All Forum Posts by: Julee Felsman

Hi @Jessica Vollendorf 

I'm a long-time loan officer and real estate investor myself in Portland. I've searched for years for a financial advisor who "gets" real estate. They're hard to find. For the most part, the advice from the financial planners I've encountered, when it comes to real estate  is a version of "too risky" and "you need to diversify". Risk is in the eye of the beholder (what investment isn't with out risk?). I probably do need to diversify my investments a bit (but I've muddled through so far and done pretty well). And well, I like my real estate.

Not 100% sure I've found The Planner, but I have two leads I can share if you want to DM me. One is in Lake Oswego (recently met them, getting to know them still, but impressed so far). Another is out of state, but a dear friend who's soon-to-be retiring on the cash flow found them and she and her husband have been really happy.

These folks are financial planners -- bigger picture, holistic financial planning.

if you want to focus on managing your real estate portfolio (strictly), your best bet would probably be a team approach: an investment-focused real estate broker, a lender who understands investing and (especially in light of Portland's current landlord tenant laws) a property manager. 

All three can offer different perspectives on your portfolio, managing the debt/leverage to strategic benefit and the opportunities and risks and give you input to filter and use to make decisions. 

I've got good resources for these that I'm happy to share.

Hi @Chris Bluem,

Portfolio loan options may give you more leeway (but cost more). Standard Fannie Mae guidelines would allow you to do a cash back refinance at 75% of the value of each property after the plat is recorded legally converting the building into two units. (Max cash back is 70% as duplex that is held for income.)

Whether you need to rent the units out to refinance depends on your debt-to-income ratios. If you qualify for the loans without rental income, than you can finance them while vacant or as a short-term rental.

Julee

HI @Ed Kowalchuk, 

If you're willing to close with the loan in your name and transfer title to the LLC after closing, you can get a conforming at a 30 year fixed rate. A little risk there, but it's one that I've been willing to take for the better loan terms -- and a lot of my clients too.

Julee

@Luke Carl@Brian G.Commercial is a whole 'nuther animal... a lot of it, especially at smaller loan sizes is portfolio lending. A small bank may well have a quirk too-good-to-be-true, but is true, program... but then you do have to deal with their quirky ways.

I work with a portfolio lender on the residential side who will only lend to out of state investors case-by-case and is painfully slow to process things. Often goes with the portfolio lending territory.

I'm definitely not an expert on commercial though!

@Jonathan Paul Shortt, no problem! If you're game to be a guinea pig, I'd be happy to help out! :)

Hi @Jonathan Paul Shortt,

Your best bet would be to pay the title company for an "escrow holdback". Having them hold the funds you plan to use for the rehab and disburse them to you, will put them on the settlement statement. 

This will still be an underwriter judgement call, as the guidelines for delayed financing don't specifically refer to renovations. The relevant part of Fannie's talks about "initial investment":

Freddie Mac's refer to "original purchase price and related closing costs": 

IMHO, Fannie's leave more room to maneuver/argue than Freddie's. In either case, I think it's grey area enough that I'd want to run a draft of your closing statement by an underwriter for feedback -- and I have a hunch they may want to call Fannie and/or Freddie directly for a ruling. 

If you DM me a closing disclosure, I'd be happy to do this for you. Leveraging the creative corners of agency guidelines is my Favorite Thing.

Another angle that I think would have higher odds of success: 

Increase the price and have the seller put the renovation funds into an escrow holdback with title. Your seller will probably want to run this idea by their CPA to makes sure it doesn't create tax issues for them (could get weird if they're doing a 1031) 

I'd still want to run this up the flagpole with an underwriter in advance. I could see an underwriter wanting really airtight documentation that all of the funds in the holdback went to renovations -- not into your pocket. Having escrow pay invoices to contractors would be a really clean way of doing this -- easy if you've got one GC doing the work... complicated if you are a DIY remodeler. 

Hope that helps!

Julee

Hi @Rebecca Rios!

If your daughter applies for the loan with you, it would be considered owner-occupied. You would be a "non-occupant coborrower". 

If you're right and she has no credit history, you'll want to compare terms between owner-occupied and rental loans. 

When a borrower has no credit scores, they are generally treated as though their credit score is 620. A 620 credit score often comes with higher fees or rates. 

