All Forum Posts by: Sasha Mohammed

@Kamal Martin maybe "house hacking" wasn't the right term.... but correct me if i'm wrong, are you referring to renting the property room-by-room?

There are a TON of people who do this and utilize DSCR loans, specifically i see it in college towns, as the property cash-flows beautifully this way.

Unfortunately, DSCR lenders are more concerned with market rent, and even if you were to provide 6 leases for one property, one for each room, adding up to $10k/mo in rental income, they wont underwrite it that way.

I usually recommend my clients give me one lease for the entire property in this scenario, it can have everyone's name on it, and the actual rent amounts... but the lender will go off the LESSER of the two - lease agreement vs market rent from the appraiser. 

That said, you'll get chopped down by the market-rent component. 

There are lenders out there, though, that do not look at DSCR, go negative DSCR, or go no-ratio. If the property is only cash-flow positive w/ room-by-room rents, these may be the better option for your scenario.

@Laura Shinkle great advice all around in this response!

@Ben Berg, welcome to BP and great work securing your house hack! ive been doing this house hack for a long while (over a decade now) and have certainly learned a thing or two. The first being - don't bring your friends or family into the mix :)

Since it sounds like you're pretty solidified in your friend moving in, and it could be a good first roomie, so just to get your feet wet... i'll double down on Laura's advice - do a lease, for the legalities, but i also highly recommend some sort of written (we call it a) Room Mate Agreement. This outlines things like guest/ overnight guest policy, cleanliness standards, roomie/tenant vs roomie/ landlord responsibilities... I try to not have a lot of "rules", but writing out some expectations can go a long way in resolving conflicts down the road and hopefully not ruining relationships/ friendships.

happy to go over more specifics with you if you'd like! Enjoy the ride, its a fun one!

To add to @Patrick Roberts post - this loan type will require you to qualify with income and liabilities = DTI ratio, which will include the rents you pay to your NV home. But it is the lowest down payment option, and likely the lowest rate option as well.

one tidbit - condos don't usually like the STR piece, so make sure to do your DD in whatever area you're looking to buy in before puling the trigger.

hi @Alvin Taveras

Mortgage Broker here, i've been referring clients out to Credit Unions for their HELOCs. we have a handful of lenders that can do them, but i'm finding the juice is not worth the squeeze in the broker/ wholesale world. Clients are getting much better terms using their local credit union, and generally really appreciate being the good advice and direction. Unless someone specifically wants to work with us, they have a tough scenario in terms of qualifying, extenuating circumstances... so on and so forth.... CU and local bank is the way to go for that product specifically. 

just don't do a lease. as others have mentioned, this forces the buyer of the property to take over the lease (if its even allowed/ they qualify) and it certainly does make the property a little tougher to sell. 

i'm also doing a house hack, and here in CA, its made a world of difference for me. the bulk of our energy usage is in the summer when we want to run the a/c. my bill stays a constant $228/mo (i pocketed the tax credit and simply financed the panels after that grace period). instead of getting an $800 bill in the summer months, we run the a/c at a constant temperature 24/7 on auto, stay comfortable, and i typically get a little bit coming back at the end of the year. don't expect to pocket this "little bit back" by being conservative with your useage, it sort of is a use-it-or-lose-it situation... i think i got $54 back this year. But just in terms of my face not changing when someone is too warm and wants to run the a/c or drop the temperature... its been fantastic. For context, 4 adults and all our tech living here, we were running about $250/mo on average per month for electricity anyway... outside of summer a/c useage. so all in all, its saved me about $2k a year if i had to guesstimate for you (it stays hot here through October usually).

i still owe about $23k on mine, have no intentions of selling the house. but if i decide to move out and rent the whole house out, our market would support higher rent in exchange for no electricity bill. i think you just need to decide what YOUR main benefit of having the panels are. for me it was for the house-hack, and consistent billing, despite the usage. if its strictly for property value increase, i'm not sure it would be worth it, pending your specific market. 

Hi @Albert Aitov,

For starters, i would recommend reaching out to a mortgage broker. Specifically one that specializes in investor-focused lending. You'll spend a lot of time (sounds like you may have already) spinning your wheels in trying to find the right lender, whereas a solid broker can pair you up with the right fit right away and get your project moving. Yes, there are added costs to this, but what is your time and energy worth?

There are plenty of lenders out there that do fix and flip/ rehab lending. 100% on acquisition and 100% on rehab is unlikely, but 80%/100% is totally do-able, and potentially even 90%/100% - all without even looking at your personal income. 

Hope this was helpful, 

not enough info. what type of development projects are you trying to do?

personally im not a fan of sub2 (unpopular opinion on BP, sorry ab it). most don't understand what they're getting into with sub2 and thats where it becomes problematic. 

Assuming since you're asking, you're not interested in some sort of traditional financing? is it the down payment you're trying to avoid? 

if it MUST be something creative, you could just simply to seller financing, or a rent-to-own situation. My best recommendation, though, is to have a lawyer structure the contract, and make sure you are put on title. < this is where most people get hung up. title is like the pink slip to the house. if you're not on title, you don't own anything. 

best of luck!

yes 100% financing is likely not going to happen. i say likely because I'm sure there is someone out there somewhere who would willing to take this on, but certainly not going to be an easy find. 

ground-up construction is more challenging as well, as you will need to evidence your experience w/ previous ground-up construction deals where you are on title. this is how lenders feel warm and fuzzy about lending you so far above and beyond the existing land value before anything is built on it. 

Fix and flip and ground-up lending, though, WILL give you acquisition money PLUS rehab/ build money! as an example, lets say a lender gave you an 80% loan to buy the land PLUS 100% of the cost to build the property on it in the form of draws... theoretically you'd be walking away with MORE than 100% financing. its just done in a round about way, and you would still need to bring in some "skin" as @Brandon Croucier mentioned. 

*disclaimer* i'm not saying you could get those specific terms, its purely for example purposes.

effectively, you'd either need to look for a lender that would let you use the other property as collateral (cross) so that you can avoid actually taking the cash-out (this is rare in terms of institutional DSCR lenders, but fairly common in the hard money or private money space)... OR you'd have to do 2 separate transactions and incur 2 sets of closing costs/ transactional costs.

i dont think its a bad play, a lot of people leverage one to help them expand to the next. another challenge you will have, though, is pulling something small like $50k out. most lenders rn have a $100k min. you might be able to find less but then fees/ points will be a little excessive.