All Forum Posts by: John Ching

Hey Brian,

I know common sense tells you NOT to go negative on a property, if you can, but since we are in the real estate investing business, when did common sense ever make sense?!

Please take the preceding with a hint of sarcasm....But on to your question....Personally, I feel that you need to balance out the pro's and cons of (potentially) going negative on cash flow vs. the gains of pulling out equity.

First of all, using conventional lending, an underwriter may catch this fact and kick out your file. I'm not saying they will, but it is a possibility. Lenders are very suspect on income-ratios when it comes to investment properties. Just because your loan officer/mortgage banker says it fits guidelines doesn't mean the underwriters won't deny it. That's actually their job.

Second, although the rental market is hot, what is your comfort level (i.e. "reserves") when it comes to vacancies? Are you prepared to weather the storm? What about maintenance? Worse, what about unexpected personal losses not even related to real estate (job loss, health issues, catastrophic event, etc.)? 

Again, you need to balance out your comfort level with the amount of risk you are willing to undertake. One major factor, I would think, is that the rental market is hot and should continue in this manner.

It sounds like you are in a great part of Houston - good jobs, in-demand properties, appreciating values, etc. This bodes well should you decide to pull the trigger and cash out the equity. Best of luck.

What's your question, Joe? 

Conventional lending is starting to move back into vogue as an investment tool. But it involves the usual bells and whistles: documented income, tax returns, W-2's, bank statements, etc.

There might also be some time requirements between buying and selling, depending on the lender/loan program you go with. Think 90-days between buying and selling a flip.

Sending you an email, Shannon...

Thanks for the chat, Shannon, will be in touch again once I have more information about the SD property.

My client needs cash to pay off an ex-girlfriend (never married). Here's the current situation:

• Property is a SFR in Venice, CA. Value is estimated at $1.2-$1.3MIL (possibly higher).
• Current mortgage is approx. $182,000.
• Client needs $170,000 cash to cover legal fees/child support.
• Has low 600 (est. 615-620) FICO.
• NO tax returns filed for past several years (he's working on rectifying that!).
• Has worked as a freelance TV Director for the past 5+ years. 
• Annual income is $85k-$90k.
• Additional monthly passive (rental) income from San Diego property (SFR, owned free/clear)

Caveats:

The Venice home is jointly owned by both parties. The ex received a partition from the court several months ago but has not forced a sale. She appears open to lifting the partition if she gets the back child support, hence the need for refinancing.

I can be contacted directly at (310) 406-5895, thanks for looking.

Michael,

I see that you are from Chino, CA, I'm curious, why Kansas City?

Hello Holly. I just left you a voice mail regarding this property. Is it still available? What is the estimated rehab cost?

Sorry, Leo, I do not lend in either of those states. Just for ishts and giggles, I Googled, 'portfolio lenders wisconsin',  and found Associated Bank (associatedbank.com) which looks like they have several actual branches. I'm sure you could do the same for IN.

Good luck and let us know how it goes!

Leo,

John H pretty much summed it up, but the way you pose your question leads me to divulge a bit more. 

Conventional lenders tend to have conforming guidelines because their loans are typically backed by Fannie/Freddie. In other words, you either fit their box or you don't. FICO, W-2's, tax returns, bank statements, etc. are all part of the approval process.

On the other hand, portfolio lenders tend to have their own guidelines since they will be holding the note and reaping the benefits of monthly mortgage payments directly. While portfolio lenders will still ask for income and asset documentation, they are more apt to take other factors into consideration when making a decision to lend on a property.

This is a benefit, as investors, in using portfolio lenders. 

Nearly all the banks here in Springfield, MO are smaller, regional banks. These typically tend to be portfolio lenders since the big boys just don't have an interest/footing in this area.

Michelle,

I was born and raised on the westside so I know exactly the situation you are talking about. My father still lives in the home he bought back in 1964. It's just below Westwood. Prices have skyrocketed in the past decade, as well as the traffic.

Lots of good advice here so far. You didn't mention a budget, which is a big part of the equation. You are right, multiplexes probably won't cover living in that part of town. Current owners are either long-time holders or burning funds to cash in on appreciation.

I would suggest looking outside the immediate area, probably towards the east and/or south-east. West towards SM is humbling. What about the valley? (I know, it was taboo growing up on the westside to even consider it!)

If you need a connection investing in the midwest (Missouri), let me know, there is a ton of opportunity out here for cash flow.