FHA loans tend to be a little more generous about having no credit history and/or a lower credit score, but FHA also carries a fairly healthy MI premium.

if you want to try to be sneaky, you might be able to get her on the radar with the credit bureaus quickly by adding her as an authorized user on one of your credit cards. This trick can work well when you're going to be on the loan together. (Not as well if she were to apply solo.) Having a knowledgeable loan officer look at your credit report to pick out the best credit card to use would be a good idea. 

Good luck!

Julee

@Rebecca Rios What are your questions? 

If your child is going to college at least 100 miles from home or has a disability, there are special loan programs that allow a parent to purchase under owner-occupied or secondary residence terms. (As an aside, this program also permits a child to buy for a parent.)

But if you just want to buy to rent to your child, you can certainly do so. The only caveat would be that you probably can't use a 1031 exchange as part of the purchase (the IRS considers a home rented to your child to be "personally used" and it doesn't qualify under 1031 rules. (Disclaimer that i'm not a tax or 1031 expert... definitely want to check with a pro on those two topics!). 

Julee

@Devan Sprayberry, my opinion is that the loan officer is as important as the lending institution. Of course, consider the source... this is coming from a career, 26 year, loan officer. ¯\_(ツ)_/¯

Your different lending options are: bank-banks (big 'uns and local), credit unions, mortgage brokers and mortgage bankers. 

I work for a company (Guaranteed Rate) that is a mortgage banker that maintains the option to work as a mortgage broker too.

Nearly all loan officers are compensated on commission and only get paid when a loan closes. This is why I like working for a banker/broker. I feel it gives me the broadest set of loan options to offer, which gives me the best chance to find a good match for each potential client, have them hire me and get to closing so I get paid. 

That's a very loan-officer-centric answer to your question. As a consumer, you have a broad landscape of options... make some calls, do your research and find the best fit for you.

But don't forget to ask questions about things besides the loan terms... the process, the ability to collaborate with you and your realtor, answer your questions, guide you through the choices you'll need to make, close in a timely manner... all of these things matter too!

@Aladdin M.,

I can't speak to your rights in California... hopefully some else will chime in who can share this information. 

On the appraisal front, things were very confusing and lenders were attempting creative workarounds to traditional walk-through appraisals. My company (Guaranteed Rate) was letting appraisers use Facetime or Skyp to see the interior of the property, for instance.

A few weeks after we instituted this practice, Fannie Mae and Freddie Mac came out with clear guidance:

If your landlord is doing a "cash back" refinance (taking more than $2k of cash back or paying off a second mortgage that wasn't used to buy the property), a traditional interior inspection will be required.

If they are not taking cash back, for the most part "desktop" appraisals and exterior-only appraisals can be used. Leniency is greater if both the old and new loans are owned by Fannie Mae or Freddie Mac (Fannie to Fannie or Freddie to Freddie). There are web sites where your landlord can look up who owns their loan. (Fannie here or Freddie here.) 

I'm being careful to check the ownership of any loan i'm refinancing with no cash back and locking the loan with these rules in mind -- for everybody's safety and for simplicity.

There are lenders who sell only to Fannie or Freddie, which may stymie their ability take advantage of some of this flexibility (Wells Fargo is a Freddie shop, as is US Bank, B of A is a Fannie shop, pretty sure Chase is too.) Working with a lender with access to both Fannie and Freddie gives more flexibility. I've always chosen to work for companies with access to both (and lots other investors) which is nice when shopping for loan options for a client -- but now it can be a matter of health and safety!

A couple of other notes:

A lot of loans can be done with no appraisal at all -- waivers of appraisals are fairly common on purchase transactions and no cash back refinances when the property is owner-occupied or a second home. I don't see many (if any) on a cash-back refinance or when the subject property is a rental.

Loans that are above the conforming loan limit ("jumbo" loans), and other portfolio programs have different rules and may require an interior inspection. Th VA has offered leniency on their appraisals -- FHA has not. You're in California where the odds are higher that your landlord may be seeking a "jumbo" loan.

Back to your specific situation: You need to know more about your landlord's requested loan and lender than they may want to share to know if any options exist... but your landlord may not be aware of or have asked about alternatives.

If there's no way around an interior appraisal, I'd suggest asking to talk to the appraiser ahead of time and see what precautions they're taking. More than likely they'll be wearing PPE and will try to get in and out quickly (for their own safety and yours). If you open all doors, turn on all lights (and open windows for air circulation). The appraiser can move through quickly and take the minimal notes and photos they need without touching anything -- they can get measurements and do all of the rest of their work outside. 

Good luck!!

Julee