All Forum Posts by: Marshall Martinez

@Bryan Martineau I agree with Brady, lock in a fixed rate while we are still at historic lows. Rates are only expected to go up. 

Pros of 7/1 ARM: Lower "teaser rate" for the first 7 years, increasing monthly cash flow for that period.

Cons: Payment shock at the end of 7 years, depending on the caps, your rate could fluctuate 1-2% when it adjusts. 

 I'd be interested as to how you value an option in this case?

I know when you value an option for stocks many professionals use the Black-Scholes Model, which is highly complex. 

What is the best way to value an option when it comes to notes? 

Do you have enough equity in the properties to refinance out of a VA loan into a conventional?

You could then free up your entitlement for the 4-unit property. 

 The majority of wholesale lenders do.

Your best option would be to contact a local mortgage broker that works with multiple lenders. 

@Sabrina Hill The good thing about VA loans is they are a lot more lenient on credit. Many lenders will go down to a 580.

 I guess you could just work backwards on a financial calculator. All depends on how much risk the investor values the note at.

i.e if the investor wanted a 8% return they would pay $101,154, if they wanted a 12% return they would pay $85,930.

Today the 10yr treasury bond yield is at 2.44%

 Got it. 

If the note has had 4 payments made, the present value of that note would be $93,121.62 

Assuming they were making payments of $1,255.43, which is the fully amortizing payment for a 10yr loan at 10% with an original balance of $95k

Are you looking for the present value of the note? 

Was the original note 95k?

@Chris Porter Definitely take advantage of your VA loan, great tool to house hack.

First time use VA funding fee is 2.15%, assuming no down payment. If you put 5% down you can reduce the VA funding fee to 1.5%. Subsequent use will incur a 3.3% VA funding fee.

If you have a service related disability rating of 10% or more you will be exempt from the VA funding fee.

If you are already in a VA loan you can take advantage of the VA IRRRL (Interest Rate Reduction Refinance Loan). It is a limited documentation loan that will strictly just lower the interest rate (assuming market rates are lower than your current rate). The VA funding fee for an IRRRL is .5%.

Here is a funding fee table that should help out.

Hope that helps!