All Forum Posts by: Michael Glist

So getting a pre-approval letter that is open and not specific will work as well. The benefits to have a specific one are that it shows that the lender knows about said property and has had time to potentially put numbers together specific to that property to make sure they work for you. I also found it helpful if you are looking at places that are less expensive than what you qualify for. If you submit an offer for $240,000 and your pre-approval shows you are approved for $250,000 there may be a chance that they counter your offer up to your max approval amount. So just know with a generic one you may run into that.

So I think buying now is a great idea because you can always turn it into a rental when you move. The only potential roadblock would be that you do not qualify for another home due to your DTI when you move. This would just mean that you either need to sell your current place or rent when you move. But overall I think buying now would be a great idea.

Yeah a local bank or credit union or a HELOC may be your only option as most lenders will have a minimum of $40,000 for their loan amounts. And as mentioned you will not only want to look at the interest savings but look at how much it will cost to refinance. You will also want to consider your long term goals with the property. Are you planning to keep it for 5+ years, 10+ years plan on selling it? These will all play a part in if it is worth it to refinance it as well as if the costs associated with refinancing are worth it.

When you say you give them an application are you saying you are handing them a paper application or are you sending them a link to apply online?

If I go look at 2 places and like them equally but one offers an online application vs a paper application that I have to write on then scan and upload then email then answer the questions I already answered because my hand writing is not the best or the blank spaces are too small to write legible or whatever the reason I would go with the one that allowed me to complete it online. The nice thing about it being online as well is you can set up automatic reminders to ensure that they are getting reminded of an incomplete application or missing documents, etc. all without you having to take the time to check and see if they turned it in or send in docs. 

I think though this will depend on the area and how much interest you get in the property. If you are in a high demand area then there is no need to remind applicants as there will be one that is on top of their game and will get everything to you in a timely manner without having to be reminded. 

So I would recommend talking to a lender first to see what they would qualify you for. Since you are a new investor and show no history of rental income you may not be able to use rental income to offset the new mortgage and expenses. So talking to them first will let you know where your buying power is. If you only qualify for a new purchase price of $250,000 with 25% down then you may not need to take out as much cash unless you plan on having that for other purposes. 

Also make sure you are accounting for closing costs as well as reserves when looking at how much you need to have readily available when you purchase. 

So as mentioned most private lenders will be individuals and hard money lenders will be institutions set up typically as a fund. The reason a lot of lenders will say private/hard money is because they are funding everything with private individuals money as opposed to bank money, lines of credit or hedge fund money. But generally speaking private money would be an individual and hard money a company. 

Also you may run into issues with the financing part if you are using private money to fund the down payment. That is not saying it cannot be done since it can and has been. But you will want to talk to the lender upfront about their requirements on you having your personal funds in the deal, a 2nd position lien or if there are any additional requirements or documents they need if you are using private money. You will also want to account for holding costs such as your monthly interest only payments, if you need to front money for rehab while you wait on draws, if you need to have funds to purchase materials upfront, utilities, insurance etc. 

Capital one is great for online banking. 

I would check with your lawyer to see if there are any laws on how you can hold the deposit. Some states/areas state that if the account does earn interest that it belongs to the tenant and if you do not give it to them and they find out they can sue you. So just make sure you know upfront if you can have an account that gains interest or if it is better to just get a basic free checking account. 

So you can look at local banks and credit unions as they would likely provide the best rates. 

You can also look into DSCR lenders if you are looking for strictly investment properties, as they do not lend to owner occupants even if it is only partly occupied by the owner ( such as buying a duplex and living in one side and renting out the other).

There are also NON-QM lenders which can help qualify based on assets as opposed to a normal W2 income. 

It will come down to what exactly it is you are looking to accomplish.

So for the DIT issue you can look into DSCR loans as they are based on the property and its ability to generate enough rental income to cover the mortgage, taxes, insurance, etc., as opposed to your personal income and your ability to afford it.

For the money issue you can look at getting a private investor to partner with to provide said funds. The thing with that you will want to be careful of though is making sure your lender is ok with the funds not being your own and being borrowed. That is where you will likely find bring in a money partner the hardest if purchasing as a turn key rental.

If you are looking to use the BRRRR method, then you will still want to make sure that the lender is ok with the funds from someone else but you will also have the exit strategy of refinancing and paying the lender of as well as partner off that funded the down payment.

So I think it will come down to the lenders that will allow secondary financing as well as what your strategy is. 

So I agree keep it simple.

I would just say to make sure you put in there that if person "A" is unable to complete said task that there is additional compensation for person "B". This helps in the even that you or your partner are unable to complete you task(s) due to family, work or whatever the reason and that the other will pick up the additional work without feeling like they are doing more of the work for the same amount of pay.