All Forum Posts by: Jeff Dulla

1. That lender screwed up. There isn't a loan product I know of for residential mortgages that will allow you to put less than 20% down on an investment multi unit. In fact, most will not let do this type of deal without 25% down. I have personally financed my last two had to put down 25% for both to get a Fannie Loan.

2. PMI will not help you because PMI companies are not going to issue you PMI on an investment property unless it is a single unit. You can find PMI on a single family unit or condo, 15% down, but it is expensive.

3. I am curious about this myself and why any seller would want to do this unless they were making a very serious return on doing this for you. That is the whole reason they are trying to sell the property typically.

4. Banks do not need to wait any period of time between loans on different properties, if that is what you are asking. If you are asking how long they need to wait before getting cash out, that is typically six months. Unless you bought the property for cash - then you can do something called delayed financing to pull your money out in less than six months. You are also not maxed at eight loans. You are maxed at a total of ten financed properties and that typically includes your primary residence. 

Not to continue to call out any inaccuracies in the other answers but you cannot do FHA on an investment property. You must live in it. Also, residential mortgages only go to four units, not five. Anything more than four units and you are into commercial/portfolio territory. Not residential.

I wouldn't say that. You could get a commercial loan. From my experience, they are often not a line of credit. More often than not they are multi-year balloon loans that you need to redo every few years. Typically they work more like an ARM.

Residential mortgages - first mortgage purchase, cash out refinance, HELOC, etc, are used most often for a good reason, they are typically the most stable and can be the cheapest route. However, Commercial loans have an advantage of getting around some of the rules/restrictions that Fannie/Freddie/FHA/VA/Jumbo pose. But they do that at a the expense of stability and usually cost.

You would be an owner of the LLC. If you are the only one, 100% owner. As owner you have the ability to claim the net income from the LLC on your tax returns or to take distributions on your returns. Either way, you personally will go qualify for any future loans. You have to have them in your name. Once you close, you can have an attorney move them into an LLC. You will not be able to get residential financing on properties if you are trying to close the loan in LLC. They will force you to get a commercial/business loan.

Samuel - by then hopefully you will have an LLC set up. The earlier, the better. Banks will look for a two year history of income (whether that be rental income on the Schedule E or income that flows from an LLC). At the point that you have two years or longer, the banks will take whatever income generated by your LLC and use that. Caution - there is going to be an equation used in order to determine the proper income amount for underwriting. Even after you have established this, there are ways you can make sure your income will be used properly. Often, banks will only give you credit for income that flows through from a distribution on a K-1. However, they can give you credit for simply net income on a K-1, provided your company meets a solvency requirement. There is quite a lot to it and something you should have completely vetted out before you quit your job while trying to acquire more properties.

I would say you need to be working with a solid realtor that knows the area. There isn't going to be a substitute to find out what is a solid cap rate in a given area without having someone who is knowledgeable about that given area involved. This isn't an advertisement for realtors - most know very little. But good ones will know what cap rates should look like in a given area.