All Forum Posts by: Makayla Mack

Hi Nicole,

This is a bit late of a reply! I started renting out my property in Yucca Valley in August 2023. My first two renters were 2 months each and I just signed a tenant for a year. My property is furnished which definitely attracted the mid term renters in the beginning. We are charging a few hundred more per month than other homes in the area with bed/bath/sqft comps which also aligned more with MTR. My boyfriend and I self manage, it's our only property at the moment and we live in Temecula so we're close enough to go up and clean in between tenants. If you have more specific questions let me know!

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Quote from @Bonnie Low:

Have you looked into a DSCR loan for her? I believe DTI is not an issue. It's based on the underlying financials of the property. This might be hard to prove if she's purchasing a property that doesn't have a history as a STR. I'm not sure. But it would be worth looking into and there are plenty of DSCR lenders on these forums. Also, have you considered applying with her for the loan? Perhaps you could be a co-signer or co-investor so your income could help her qualify? I personally have used the 401k loan several times from both mine and my husband's 401k's but we're doing it for properties we either flip or BRRRR so the cash out refi allows us to pay back the 401k loan quickly. That wouldn't be the case for her property unless it just achieved mad appreciation (which it certainly could in CA) and she could later do a cash out refi and pay her 401k back.

Hi Bonnie, thank you for the reply! Yes a DSCR loan is ideally what she’d like to use. But from what I understand those come with a 20% (maybe 15% at the lowest) down payment. She’d need around $70k cash for the kind of homes she’s looking at. We were hoping to get that cash from her primary home’s equity but thats’s where her DTI is an issue :(

That’s super reassuring to hear that you’ve used the 401k loans before! I believe the max amount on those is $50k, but that’s definitely worth looking into more. She has plenty of equity in her current home to pay that back. I think with one solid STR income her DTI would go down enough for her to finally tap into that equity to pay back her 401k. 

 
I’ll have to look into how I could help as a co-signer also, I hadn’t thought of that. Thank you so much for the insight! 

Quote from @Taylor Dasch:

I am assuming she is older so would like to take less risk. If that is the case then she she would have to get a loan that takes into account the income the property would produce. My initial thought though (a little more risky) would be to use HML to purchase two flips, then use the profit from the flips to purchase a buy and hold property that would get her monthly income. Although it is not ideal to purchase properties in cash, that may be her best option and would lower her DTI so that she may be able to refinance for her next deal. I would speak to multiple lenders personally and see what they say.

 Hi Taylor, thanks so much for the reply! Yes, the income property loan is what we initially had in mind but getting the cash for a down payment is our hang up right now. I really like the idea of starting with a few flips to get her some cash, she is pretty risk averse but I think that is something she might be open to. I appreciate the insight!

Hi All!

My mom is interested in buying her first investment property and I've been doing my best to help her get started. Her big picture overview is that she has about $600k between Roth & Traditional IRA accounts and a 401k account, she also has an estimated $400k equity in her primary residence. It seems like between these assets she should be able to access some cash to help her get started in investing. The biggest issue we've run into so far is her income is very low, her primary home is her only debt but just with that her DTI is close to 80%.

My first thought was a cash out refinance or home equity loan or loc. With her high equity and a credit score of 820 we were hoping that would work, but it seems like her DTI is just too high for those options.

My question is: does anyone know of a way to access home equity in a way that does not rely on a <50% DTI? If home equity is not a feasible option right now, would anyone recommend taking a 401k loan or even a withdrawal from one of her IRA's? I've also thrown out the idea of a hard money loan just to get her started, once she is showing some income from her new property her DTI would be better and she could tap into her home equity to pay off her hard money loan.

If anyone is curious, the property type we are looking into purchasing is a ~$350k SFR in San Bernardino County that will be used for a STR. I currently own one STR property in the area so we are looking for something similar for my mom.

Thank you in advance!!