All Forum Posts by: Gayle Melnick

@Caroline Gerardo

Thank you for your reply as well. Would you mind weighing in on what I just asked Zack in my previous post? I'm thankful for insight from people with more experience.

@Zack Karp

Thank you so much for your reply. 

Here is my dilemma. My realtor works with this lender. I'm happy with my agent. I also already gave this lender all my documents to get approved for the first loan. What would be your recommendation for getting out of the deal with this lender and moving forward with someone else? I don't want to burn any bridges. 

Would you use this lender for the first deal and go with someone else on the second deal?

Hi all,

I'm currently under contract for two single family townhomes. These are my first investment properties and I plan to keep them as rentals. They are both cosmetic rehabs.

I'm using conventional financing with 25% down. I also have a VA loan on my primary residence. I have the capital for down payments and closing costs as well as my anticipated small rehab costs on both homes. The problem I'm running into is that with the 3rd mortgage, it pushes my debt to income ratio to 50%. My lender advised me that it needs to be at 45%. He is not including the projected rental income in this calculation, he's only considering the income from my job.

What is the process for getting the projected rental income included in my debt to income ratio? I asked my lender about it and said he would talk to underwriting because the rules have "recently changed". Does anyone have experience with this? I just wanted to see what people more experienced than me have to say about it so that I can understand my options when my lender gets back to me.

Thanks,

Gayle

@Austin Jones

Can you explain what you mean by "partial BRRRRs"?

@Derrick U.

My first primary residence had a septic tank. Get a septic inspector and ask them questions about the system. Make sure they do video camera snaking. 

I'm not an expert, but I'd be worried about owning a property with multiple units with septic and not public sewage. There's lots of stuff that can mess up the septic system (tampons, toilet cleaner, etc.) You have no way of knowing what your tenants are going to flush down there. Not sure if there's language you can put into the lease regarding that. 

@Christopher Phillips

Thanks so much for your reply! And for explaining it. I knew if it was possible that someone probably would have already thought of it and tried it.

@Christopher Phillips

Thanks for your reply! I appreciate your insight.

This particular property is a foreclosure. It appears that there’s not much wrong with it. Outdated layout and cosmetic stuff... I may be missing something. 

If I’m reading what you’re saying right, you’re saying that it can’t work because I won’t be able to find a deal that would qualify for conventional financing.

My question is more so is it possible, if I find a property in which the purchase price + rehab cost = 70% of ARV, does it work using conventional financing to acquire the property, then try to recover my capital with a cash out refinance? Even if the numbers are less favorable, if I would be able to recover any of my initial capital, while still owning a cash flowing property, wouldn't that be better than leaving my capital in the deal?

Hi everyone,

I'm new to real estate investing. This website has been a great resource. I've been making my way through reading basically everything that Bigger Pockets has published.

I'm currently reading about the BRRRR method. I was wondering if the BRRRR principles could be applied to a conventional financing situation by buying a property that needs work but would still qualify for conventional financing. The purchase price + rehab costs adding up to 70% of ARV. Rent the property out, then do a cash out refinance to recover the initial capital. I tried to see if this would work running the numbers with a deal I'm looking at.

Purchase price: $82k

ARV: $134k

Down payment at 25%: $20.5k

Loan: $61.5K

70% of ARV: 93.8K

Rehab budget: 93.8k - 82k = $11.8k

Cash out refinance for 80% of ARV = $107.2k

$107-2.k - $61.5k of original loan = $45.7k cash out

New mortgage of $107.2k with $26.8k equity

Total cash in: $31.5k

Total cash out: $45.7k

Would this work? Are any of my assumptions or calculations wrong? I didn't factor in closing costs, refinancing cost, etc. But I just want to know if the basic principle would work.

Thanks!