All Forum Posts by: Steven W.

So interesting story and something I never thought would happen but I can't see to get a HELOC now even though I have zero personal debt and W2 income.

As a business strategy in previous years or the low interest glory days I would purchase a property under my personal name and then transfer it to LLC (owner by myself and real estate partner). We've been doing this for many years and have accumulated a pretty large sum of properties to the point we had to go to private / commercial lenders during more recent years.

Anyways I recently purchased a new primary home (had zero issues getting the loan) and sold my old primary home, used the proceeds to pay off my property. I had a HELOC on my old property so assumed I could go to the same lender and move forward.

They told me that because I had mortgages on my personal credit report yet I was reporting them through my business tax return, that they would have to calculate the full debt of my loans and could not utilize the business tax returns to back out depreciation and other expenses which are typical.

This basically put me at a 60% DTI and made it so I didn't qualify to get a HELOC on my personal property.

So 1st question is….am I screwed on trying to get a HELOC? And if not….

2nd question is…what lenders out there understand rental properties and how they are supposed to be calculated based on DTI (Fannie 1038) that could help me?

Thanks!

Hello Bigger Pockets community!

I’m trying to refinance a property that I took ownership over about 18 months ago. I was forced to take it as subject2 because of unfortunate circumstances (person on deed passing away).

My intent is to keep the property and do a cash out refinance, however lenders are having a difficult time since the property mortgage is not in my name. The title is now clean.

Any suggestions of a lender that can help out?

Details below:

Current owed - $100K

Value - $475K

Rents - $4,200 per month

Thanks

@Daniel Helland I'm not looking to refinance any of my other properties at this time. I could do a 0% intro card, however the renovation cost is around $65K so that is not a great option.

@Stephanie P. I think there are much better options out there. As mentioned previously I'm not looking to refinance this property as I just closed last week. That would cost thousands more dollars which is not needed. 

Right now I am looking at other options such as local banks, credit unions, and personal loans.

@Kevin Romines - Thanks for the input. Unfortunately doing this loan will require me to refinance a property I just purchased last week. 

Additionally the only way I can qualify for this loan on a multi-family is if the property is my primary residence, which it is not. 

Biggerpockets Family,

Good afternoon and I hope you are all doing well. For the last 5 years I've followed a pretty standard method for buying my rental properties and performing the renovation. It always looked like this:

Step 1: Buy the property under a conventional mortgage with 20% or 25% down (depending on type of property)

Step 2: Apply and use a FHA Title 1 Home Improvement Loan to renovate the property. This has always been a great loan that doesn't require any equity in the property and is low cost because it is factored over 20 years.

Step 3: Refinance the property and pay off Title 1 Loan.

Step 4: Rinse and Repeat

Unfortunately when I tried after my last acquisition I was told my DTI was too high. This is because the underwriter won't consider my rental income on properties I've owned for less than two years, even though I have leases in place!

Well this puts me in a difficult position and I need about $65K for the renovation. I was hoping that the BP community could help me on some ideas or companies you've used in the past to fund just the renovation piece.

So far I've looked at Lightstream however they seem to be a higher interest rate and max loan term is 84 months. I've also called a few places about a personal line of credit, but again higher interest rate since there is no collateral. 

What have you used to fund your renovations? Please exclude any loans that would require me to refinance the property under a hard money loan or a 203K loan. 

Thanks for the help!

@David Weintraub I didn't make it that far because one of the apartments is less than 700 sqft. According to their brochure it would be in the high 5%to low 6% range which is fine for me. 

@Kevin Romines I've spoken with a few however any recommendations are appreciated. As mentioned I already tried Lima Capital but they have an issue with the sq ft of one of the apartments.

Thanks,

@Kevin Romines I'm not looking for fannie/freddie rates but I am not looking for 7%+ on a buy and hold property either. I'm happy to be in the middle. I have excellent credit, a good W-2 paying job, and have owned rental properties since 2004. 

This partnership is new and one of my other partners is in a similar situation with good credit,  good income and rental properties. The other partner does not have good credit but has money to fund the deals and gets a % of the income and refinance amounts. It's a good deal for all of us, however the only missing piece is getting out of the hard money loan into something that makes sense. 

Theoretically we could put the equity partner at a lower than 25% ownership, but even talking with lenders they would still want to see his tax returns and information, so I don't really see how this is advantageous unless you know a lender that would work with us.

While I appreciate you sending me the full details on how fannie/freddie work, that is a lot to read through and is not 100% relevent for this situation. I understand that they do not like LLCs and that you need to purchase a house in your personal name. I also understand I "could" buy a house in my name and do a quit claim deed afterwards. This limits my home buying power however and as mentioned previously on this post I will need to reach out to others such as my wife purchase a home....

I've already moved her around enough times and with a newborn on the way the option of doing more owner occupied homes are not likely. Plus I don't buy turnkey homes. 

@Bobby Montagne Understood. My credit score is fine and the house will rent out for $3,500+ a month once the renovation is completed. I just purchased another rental property (in my name) and provided this information. I'm familiar with that process.

Christopher Phillips I've spoken to a about 30 banks and lenders. - Lima One Capital doesn't like that the downstairs apartments are less than 700 sqft so they rejected the loan - Patch of Land will let me refinance but the interest rate is above 7.5%. - BB&T will let me refinance but only into a 15 yr loan. - My hard money lender has a long term option but it doesn't make a lot of sense bc it is still above 8% interest. Chris Mason Do you think it is a good idea for my wife to get the loan in her name and then quit claim it to the LLC name later? We are 3 investors working together and buying more properties. I mean even if we do the quit claim deed it would still be on her credit report yet she is not affiliated with the LLC. As mentioned earlier we already have the house appraised at $457K and our loan is $281K. I don't think we have any issues with LTV. I'm sure there are other options out there....there have to be. I mean biggerpockets tells you partnering up is the way to expand your business but apparently there are no good loan options? That doesn't make sense - unless they are factoring in 8% interest into their calculations.

Kevin R. Christopher Phillips Yes I understand that Fannie/Freddie are much better options. I already have plenty of properties under my personal name. You can only have up to 10 properties in your personal name. Are you really telling me that people with more than 10 properties are doing buy and holds at 8% interest? I'm sorry I have a hard time believing that. Also this is my first deal as a partnership. One of the two partners I have has a lot of cash but does not have good credit so we can't do a traditional mortgage. Come on guys I'm looking for good ideas not the same ol' thing that everybody already knows. I'm looking for credit unions, banks, or private money lenders who will work with investors who have a proven track record and will do buy and hold loans for long term without charging an arm and a leg and 2+ points. If that was the case nobody can afford to buy rental properties after 10.