All Forum Posts by: Kenton LeVay

May be tricky to get one pre-approval that will work across multiple states/markets. The reason for this is because the lender is ultimately buying real property and there are underlying assumptions they make that will vary by market. For example, a $600k property in Indianapolis is going to be wayyyyyy different than a $600k property in San Francisco. The price is the same, sure, but those two will operate totally different as investments. It doesn't hurt to ask, but I'd expect the lenders you reach out to to only be able to lend for properties within a single market.

The BEST way to get started in my opinion would be to buy yourself a home to house hack first. The benefit of buying something as a primary residence is that lenders are much more willing to lend to you for low money down. If you are house hacking it, you will at the very least significantly decrease your expenses (which will build your assets assuming you're saving that extra money).

I know you said duplexes are hard to find in your market. Even if you can't find duplexes, I'd look for a SFH with an ADU, a SFH you could turn into a multi-family, or buy a SFH and rent the rooms. Even if you have a family and this doesn't work for you, you could still live in a SFH and rent out the garage for storage or rent out the driveway for parking, etc. With limited options, you are forced to be creative! Even in the worst case scenario there, I still think it's smarter to buy a primary residence first so you can get in for a much lower down payment.

1. In your example, the lender will loan $525k because that's based on the VALUE of the home. During the refinance process, the lender will send out for an appraisal on the property. They'll take into consideration things like comparable home sales, current condition, etc to develop a fair market value for the property ($700k in your example). The bank will loan on that amount and use the $700k home as collateral. If Bob defaults, the lender will foreclose on his $700k home. Once Bob gets the refinance, he will use the $525k to pay off his existing loan, so then he will only have one loan (the refinance).

2. You're allowed to do it as many times as you want on a property as long as there is equity. But the larger the loan value, the higher the monthly payment is to pay off that debt.

First off, if Bon could invest $20k to increase his equity by $400k...we need to have a chat so I can figure out Bob's secrets. Numbers aside, here are some answers:

1. Yes, Bob can refinance and keep it as his primary residence (most lenders are willing to give 80% LTV on a cash-out refinance on a primary residence and only 70% LTV on a rental property).
2. No, I think you may be confusing the cash-out refinance with a 1031 exchange. When you refinance the property, you're not selling it, so there are no capital gains, so no capital gains tax, so no need to reinvest that capital into another property within a certain timeline.
3. If you're lucky enough to get some additional cash back after a refinance that money is yours to do whatever you want with.

This is awesome! Congrats on committing to the live-in-flip. Stay in there for two years and sell that tax-free for a huge profit!

Take a look at what other comparable homes have sold for. Use the pictures as a guide as to how much you should invest into your place and that their sale prices are what you can use as an ARV. Now you know how much your home will appraise for. I know this may not be exact, especially with the housing market has been over the past year, but it should point you in the right direction. When in doubt, I'd err on the side of renovating it using low maintenance materials (LVP, tub surrounds, vinyl windows, etc.). This way, you run a lower risk of maintenance issues and potential lost revenue if it's an AirBnB. Recently sold comparables are your best friend.

Well you'll only be able to get a loan for 5% down if it's your primary residence. If you're new to investing I would suggest just finding a livable property and put 5% down. Taking on a rehab on a multi-family that's also your first property and primary residence sounds like a lot of unnecessary stress. I know this because I set out to do a BRRRR on a SFH I'm house hacking and it's been like Murphy's Law with everything that has gone wrong. I wouldn't buy a recently renovated property (unless it's a really good deal) because you still want the option to flip it as an exit strategy. Buy a cheaper, livable property and put down 5% while interest rates are still low.

But to directly answer your question, it just depends on how the numbers shake out. Most lenders will only give a cash-out refinance with an LTV of 70%-80%. If your 5% down payment + rehab cost is less than your 30% of your ARV then it doesn't make sense to refinance. Another thing to ask yourself is how long will the project take? Interest rates are likely to go up in the near future, so I'm not sure avoiding PMI will save you much money if you're paying a higher interest rate.

Looking forward to it!

Tech jobs are moving from higher cost cities to lower cost cities/remote. The Bay Area will always be Silicon Valley but there is a distribution of wealth trending.

Hey Chow, I recommend reading David Greene's book on Long-Distance Real Estate Investing. In it he lists out what you'll need. The biggest thing is building your Core-4 (realtor/deal finder, lender, property manager, contractor). Of the four, the realtor and property manager will be able to help you out on intricacies within our market.