All Forum Posts by: Sasha Mohammed

Hey Austin, 

Both could work. Private money by definition is private, you can negotiate whatever terms you could negotiate, however, i would encourage you to make sure you trust your PM lender if you go this route. there are a lot of scammers and scumbags out there. 

DSCR through a traditional lender should work as well, and you'll get a bit more standardized terms. As @AJ Exner suggested, keep an eye on loan minimums. this could be your hurdle in St. Louis specifically, depending on your price point. 

I think one of the big appeals with the BRRRR strategy is that hopefully you have purchased the property under-market value (being that it needed renovations), did the renovations, and now significantly increased the value.

This forced-appreciation hopefully helps you at least take out your initial investment, and hopefully also increases the cash-flow of the property even with today's rates. 

If those numbers are not aligning, I would encourage you to revisit the initial investment strategy. Are you purchasing investment properties for appreciation? or cash-flow? Many move forward w/ BRRRR due to the hype without fully understanding the deal-flow, and whether or not it aligns with their goals.

I don't have a lender for 10% down directly for inv prop, but I do have one that will allow up to 90% CLTV - meaning if you can get the seller for example to do a 2nd behind them, you could accomplish your 10% down goal.

It is possible to put only 10% down, however, it may require a little creativity. 

State by state is going to vary, but general rule: if you still had contingencies intact, you should have every right to exercise those contingencies. OH is an escrow state, so i would have your agent reach out to the escrow officer and let them know you are cancelling the escrow, and which contingency you are exercising (whether it be appraisal, loan, or otherwise)... and ask when you can expect your EMD back in full. Disclaimer that I am not licensed in OH to give you any formal advice but I don't believe the seller has any say in the matter here regarding your EMD... this is the literal point of having a third party middle-man (escrow) in the mix.

Hi Alexis!

This isn't as hard-lined as many people think. You CAN get around the 2 year s/e history thing... Usually, the workaround stems from having previous job history (right before self employment) in the SAME LINE OF WORK. For example, if you were a CPA for a law firm, and then went on from there to open an accounting firm on your own, SOME lenders might be willing to look at this as a 2 year history, even though you're only 1 year into the self-employment piece. 

There are a lot of specifics pertaining to this and every lender is a little different in their interpretations of guidelines. I hate to admit it but a lot of people (loan officers) are lazy and would rather just tell you that you need 2 years needed so they don't have to put in the legwork to see, but it is possible. 

Im not a fan of seller financing unless that property is free and clear and the seller is offering reasonable terms NOT on money they have borrowed. just too many people get into this type of thing without understanding the whole picture, like title being moved into the buyer's name, due on sale clauses... etc. etc. 

also, just because its a very commonly overlooked guideline which makes financing on 3's and 4's a little challenging: FHA requires the property to self-sustain its own PITIMI by the rents. You may want to consider conventional 5% down if you decide on a 3 unit over a duplex.

Hope this was helpful.

Do you have access to a credit union? Reach out to them for terms on a HELOC. should be much better than Better.

One look at that and i would tell you it's wayyyy too high, but there's not enough info from your post to determine what is contributing to that interest rate. The advice i'll give you is to shop. CU's are doing really well on rates for HELOC right now.

if you can get close to finishing the project w/ a HELOC, this is not a bad play. Private money (like true private money) may not be a bad play either, just make sure you trust the individual you're working with. lots of scammers out there.

BOL!

If you're lucky enough to get a free and clear property where the seller is willing to finance, this reduces much of the risk associated with seller-finance.

I would make sure the title is then moved over to your name, especially since there is not a risk of a due-on-sale clause being triggered. The seller may not want to do this, as many of these guys are benefiting from the tax deferral which comes with NOT moving title over. But you should be aware - you own nothing if your name is not on the title. This also begins YOUR title seasoning, so that when you're ready to take out a traditional mortgage, you can refinance and pay off the seller without a title seasoning issue. you can buy title insurance from the title company at closing. this is a good idea. 

Seller should record their lien against the property, you both should have an attorney review to make sure all interests are property documented and protected, and i think everyone is in a good place. 

as far as evicting tenants... this is up to what you and the seller can negotiate. i would still be putting on the same contingencies - appraisal, inspection... know what you're buying. don't get blinded by the seller-finance piece. 

I think in the private money space especially, @Jay Hinrichs approach is super important. Private money by definition is a private individual - they set their own rules for engagement and appetite. That said, I have a good friend of mine who is very well seasoned in this space, whom i have immense respect for, once told me he won't work with anyone who he hasn't known for at least 5 years. Interesting perspective, but with how much abuse there is these days, I now understand why it's a good benchmark. 

The only tidbit I feel important to put in here, unless you personally know your PM lender: if it seems too good to be true, it probably is. 

There is no one-size-fits-all answer here. i have clients call me asking to lock in the maximum buy-down we can possibly allow; and others who think its a terrible idea. 

as other's have mentioned, i would first look at your recoupment period. (cost of buy-down in dollars / monthly savings vs the free loan = # of months it would take to recoup the money spent). 

will you keep the LOAN at least that long? do you intend to refinance before then? what is the opportunity cost of those dollars not going elsewhere?

Any one of us could give you our two cents on the math of it, but only you can decide if it makes sense based on what your specific goals are. personally, i paid points on my house because my goal was lowest possible monthly payment. But we are all in a different boat an these decisions should be treated as such.

Yes! but i also 2nd @Jay Hurst's sentiments - get a 2nd or even 3rd opinion on DTI/ full doc. i personally love files that are puzzles, i get some weird satisfaction out of figuring out how to make it work on full-doc, especially when my client has been told "no" before. if it doesn't work now, a good loan professional will help you create a path forward. BOL!