All Forum Posts by: Sasha Mohammed

@Ashly B. This is exactly why many RE investors just stick to commercial loans. The higher rate is the price you pay for more creative qualification methods (DSCR instead of DTI). There are still institutional investors that will do this, not necessarily private investors, so the rates aren't HORRENDOUS (you can find things in the 5-7% range)... but yes, I hear you, a higher rate does add up.

The question you have to ask yourself is: is it a deal-breaker?  Is it more worth it to continue investing (assuming you're using the c/o proceeds to buy more properties) or keep your current investments at a low rate? Most of this game is leveraging/ managing debt. I can't answer these questions for you, you just have to run the numbers. 

going to commercial and then trying to go back to conventional will give you the same results as what you're running into now. unless your income changes (doesn't seem that's the hold up), or unless more accurate comps pop up between now and then. But you also risk rates rising between now and then as well.

@Daniel D. it would probably be more appealing to your investor if YOU put the down. That way you have some skin in the game. 

I'm still a little confused as to what your question is here, but if you're looking to rehab properties without utilizing your own funds, I would GUESS (unless you're experienced or have an experienced rehab team) that 2-3 months is probably not a long enough window to complete the project, let alone get a cash-out refi and pay off your "investor". 

** If the project completed with a cash-out refi would not profit enough to pay back your investor, then it probably isn't worth moving forward with that project, and i would look into another property with higher returns. Don't get stuck on one property, run the numbers and make sure the juice is worth the squeeze. **

There are plenty of lenders out there that specialize in such rehab projects, and will lend you not only funds for acquisition, but also rehab funds. and they'll give you the time needed to finish the project (12 months, or longer). Plus, that's what they specialize in, so you have a bit of a safety net in that you're not jimmy-rigging a deal together with an individual investor. 

Hope this helps!

or to piggy-back on what @Andrew Postell suggested -- if not LO Assistant, you could look for a Processing position. That would get you tons of hands-on experience on the back-end side of the business... and could potentially get you some income along the way. 

you may have better luck with a construction lender, depending on where you are with the project. it's not a good look to be halfway done and then ask for money, but it's not impossible. Looking into lenders who are comfortable with ground-up construction in this case would be the first place i would look. Don't even mess with conforming lenders, it's a waste of time. 

if you have permitting in-hand and already own the property, you could probably get a 12 month loan with no prepayment penalties to finish your project. rates may be high, something like 8%-10% or so, but it would give you the liquidity to finish, and you could pay it off with the proceeds from the sale of the flip.

ask about cross-collateralizing that flip, too. may give the lender more peace of mind when you're out of cash and need to borrow. 

Just getting creative. 

You can try @Alex Bekeza, he may have a lender that can help you. 

@Keith Miller i think the toughest part about the scenario you outlined is 2-fold: 

1) the air bnb income is not stable income (as far as lenders are concerned), and most lenders won't give you credit for it at all. There are a few out there (a few) that will, but you'll have to show at minimum a 12-month history of that Air bnb income, and even still they may cut it down and only give you credit for market rents in the area. We all know you're making way more in airbnb income than market rents, it's just a pill you'll have to swallow if you continue this route.

2) if you plan to live in the new property, you'll have a difficult time finding a lender who will NOT qualify you with income and DTI. SOME, however, have really awesome bank statement programs or P&L programs... that's what i would look for FIRST if i were in your shoes.

IF you can, my suggestion is to finish your current project, make sure it's all permitted properly and the county is cool with zoning, etc. and then get lease agreements with long-term tenants. forego the airbnb for a short time. I cant suggest lying to a lender, ever, because it's illegal... but if you can get lease agreements for those units, then the lender should utilize those rents received on your DTI for the new property. They still may cut it down to 75% (fairly typical) or pin it up against market rents, still; but at least you'll be able to use that income to qualify for your next purchase with a conforming lender and swoop those shiny low interest rates and payments.

Hope this helps!

@Irene Hunter most conventional lenders won't lend to an LLC, only in your personal name. What you chose to do with it after the fact is not up to the lender (ask, though, in-case there is some acceleration clause i'm unaware of). once the loan has closed and the property is owned, you can move title to an entity. there would be additional costs/ fees, but you'll be hard-pressed to find a conforming lender to close in the LLC.

