All Forum Posts by: Kevin Lindahl

Hello All - We recently decided to apply for a HELOC on our primary home to pay off all revolving debt, etc.. We found a lender here on BP forum and applied.

Initially , based upon the data we provided, we thought we were looking at close to 7.5% to 7.75% rate but after submitting all the required info we've jumped up to 8.625%.  My wife and I pulled FICO 8 scores yesterday before applying (850 for her and 830 for me).  The lender said we're at 749 for their needs.  Here's a snapshot of what they provided:

(I'm the top one and my wife is the bottom.)....Keep it clean....LOL
 

They said our LTV is "just under 70%". We owe right at $520k and their "electronic" appraisal came in at $911,217. (I calculate that at about 68.75%)
Based upon the chart they provided (below) it puts us at prime + 1.125% (Which is the 8.625% they're quoting)

Here's my issue with all of this....
1.  With our FICO 8 scores so much higher, WHY are the scores they pulled so much lower? Is it a way for them to "manipulate" their rate?  WHICH FICO score are they pulling that is SOO much lower?  

Here's what the lender said:

They use a matrix of FICO and LTV for rates.

As for FICO, all lenders take the middle score, and for 2 borrowers, the lower one.

My question to you all is....Are there better rates out there right now for same scenarios?
Or are we getting a "fair" deal right now based upon the variables provided?  (For example, BofA offered 8.75% with ZERO closing costs and 6 months at 6.75%.  One of our credit unions offered 7.875% without closing costs.)

We just don't want to pull the trigger on something  that doesn't make sense and after a 1-5/8 point increase I'm not sure we're making the right decision.

As always, thank you all for your help!

@Chase Busick - Thank you for your insight. We definitely took into consideration their situations as well. They’ve been good tenants and we don’t want to have to start over by pricing them out of their homes. With this current increase we’d still be about $100 under the other comps nearby so we think it’s still fair. We also pay the mow/snow on the almost 1 acre parcel whereas others don’t seem to in the area. 

I need to clarify. We bought the property three years ago, but the tenants were already there. We initially put them on a one-year lease and increased rent at that time the following year we made a slight increase and new leases. Last year no changes. I only asked because I read conflicting information on one of the state of Michigan websites.

We own a duplex in Hastings, MI with tenants that have been there over 10 years. When we bought the property we initiated a one year lease that has reverted to month-to-month tenancy at the expiration of that lease. Comps are higher now and we want to increase their rent, but the state of Michigan website is confusing in the explanation of whether or not we need to give 30 days or 60 days written notice. Anyone out there in Michigan that can clarify this for us? We appreciate your help. 

Thanks @Drew Sygit - So, maybe the 11 page one is the way to go huh? What would you charge to help with the new leases?  When I checked your company website Barry Co. (Hastings) wasn't listed as an area you service.  If I sell Wifey on it, would you guys even manage a single duplex??

Another question if I may folks...Does anyone have a pre-made Michigan Residential Lease Agreement?   I've found a few online but OH BOY....Crazy variations.  (One was 11 pages long!) Also, is there anything else we should be getting as new landlords? (We plan on doing a delayed walk-thru inspection with the tenants at the end of the month). Finally, we were told their current month-to-month agreements "transferred" to us until we terminated them w/30 days notice or created our own. Can't get a Legal Zoom appointment for a few days but want to make sure we're legal in everything we do starting tomorrow as it's a month out from when we plan on increasing their rents.  Thanks again all

WOW! Thank you for the great info and resource Drew. And thanks again Michael for your insights. We’ll do better on our next one for sure. Just gonna take a little longer now to build reserves back up. Have a great day!

 Thank you all for your feedback. @Drew Sygit @Nathan Gesner@Michael Magno @Jacob Bohrer 

As I said, this property is in MI (Michigan) I don’t think it effects anything but we live in CA. They were on month to month agreements with the previous owner. We spoke to both of them and they’re going to stay. We’ll be signing 1yr lease agreements with the new rent effective 3/1/21. They’ve lived there 10 & 12 years and really like living there. One is awesome, the other wanted to complain about previous owner but understands that was him, not us. We increased a little more than 20% but it’s still slightly under market. Managing ourselves only because it’s only two units and PM in the area isn’t interested in something that small (at least not at a reasonable rate) Michael, curious, What’s a “comfortable” Cap rate and cash on cash in your eyes? We were blindsided by the property taxes on this property and disappointed in our realtor not knowing we’d have to pay a homestead tax since we didn’t live in MI (basically doubled the estimate - leading to the lower return rates) Lesson learned for sure. Thank you all again, guess we need to read more forums but we’ve learned a lot with our first and looking forward to the next one. 

Hi all. Newb here! My wife and I purchased our first investment property in MI.  It’s a small duplex in Hastings, MI.  We closed last week and are going to talk to current tenants this afternoon. Curious if other members can lend any advise.  We plan on asking for a 1 year lease and want to increase the under market rent they’re currently paying. We thought we’d advise them today that we plan on doing so 3/1/21. Is that enough time “legally”? Also, we’re unable to personally meet them until around the end of next month. We had planned on doing an inspection checklist with them then. Should we have them both do so now and we “verify” their findings when we visit?  We plan on managing the property ourselves since it’s just 2 units and we don’t really have “room” in our budget for professional property management. (After rent increases we’ll be at 6.74% Cap Rate and 11.5% cash on cash.)  ANY other thoughts, recommendations,etc. are greatly appreciated. Thank you

Hi @Shoshanna Douglas - I'd re-read your CC&R's and any HOA related documentation to make sure the HOA doesn't restrict short term rentals and/or by the room rental. Many CA HOA's don't allow either one. Good luck!