All Forum Posts by: Sasha Mohammed

This is awesome! it's been a while since i tried to fight this fight, i'll look into it more again tomorrow to see what updates ive missed! thanks for sharing @Dan H.

@Dan H.undefined

i think this is a decision only you can make. im in a similar boat (house hacking my primary) and considering renting the whole thing out to get a solo home for myself. certainly a lot of appeal in that, given how much work goes into the house hack. but whether or not the numbers on cash flow align is up to you. 

personally i dont think $150 (seems like about 12%?) in cash flow would cut it for me. i'd want enough to cover the mtg, but also R&M and a little for vacancy. if i can't do that plus have a little actual "cash flow" left over.... i'm still here :) if that's any indication. 

Hi David,

There are lenders that will allow you to purchase via a DSCR loan using STR income to qualify. However, they will not allow you to live in the property at all, full stop.

This is because DSCR loans do not follow/ pass consumer protection laws. when you live in the property, it creates massive problems for this loan type and the lender which would issue it to you.

For that reason, most of these lenders want to ensure you OWN your primary residence. Some will let you rent your primary and still do a DSCR loan on the subject, however, this would come with the added scrutiny of really documenting and evidencing you have no intention of moving in to the subject.

Fannie/ Freddie does not like multi-family with ADU. "why?" you ask? good question. they didn't have an answer for me when i asked either. they just don't want them.

SFR with ADU is no problem. but if you're considering adding an ADU to a multifamily property, consider the limitations you're creating on your back-end buyer if you decide to sell, or your own financing if you choose to refi.

I'll also add that guidelines change over time. just because they don't like it now doesnt mean they wont decide later to be okay with it. 

if you're W2 and full-time, hourly or salary, you should be able to go off your pay stubs for qualifying. Unless there is a reason to submit your tax returns, you could go w2-only. 

Some reasons you'd need to sub your tax returns: if you have a schedule C (self employemnt) or a schedule E (rental income). 

Another consideration is if you are not full-time, consistently, without gaps or missed hours. Anything the u/w can perceive as "variable income", even if its a shift-differential like nurses or firemen... "variable income" will require a 2 year average of income/ earnings to qualify. 

Still, you may not have to submit your tax returns. more info would be needed to know for sure, reach out to a seasoned loan officer for pre-approval and see if your situation would allow for this. 

Hi Bruce, i'll start by saying i'm a mortgage person, so please understand the context in which my response is coming from. 

you'd need to create CC&Rs/bylaws and establish an HOA in order to do this. You'd also need to establish a budget, and secure a master insurance policy. i THINK you need to do these things before reaching out to your municipality to have it converted officially with the county or city but they would be the first ask for steps in order.

i will add, this would make financing on these units a bit challenging, as in the mortgage world, at least initially, they would be considered "non-warrantable" condos. Tons of rules here which make a condo association "warrantable" vs "non-warrantable" but just one on the list: one owner owning the majority of the units alone will typically make them non-warrantable. This will affect things like required down payment, rates, and even which lending institutions would be willing to finance. 

i encourage you to look up warrantability for financing just so that you don't have surprisses when your 20% down buyer cannot finance that way. That said, I've been seeing the TIC (tenants in common) becoming a popular alternative to converting to condos. may want to look into that as well.

none of this is intended to discourage you from moving forward, just some food for thought. 

Hope this was helpful.

 LOVE to see such thorough and accurate responses! good work, @Patrick Roberts

I'll also add that on 3 and 4 unit FHA, there is an added guideline and self-sufficiency test. The property must be able to self-sustain from the rents received if you are financing using an FHA loan (rents must be able to cover 100% of the PITIMI). this does not apply to 2 unit, and I'm finding that some lenders will use all units for this test (assigning a rent value to the owner occ unit) and others will only use the non-occupied units for this test. its a hurdle to be aware of if you intend to buy MF using FHA.

I don't believe you can omit the payment on this one unless the person making the payments is on the current mortgage. But I agree, seller's best bet is to buy using a conventional loan if they can qualify. 

BP has great tools, I'm pretty sure there's a list of us on here somewhere. Our team is called Investor Property Loan, feel free to check us out. Always happy to help! 

ok, yeah, you can do that too (get a DSCR loan without owning a primary). MOST DSCR lenders will WANT you to own your primary, but not all of them require it.

there's no name per-say on renting room by room. house hacking kind of refers to buying a house/ owning a house and then renting the rooms out (i do this in my primary). The more official terminology in the mortgage world would be "boarders" not tenants, so their rents would be "boarder income" which most lenders wont let you use for qualifying. But i digress, this paragraph is more related to consumer lending.

DSCR loans are business purpose loans, so they dont usually look at your personal income anyway. But they also typically wont' look at the rents on a room-by-room basis. IMO, this is mainly because if they had to foreclose, no lender wants to mess around with that level of property management.

That doesnt mean you can't do a DSCR loan if you are renting each room out individually. you'll just want to set it up correctly (one lease for example would be helpful), and then make sure the numbers align from a market-rent standpoint. OR, find a lender that is ok going below 1.0 DSCR, OR get creative... maybe a 40 year, or IO options.... or no-ratio/ no DSCR which is out there but higher rates :)