With that said, there are alternative financing options to conventional loans that WILL allow you to buy with the entity. You mentioned you may be looking into a flip -- there are rehab lenders that will allow you to close in an LLC, and in-fact may prefer you do it that way. AND they'll lend you not only the funds to purchase/ acquire the property, but also funds for rehab, too!

@Lance Foster take what your LO friends say with a grain of salt. you're going to get different opinions from everyone; opinions are like armpits, remember? At the end of the day, run the numbers. When you're talking money, math is math. The difficult part of this is guessing where rates will be down the road, and what your adjustable rate HELOC payment would be once it adjusts (if it adjusts... it probably adjusts).

Disclosure: i also am a loan officer, and i don't really like HELOCS. But I still offer them when they're in my client's best interest. 

IF you plan to take out the HELOC now with the intention of refinancing this home later to pay off said HELOC, then i would suggest you just do the cash-out refi. I say this because if you plan to refi the entire debt anyway in 3-5 years, you're just gambling with the interest rates. May as well lock-in low rates now, eat a slightly higher payment (if it is slightly... again, run the numbers). and if you can afford to throw more $ at it on-top of your new payment, you'll just pay it down more quickly.

Waiting to see what the market holds in a few years to move around this $50k could ultimately end up costing you a lot more if the rates jump up by then. they have been moving upward for the last year, year and a half. 

For $50k... it's tough to say without knowing your current 1st mortgage balance, rate, or payment. but i would guess that the stability of a cash-out refi would outweigh the benefits of a HELOC in your situation. you can ask your LO to structure the refi with no closing-costs. there are a couple of ways to do that, but i'll let your friend explain those options.

I'm not sure what your financial situation is @Joshua Smith, but I had a lot of luck starting out in the industry based on the fact that i was willing to work for free. no salary, no hourly, no "base"... just straight commissions. Dont get me wrong, I was flat broke back then, and living in my car. Yes, you read that right. To say it was hard would be a massive understatement.  

I agree with everything @Chris Mason posted above about training and low-hanging fruit. it's all true. But don't feel like you have to land your dream job right away. I have a friend who started with an escrow company while working toward her RE licensing. She knew she ultimately wanted to be a Realtor, but no one would hire her without licensing and experience. catch-22 right? She found the experience elsewhere, and is now doing what she wants to do after a couple of years. 

It's all about what you can bring to the table; and if you're willing to work hard for the success, it will come. Hope this helps!

@Kelly Pierce i was actually the tenant in a similar situation not too long ago. It is difficult being in those shoes and having the home sell out from under you. it's invasive, it's stressful, and it's expensive. The good news is California properties tend to sell quickly if priced right, although you know the real estate market better than I do in your specific property's area. 

Cash for keys is not a bad option if you think you can come to an agreement with the tenants. Waiting out the lease isn't always in your best interest, especially if you think the market is softening. It may be worth it to offer them something like their deposit back in-full immediately, along with moving costs (idk $300 for a moving truck?) and an extra $1000 toward their new rents/ deposits (just throwing something out there, i'm sure you can find what works for you to offer them). Get creative if you need to. But showing that you're willing to work with them will go long and far when it comes to them working with you on the sale (them accommodating showings and open houses). 

I read a horror story on BP not too long ago about a tenant that knew his rights, and followed them, but would do things just to make it uncomfortable. example, he would be in solely his bath robe for showings. It seems ridiculous but its not uncommon... or illegal, so tread lightly. Cali is very tenant-friendly, so if you go this route, make sure to consider the tenants and their needs. Even if just for the purpose of protecting yourself. 

@Marco Gonzales @Daniel Federico CoreVest is fantastic! We love them. They qualify you based off the cash-flow of the property. There are very specific value per-door requirements you need to hit on multi-family, and since it's based on cash-flow, you'll have to hit specific DSCR requirements as well.

Have you reached out to any local banks for this as of yet? It will be a bit more cumbersome to qualify for a loan through a local bank or credit union, but you might get better rates and terms...  

Feel free to send some info over to @Alex Bekeza, he may be able to help.