hard money type rates; I would think you could do much better than that unless you have a credit issue of some type.

Banker here.  If you are able to put down 20-25%, you don't need a sponsor.  Sponsors are more typical in large ($10MM+) deals.  But any bank, even a small credit union, can gladly handle a real estate loan under $1,000,000. 

Banks care a lot more about the financials than they do about your experience level (although that does count for something and may be a slight added risk in your case).  However if you're planning to hire a property manager that will take care of that question.  If the income ratios work, and your credit is good, and you aren't sitting on a mountain of consumer debt, and you can put down 20% and still have some decent reserves leftover, they'll approve you.  Assuming the property appraises of course.

You just need to get a few quotes from banks to see what terms they'll offer.  Start with any banker you know, or ask your CPA or financial advisor for a referral, or just walk into the local bank where you do business and tell them you'd like to speak to a commercial banker about a loan. 

If you pull out before the financing contingency expires, you shouldn't lose your earnest money. Just say you couldn't get approved for the loan - which would be true. In reality I know it happens but it's rare for someone to actually lose their EMD. There are all kinds of ways out of real estate contracts. Just be open with your realtor and see what he or she advises.

Also be open with your loan officer.  As a lender myself I'd be doing everything I could to help you obtain exactly what we need so we don't all lose out on this deal at the last minute.  The deposit verification is a pain; I went through it myself a few months ago doing a refi and it was a nightmare because we'd just invested in two private equity deals and had moved money from two brokerages and around 3 different checking accounts to fund the investment right before we applied for the refi.  I just made an excel spreadsheet and sifted through each statement and made a note next to each big deposit or withdrawal as to what it was ("wire from X account, see related X statement"; "payment to Susie for services rendered"; "payment from Bill for XYZ."

Documentation doesn't mean you have to have proof of what the thing was.  For most small amounts, you simply have to email them an explanation - a simple email is the documentation.  Don't overthink it; you don't need to generate an invoice for a payment that a friend made to you unless they gave you like $10,000 or something.  Just email the loan officer an explanation and go from there.  Note: although for really big amounts like if you got a gift from a parent for $20,000, they'll ask for a signed letter from that parent saying it was a gift not a loan.

I live in Dallas (Uptown) and have been a residential real estate investor in DFW for 10 years.  There is a lot of competition for many properties, due in large part to cash investors from all over, but there is also steady population increase and stable/grown rents (as well as vacancies staying fairly low in most areas).  

It's hard to nail down a certain area for best deals; money can be made in any neighborhood depending on your resources and time frame and timing.  Buy and hold works well here, but flipping/rehab deals may require a more precise plan to execute well given the heavy competition not just from owner-buyers but also renters who have seen new, nice apartment buildings pop up all over the place.  

I dove into the rental RE market as a naive 20-something 8 years ago and now have 4 duplexes and two condos.  I'm trying to figure out where to go from here now that I have more cash flow and capital (from my day job) and realize that some of the rentals I bought aren't ideal (low cap rates, negative cash flow in some cases).  Should I sell and shift to better rentals now that I know how to analyze RE better?  Or hold for the equity build up even if cash flow is weak due to high transaction costs?

Tony, I'm a banker in Texas, and we do cash out investment property loans all the time.  I'm sure a local or regional bank in your area can help.  Look for a lender who holds their loans on the books or even at a national bank who sells their loans if you don't have a ton of other loans.  Many banks including the big ones will facilitate cash out mortgages on 1-4 family rental properties without a problem.  If you have a credit score issue though or are self-employed with some income issues, a private bank group that doesn't sell the loans (and therefore can do manual underwriting) may be your best bet.  

Thanks for the responses!  @Patrick Smith the cash flow is low because of relatively high HOA dues (24 hour concierge and a pool bump that up) and the fact that I have it on a 15 year note. But condos here are tough to cash flow at least at optimal rental cap rates from my experience due to relatively higher HOA dues and property taxes and the fact that rents are compressed due to a boom in new apartment buildings.

It would cash flow on a 30 year but I don't want to refinance again.  The costs are prohibitive on such a small mortgage, and cash flow isn't an issue for me.  I have 9 other rental units that cash flow or breakeven and also could easily service the rental debt from my day job salary if I had to.

Here are the details though:

Rent - $1400 (probably can increase to $1450 when the lease matures in Nov)

HOA - $339/mo (don't expect this to go up anytime soon)

Property taxes - $3800 a year (might tick up next year with values but only slightly)

Insurance (walls in and liability) - $550 a year

Mortgage - $808 a month (nearly $600 of which goes to principal)

@Linda Weygant Yes we make too much to deduct any passive losses currently.  But this loss offsets gains on a couple of other investments as well.  And honestly I don't really ever want to sell.  I bought it to live in but also to keep as a long term rental from day one.  I may not buy this as a rental today, but I don't think that means I should automatically sell, primarily due to the transaction costs of getting out of it and into another.

@Jay Hinrichs Yes I agree, the tax savings aren't great enough to tip the scales toward selling, particularly since I don't necessarily plan to sell in the foreseeable future.

Thanks all!

I converted my homestead condo in Uptown Dallas to a rental property 2 years ago when I married and moved, and I am hoping some experienced - and objective - investors can advise me about whether to sell or continue to hold it.  Here are the numbers:

Paid $145K in 2006 and I could sell for $180K today (I owe $90K).  If I sell by year end I can still treat it as a homestead and avoid any cap gain tax because I've lived there 2 out of the last 5 years. 

I am 4.5 years into a 15 year mortgage at 3.0%. Current cash flow is negative $110 a month, not including vacancies or maintenance (which are very low as the unit is in a very popular area, HVAC and hot water heater are new, and the HOA maintains the exterior). However, the mortgage is ticking down at nearly $600 a month, so holding it positively impacts my net worth.

I know negative cash flow is never ideal for a rental, but I also love how low maintenance this unit is. It was built in 1999 so building is in good condition and has a stable HOA. I can also see myself moving back into it one day if I ever get divorced or if my husband pre-deceases me - or if we run into hard times or want to save a ton of money fast we could squeeze in there together.

If I sold I would probably use the proceeds to pay off another rental mortgage I have that is at 5%.  Theoretically I could reinvest into other rentals, but the market is pretty frothy - and competitive - and it seems silly to sell a predicable easy rental just to bet on another that has also run way up in value over the last decade, even if the cash flow *could* be better.  Any thoughts??

VA loans are some of the most expensive loans you can get. If you can afford to avoid them (by having any down payment), you should. FHA and conventional loans will save you tons of money in fees, though you'll have to have a higher down payment. Most conventional loans will require 2 years employment history for approval, but look for a regional bank or credit union that doesn't sell off its mortgages. There are lots of them (including my employer), and those companies can make exceptions on things like that because they don't have to follow investor guidelines.