All Forum Posts by: Josue Guerrero

Alright, I'm not too sure with the workings of section 8 so bear with me! My aunt and uncle raised an interesting question to me the other day about it. My uncle was the one who applied for section 8 a few years back and he was approved and now they are renting in an apartment because of it.

My aunt and uncle are both on the lease together

They want to know what would happen if he were to pass away? Would she do nothing and it then roll over to her name and still cover her rent or would she have to reapply immediately?

@Vishal Gadhia So to recap, everything that is required for the delayed financing through the conventional loan applies, and it's the same exact process as a normal one, but the terms are more like commercial terms? Would you happen to know of any conventional lenders that do this?

@Brie Schmidt If I decide to go the commercial lending route, what would be the seasoning required if I decided to finance on rehab and acquisition costs? Also, how much would your commercial lender finance if you went the ARV route?

Finally, do you have any specific commercial lenders you prefer, so I could do a little bit of research on them?

@John Horner Oh, I see, so in other words, if it costs you 105k to acquire and rehab an investment property, the bank will only allow you to finance up to a certain percentage of that. Let's assume they only finance 90% of it, which would be 94.5k financed. Causing you to have at least $10,500 of skin in the game. 

So basically, once you refinance and pay back your HML, you would still owe him $10,500 dollars plus any interest and loan fees that may have been incurred as well, correct?

In other words, a HML would be a less than ideal route to use if you wanted to follow this strategy? What would you suggest?

Thank you very much Frank, I appreciate the response and will definitely call up some lenders and make sure that I at least get a hold period of 6 months (or more!)

@John Horner I'm a little confused as to what you mean by the banks financing Loan To Cost? I thought loan to cost ratios were just for construction type loans, how does it work in purchasing say, a single family home?

@Andrew Meyer You don't necessarily have to go the HML route to use the BRRR strategy. There are other ways of creative financing available. You could either use private money, your own capital, or take out a HELOC on your current home (if you currently have one with substantial equity on it!)

As far as refinancing the FHA loan in 6-12 mos goes, I'm really not 100% sure because of that pesky owner occupant requirement. So my best guess would be that for the first 12 months of the loan you're stuck with it, and you're forced to live there. After that's said and done, I don't see why you wouldn't be able to refinance it through a traditional lender. Keep in mind like Brie said above, they will only refinance up to 75% of it so make sure that it has indeed appraised in value enough or else you'll be forced to put up the remainder!

@Brie Schmidt The business is incorporated so I should probably "employ" myself within the company start paying myself a salary and receive a W-2. I'd be able to waltz right in and theoretically qualify for a mortgage at that point right? In other words, I wouldn't need to provide 2 full years of tax returns, right?

I was also not aware of the LLC, not being able to get residential financing. My plan was to purchase the homes in the name of my LLC through typical conventional financing, and then simply guarantee the loan under my name. Would this setup still not work?

Again, thank you for taking the time to answer all of my questions, Brie, I'm starting to get a much better understanding of everything now!

@Brie Schmidt Awesome, so to see if I'm understanding correctly, I can put down how much rental income I'm projected to receive from that duplex in order to strengthen my approval limit from the conventional lender? What if I was purchasing a SFH to use as a rental property. Could I use that projected rental income as well?

Solid advice as well, I'll definitely have to go in for the pre-approval before I even consider a HML. Credit shouldn't be a problem, but my DTI isn't helping my case. I don't have any income since I'm self-employed, and not paying myself anything, but I don't have any real debt either. Would a solution to that be to go in with a trustworthy partner on my first deal to improve my chances of getting a pre-approval?

@Brie Schmidt  Ah, I see, thank you for letting me know about that, I'll have to make sure that my hard money lender is made aware of that and to allow me at least 6 months. I would assume that I would need even a little more time than that, at least so all the paperwork for the conventional loan can go through, right? 

So before I even consider looking at HML, I should first get pre-approved for a conventional loan. Could I be able to use the projected rental income from the property I'm going to purchase from the HML as a way to ensure I get a good enough approval limit? If not through conventional, than through portfolio means?

Again, thank you so much for the information, Brie. You've really helped me understand this refinancing process!