All Forum Posts by: Jack Okada

Hello all,

I have a a decent amount of short term gains that will be pretty severely taxed (as ordinary income obviously).  Looking to place some money into a QOZ fund.  Is anyone aware of any experienced sponsors with an open fund?

tia

For posterity and anyone else in the future experiencing this issue, here is documentation of what Chris mentioned above regarding the incorrect way the lender calculated DTI. PITI is NOT added to the DTI calculation for a rental property, rather, the net gain or loss is added to income (or deducted).

https://www.fanniemae.com/cont...

Follow the link to the Fannie worksheet and you'll see where it specifically confirms.

So your advice was to go back in time and not buy a car? Christ.  Even the advice to ditch the car loan isnt great.  Spending $25k in cash to wipe out zero interest rate debt is tremendously wasteful.  Even if I wasn't investing it elsewhere (which I am) the true cost of paying that loan off, at the very LEAST, is the 2.4% I get in my savings, which is $600/year...

@Chris Mason, you're correct. He did use PITI for the liabilities rather than the way you described. He told me so, explicitly, over the phone...

Can you advise? PM me.

Understood.  I knew these to be my options, but was hoping there to be something creative I wasn't aware of.  That said, it's good advice.  Fortunately, the tax year is ending so I'll be able to do what needs to be done this year.

Fair points.

The lender specifically  called it vacancy,  but what you're saying is really the same thing, effectively.  That house has been occupied without any vacancy for many years.  I'm intimately familiar with the things you're describing  as I'm an Asset Manager who oversees right around 3000 multi family apartment units for a living.

Again, mathematically, looking for 50% DTI when you have rentals is difficult. Most of my multifamily portfolio have requirements for 1.15 to 1.25 DSCR. This metric makes sense for multi family. The Oakland rental blows that number out of the water. The SFR rental comes up a little short. Averaged together, theres plenty.

If you're buying a single family house to occupy, 50% DTI is a fine way to qualify a person.

Caleb, paying off the car and even the student loans is literally like throwing money away, TBH.  I trade stock options with my free cash.  This year my taxable trading account is up 140% YTD.  If I wasted 55k paying off low interest debt i would lose out on a LOT of trading income and I would only gain the minimal interest saved on the student loans and nothing on paying off the car.

Also, criticizing someone's purchase after the fact doesnt really do much except come off rude.  You don't know the reason or circumstances.  In general, I'd agree with not buying a new car, however.

I have plenty of cash to pay off all the debt and still buy the house; the opportunity cost of doing so is simply just too high.  I'm not here asking how to do the obvious,  I'm asking for hopefully more creative solutions as I cant imagine mine is an uncommon situation.

Ps For the record, paying off either the car loan or the student loans would both put me over the line.   

Well, the last primary residence I bought, the underwriter adjusted for the non cash loss I was taking on my rental once I explained that they were one time expenses...

PM me, Shaun,  if you've got time.

My fiance and I have a 3 unit rental building in Oakland. We are currently occupying one while we were searching for a SFR to move to. Total rent once we move out will be approximately $7k. The mortgage is 2700 + about $500 for property tax.

I have a SFR rental property with 11 years left on a 15 year loan. The mortgage is $2200/mo, and another $500 ish for property tax.. It pulls in $3200 month in rent.

For debt, we have one zero percent interest car payment with balance of 25k.  Outside of that, all we have is my student loans of around $30k at 4.5% interest. 

I tried to get qualified for a home purchase of $810k with 20% down at 3.875% interest and could not get qualified with a 50% DTI ratio....we were at like 52% or something.

The first problem is they count a 25% vacancy rate, which is absurd in the areas where our rentals are. The second issue is that (and we havent gotten here yet) is that they are even assuming a positive income from the rentals on my tax returns. My SFR rental is definitely not showing positive income, because....why would I want to pay tax?! So once they dig into my taxes, itll be even worse from a DTI standpoint.

This seems crazy to me as we make plenty of money to afford the mortgage, but the 50% DTI ratio requirement once you tack on rentals is crippling. $3500 a month in positive cashflow from the Oakland 3 unit and another $500 from the SFR plus our salaries which are more than enough to qualify for this house without the rentals.

Does anyone have advice on how to overcome this?  $800k for a single family house is BARELY in the median home value range in a small bay area city that is cheaper than where we are now...How are other people able to get a loan?

Thanks for the responses guys!