All Forum Posts by: Eric Guiltinan

@Andrew Postell  Thanks Andrew.  This post has gotten quite confusing but what @Austin Styer and I, and others on this thread, are talking about is owner occupied multis.  The previous posts reference the section of the Texas constitution that Fannie and Freddie and other banks have interpreted to mean it is against the law.  

As a lender, do you have any experience with closing a cash-out refi or a home equity loan on an owner occupied 2-4 unit in Texas?

No, Fannie and Freddie will not buy cash out refis on owner occupied multis in Texas.  It needs to be a portfolio loan.  Or I guess a loan sold to someone other than fannie and freddie.  They will also not do a non occupied cash out refi on the property if you are living in one of the units.  I think a portfolio loan is a stretch since the law is a little vague and most banks will probably be conservative about it and come to the same conclusion that Freddie and Fannie have.

If you aren't living in the multi than it is just a normal investment property and the normal rules apply. I think fannie and freddie set the LTV for a cash-out refi of a multi at 30% but I'm sure there are a lot of people on here with more experience with that than me.

@Austin Styer, I haven't done any more digging on it but i'm not sure there is anything left to figure out. I think your best option, and I know its completely ridiculous, but you could move into a rental and then refinance into a non owner occupied loan. I think cash out refinance rules vary a bit but UFCU was willing to go to 30% LTV. Your other options are what were stated above. "Condo out" the property by splitting the deed and then refinance, or get a portfolio loan.

If you find something else out please let me know.

@Michael Cohen thanks for correcting me.  @Syed Rizvi, buying a place with your brother sounds like it could be a good idea.  Buying a place for yourself and using your brother (or your friend) as a way to get a low down payment loan to go through sounds like a bad idea.

If non occupants are on the loan then your only option is a non-owner occupied loan.  Bigger pockets isn't here for people trying to cheat the system.

Using an FHA to buy a multi family is a good idea. Try Houston. Its fraud if you don't live in it.

You can drill down pretty deep into this stuff on the governments website.

https://www.census.gov/data/tables/2016/demo/popest/total-metro-and-micro-statistical-areas.html

Thanks for posting.  I'm not sure these qualify as "large" cities but I suppose its all relative to where you are from.   I would be cautious when looking at growth as a percentage from smaller cities.  A few new subdivisions or not and these numbers could swing wildly.  Best to look at MSAs for overall population growth and look at the neighborhood level for selecting investments.  The reason for lumping Cedar Park and the rest of Austin's suburbs in with Austin (or any city for that matter) is not because Cedar Park feels like "Austin" its because the drivers of population growth and the economy are intertwined.

Hi Nick,

I agree with Dan, perhaps your wife could be convinced to buy a duplex that was detached. They exist in Austin although in the more expensive parts of town they are being converted to condo regimes. Its difficult to find cash flowing places in Austin and nearly impossible to do so with SFR. I've owner occupied 3 different duplexes and had no issues with the tenants. If you are going to be a landlord you'll need to learn to deal with tenants and their issues. Might as well get started.

I also think you shouldn't worry too much about MIP. Focus on your overall ROI and cash on cash return. A big advantage to being an owner occupant is the ability to buy places with little down. If you run the numbers you'll find a much better return if you put 3 to 5% down and pay the MIP.

Also, just FYI, but I believe that when qualifying for a mortgage lenders will only consider 65% of your 401k as accessible money.

Good luck.

Just a follow up here for those that find this thread in the future.  I finally ended up reaching out to my lender who sent my question directly to a Fannie underwriter and was told that Fannie and Freddie will definitely not purchase a home equity loan on an owner occupied multi.  In fact, the underwriter said that they will not even do a traditional non occupied cash out refi if you occupy a multifamily.  You need to move out first.

I suppose there is some possibility of finding a bank that will hold the loan or sell it to investors but with Fannie and Freddie definitely off the table it becomes pretty difficult to find a loan. 

They do these loans in other states.  Just not in (the nanny-state of) Texas.  But I believe it is just due to poorly crafted legislation where owner occupied multis were not considered.

@Stephen Stokes They sell in that range all over the north part of town.  A quick search shows that in the last 3 months 6 duplexes sold in that range in 78758.  In fact, only one sold for more than 300 and it sold for 309k.  Like @Jason Hirko said, they need some money put into them but they will cashflow afterward.