All Forum Posts by: Jason Wray

Christopher,

Helocs have changed over the years because you could get a Heloc with a rate in the low 3-4% which made the payment affordable. Fast forward to today and Heloc rates are in the 9% or higher depending on Heloc amount, CLTV, Credit, Property type, and terms. A Heloc is a good tool for doing renovations and repairs.

When it comes to down payments on more investment properties a Heloc is not the best choice. A cash out refinance is the better choice for a few reasons including lower rates, longer term (30 year vs Heloc shorter term) equals a lower payment. You also cannot use a Heloc as a verifiable asset or PITI reserves that are required when buying more properties.

A Heloc is always going to be in 2nd lien position and you cannot borrow more money unless the heloc is paid off. A cash out refinance lets you pull cash out to put into your checking or savings as a verifiable asset or PITI reserves. Heloc is the same as a credit cards its a open end mortgage and it adds another trade line to your credit. Excessive trade lines on credit can drop or hurt your credit score and raise your DTI.

I would encourage you to look at a side by side to examine the savings and benefits of a Cash out refinance payment versus a Heloc payment.  

Jalen,

You are correct the best way to utilize your VA entitlement and using your DD-214 is to buy your primary home and then refinance into a conventional loan. One big loophile is to start with a Multifamily 2-4 unit so that when you exit in as little as 6 months you have 2-4 doors paying the mortgage and cash flow.

VA also allows you to build your home and will include the cost of the vacant land/lot into the financing. VA offers renovations loans as well to renovate or repair things like roof, convert garage to bedroom, adding sqft etc.

Biggest rule of thumb is refinance before you move out so that its still considered a primary owner occupant home to get the lowest rate. You can also use VA to buy the home and renovate it so that it speeds up the ARV to pull cash out if needed.

If you have any questions feel free to reach out I enjoy helping other BP members especially other Veterans.

David,

Welcome to the BP forum and nice to see more investors joining and interested in building their real estate portfolio.  If you ever have any questions feel free to reach out I enjoy helping or offering tips/loopholes to other BP members.

Shema,

Good advice and its always the best way in any business is talk to everyone and start a conversation every where you go in life. I have met some of the biggest investors, home flippers, realtors, and more in places like the DMV, Waiting at a Restaurant, sports game, church, events etc. Cold calling is almost a forgotten tactic but its the strongest marketing tool in most cases.

When it comes to land you can find the owner of lots through the county assessor or tax records under owners. Sometimes you get an LLC but yu can also look up an LLC and get a name or phone number/email. I have had a lot of success tracking down land on sites like Craigslst, FacBK marketplace, Landwatch, Landsearch, loophole and more.

All of those websites are great but Landwatch and Landsearch both offer Vacant lots and acreage. In most cases the land/lot offer seller financing and its affordable to get into contract and simply refinance or build on it for the payoff.

If you ever have any questions feel free to reach out I am always happy to help other BP members.

Quote from @Wendy S.:

@Jason Wray Thanks for your response. I do understand the difference as you stated. What I have been finding is that the traditional players ( big banks, Cu ) that offer a true Heloc are assisting about 60 days to close and fund while the more online players such as Figure is offering A Heloc that to me is really a Heloan because you have to take the money over approved for the full amount but they promise a 7 days payout all things being equal.

This is why I specifically asked if anyone know any Lenders and to please clarify HELOC or HELOAN.

Thats crazy to take that long it should only take 10-14 days to close on a Heloc or a Heloan.  Cash out refinance take 20-30 days max.  I cannot speak for evey bank/lender but that's what I see as teh normal turn time.  The good thing is rates have dropped so again the cash out refinance is usually the lower/better option.

Aaron,

Welcome to the BP forum and sounds like you have some great credentials and off to a great start.  If ever have any questions feel free to rech out it woud be great to Network!

Pedro,

You only need 10% down for an investment property if its a SFH, Condo, or Townhome. As far as a MFH 2-4 units you only need 15% down even up to 4 units. This comes down to cash flow if you can put less down and cash flow its wiser to keep your money in the bank.

Indiana has been a hot spot over the last 3 years for investors for SFH and MFH homes. You can still find a duplex for sale in Indianapolis under $200K. $30K can be stretched a longer way over (2) homes versus one REI.

You can also buy a Second Home/Vacation home for only 5% down for SFH, Condo, or Townhome. Vacation homes can still be rented to help support the mortgage when not visiting or staying at the property. Later you can transition it into a full time investment rental down the road by doing a refinance and lowering the rate at the same time.

There are renovation loans out there that also allow you to borrower over a 8-10 year term to cover the renovations and again refinance to consolidate the reno loan when the ARV increases. If you have any questions feel free to reach out, I am always happy to help.

Desiree,

You list a lot of good points and coming from a Banker when you wait for rates to come down you end up paying more! May sound strange but one thing to remember is when mortgage rates take a big drop it causes more buyers to come to the market. When more buyers come to the market and put in more offers it drives up bids/offers. Now that same house you could have purchased for say $300K is now $325K+.

So if you would have purchased that same home at a higher rate you are paying less versus a lower rate on the higher sale price. Example, if you buy a home at $300K at 6.50% with 10% down your payment is $1706.58.

If you wait for a lower rate 5.99% but the home increases to $325K at 5.99% its now $1,751.81. You are going to pay more due to increased home sale prices and what triggers homes sales? Lower rates! If you buy right now you get in on the ability to increase your equity faster and simply refinance in 12-24 months when rates drop.

I have seen this cycle twice in my 19+ years in banking and we are getting ready to have much lower rates over the next 3-4 years. You will also see home prices skyrocket in many states while some states even out. States like VA, FL, IN, OH, GA, TX, NV, and a few other states will continue to surge while CA, AZ, WA, CO, AL, LA and a few other show some decline in some counties but not all.

Regardless of the states find a home now and buy it if you want to avoid higher sale prices and that comes with higher taxes! Marry the House, Date the Rate - You can always refinance when rates hit rock bottom and lower your payments.

Michael,

Construction loan programs are fairly simple and in some cases the answer to little to no inventory. You can also build a single family home or a 2-4 unit multifamily so its really up to you and what you are looking to accomplish. One good thing about building a 2-4 unit as a primary is you less money down and you can use the other units as income to help build a more expensive home.

FHA allows for a higher loan amount as you get into the 2, 3 and 4 unit homes and its still only 3.5% down. If you are a Veteran its 100% financing which can also help save money and in as little as 6-12 months you can move out of a unit and rent out all units and start over.

Newer construction homes are a little easier to sell when you decide to move out or rent due to the age of construction and being more turn key. Its also a great way to increase values in a market since newer homes sales offer higher sale prices. That is why a lot builders buy a few of their own homes and pay "all cash" after they are built to establish sold comps and set the market.

If you have any questions feel free to reach out it can be tough trying to figure out the first few steps and what is required.

Alex,

There are a few other options when it comes to your situation to get the cash out of the home.  You can use a bank statement program, (1 year 1099) and depending on your schedule E or how you show your passive income or Schedule C depending on business tenure you can use just one.  

Feel free to reach out or send me a message be happy to walk you though it or tell you what to ask for and how to know in advance you can do either option.  Alway happy to help another BP member!