All Forum Posts by: Matthew Ware

Thanks Jay. That's exactly what I am going to do. I've gotten some great referrals from this thread. I'm also learning that so much of this real estate game is about relationships and the sharing of local knowledge. As someone, who has come from an education background, I think I suffer from smart guy syndrome. I get to thinking that I can figure this out all by myself, (because I'm sooo freaking smart) only to get frustrated by the shear magnitude of choices and nuance that goes into each step. I'm starting to loosen up and trust others here as well as myself. Thanks again everyone.  

Thanks all for the responses. I am an newbie to this process so I truly appreciate your patience. So it seems like I can choose to wait another year and a half with a big bank to access the equity in the properties because I'll then have two years of rental tax returns (boo), or find a local credit union who will issue me a loan because they do not have to sell the mortgage to Freddie/Fannie and thus have more leeway, or I can go with private money (much more expensive but fast?). The credit union piece is tough because my local ones here in Vermont are reluctant to loan on properties out of state, so I suppose that means looking to CA credit unions? How many credit unions should I go through the application process with in order to get an idea of a competitive offer? There are dozens and dozens of them. The first one I contacted quoted me 5% for 30 year fixed and when I mentioned the income piece they told me I'd have to apply to find out the answer because they review  each request on a case by case basis. This means an hour plus on the phone/computer for each application and a hard pull of credit. Do those of you who shop for loans apply for a whole bunch of loans and then choose? Is this why people use mortgage brokers? Thanks again for helping me along the learning curve. 

Thanks all for the replies. This money game is confounding and doesn't seem to operate on common sense. Am I missing something? I'm astounded at the value they place on W2 income. Since I filed W2 last year, I could go get a job in my field and quit or get fired in a month after showing my pay stubs, but rental income which I am much more invested in maintaining because it's tied to my asset is counted as zero. If I don't pay back a 300k loan the bank gets a nice 600k property in San Diego. If I were issuing the loan I think I'd want me to default. It just seems silly to me. Can anyone suggest a mortgage broker or private individual who can help me navigate this? A local credit union appears willing to give me a conventional loan at a competitive rate on a purchase, but I'd rather not drain my savings to come up with 20 percent down and since my investment property is out of state they won't do a cash out refi on it. You folks who have mastered the lending end of things have my ultimate respect. Thanks again. 

I think our DTI is just fine. My gross rental income with leases in place and over a year of rental history is 58K So 75% of that is 44K which is conservative. My domestic partner is at 62K with W2 income. We are both debt free save for a couple of car loans and a small mortgage on her home that combined is about $1500 a month. We are in Vermont and the rental property that is being borrowed against is in San Diego CA. Should I look to a local credit union in Vermont or California? Would a mortgage broker make sense? Talking to Chase we were off by about 500 bucks a month just based off of her income because they counted zero of my dollars, Quicken Loans was the same story.

Hello Bigger pockets. I'm attempting to tap into the equity in one of my investment homes in order to buy a primary residence. I'm looking for a 30 year fixed cashout refi on a property that is owned outright. My sole source of income is rents received while my co-borrower is on a W-2. The bank that I have talked to (Chase) will not count any of my income because I do not have a 2 year history of rental tax returns, so we have run into debt to income issues. The house I'm borrowing on is worth about 600k and I want to pull 300k out. Chase quoted me a rate of 4.75, for a 30 year fixed, because it's a rental property, but then brought up the income issue at the end of our long conversation. Grrr. Any help or suggestions would be appreciated. Thanks.  

 I suppose I was mistaken thinking a national bank would be more willing to loan money.  I'm with Chase because it was the bank my probate attorney used when I inherited the estate. I'm naive about borrowing money, what's the joke about Chase?  

I own outright two properties in San Diego that are providing steady combined rental income of approximately 4k a month after expenses. They are worth about 600k each. I would like to take out a HELOC on one of them, so that I can purchase more investment properties with BRRR in mind. I called my bank (Chase) and spoke with a loan officer and she told me they were unable to count my rental income on the house I wished to take out the HELOC, and therefore, my debt to income ratio is too low to qualify for a significant loan. It didn't matter that I have stellar credit and a pile of cash in their bank, or that I was asking for less than 50% LTV. What should my next steps be for finding money that is available for cash real estate deals? Should I keep looking to banks, or will I get the same story everywhere? Is hard money the only option and how does one transition to a conventional loan after rehab without running into the same issue? To complicate matters I live across the country in Vermont.

I got confused. Justin I was intending to thank you personally in my last post. Sorry about that. Aaron you of course are awesome as well. 

Thanks for the support and kind words Aaron. You make very good points from a local SD perspective that confirm my gut which is reassuring. I've never owned an income generating asset nor did I ever expect to. I never learned about them in school and as a high school teacher lived virtually paycheck to paycheck. It's funny, I was always a "smart kid" growing up, but I was virtually clueless when it came to this stuff. I just accepted that I would never have any money while also holding on to a romantic/bohemian idea that money was somehow inherently bad. Funny how humans can rationalize. Now after being teleported to this financial position, my fears of making mistakes are slowly fading, and I am realizing that "good enough" works. It has been quite a shift in thinking for me and one that has taken time, but hey we just have to keep growing and learning. Thanks again for your help along the way. 

Hi Aaron,

Thanks for reviving this thread. My father had not communicated anything about the property before he passed. The properties have little sentimental value to me and I am trying to view them as pure assets. Since posting,  I have solved the inherited tenant issue and both properties are grossing 5k a month combined. I had to spend several thousand dollars on the long term renter's house in order to turn it over. Doing it long distance caused it the repairs to cost significantly more since I could not oversee the work. I don't think I got ripped off, but I know I paid a premium.  

I hear you on the San Diego market. As an outsider it does seem insane and untenable, but every time I visit, I am amazed by the climate and culture and can understand why so many people want to live there. One other bit of inherent value that these properties have is that they are directly next to Mesa College and there is tremendous demand from students and others for rental houses. I think it is safe to project a very low vacancy rate moving forward which combined with the very low tax burden (Prop 13) I am leaning towards keeping the properties and leveraging their value with a HELOC. I'm currently looking to acquire property in Vermont and also the Port Orange, FL area where my mother and stepfather live.

I may eventually sell the properties, but for now they feel like blue chips in the the sense that they should consistently produce a nice bit of monthly income and I can still tap into their equity and make starter deals with cash. I don't know if I'm ready in my learning curve to have a million dollars liquid needing to be invested. There still seems so much for me to learn. It seems to be the consensus from most pros around here to sell the properties and jump into the game with both feet, but they are benefiting from their years of experience, and the confidence that comes with it. I just don't have that yet. I want to eventually do better than a CAP rate of 3.6%. I calculated this as 36K NOI / 1.1m (based on the 50% of gross rule, and Zillow) I know these are not real numbers, I think the 50% rule is a bit conservative for this property and the Zillow estimate may be inaccurate and doesn't include transaction costs. But as an asset it still seems clear that it is under performing compared to the deals people consistently seem to be putting together on BiggerPockets. Any and all advice is welcome.