All Forum Posts by: Jim Blackburn

Hi Robby, 

I would be interested in taking a look.

Jim

@Jonathan Klemm 

Yes, FHA is allowed if buying from family member.

We've all heard the expression "What goes up fast, comes down fast." Well, lenders are concerned about property flippers over inflating values in a short period of time, the lender lending at 96.5% of an over inflated value and being stuck with an asset that is worth less than the money that was lent.

This is the reason why when buying from family member, it establishes an "Identity Of Interest Relatinship," aka "Non-Arm’s Length Transaction."

When this is established, a 15% down payment is required instead of a 3.5%. This reduces the risk of loan default because a buyer with more "skin in the game" is less likely to default on the payment.

3 Exceptions to the rule include:

1. buying primary residence of family member, finance, spouse, or domestic partner
2. buying from a landlord where you lived and can show 6 monthly payments
3. buying from employer as part of a job relocation

In most cases, a conventional loan will be best as loan as the borrower's income (DTI) and credit score qualifies. Fortunately, there are 1% down conventional programs today. The only down side with conventional is 3% max seller credit vs 6%.

@Christopher Piazza

Build for $300k. 

Sell for $500k 

Pocket $200k

You need a loan for 75% of Land value + cost.  The difference is down payment.  If you don't have the down payment, then you get partners (other investors, friends, coworkers, family) to put money down and you give them a return on their investment. Plan on needing approx. 100k.  If you give the investor a 10% return over 12 months, you give them back $120k.

You profit $80k.

Then you pay capital gains tax 15-20% on that 80k unless you 1031 exchange it to another property project within 60 days

Equity can be calculated by subtracting liabilities from assets and can be applied to a single asset, such as real estate property, or to a business. For example, if someone owns a house worth $433,000 and owes $433,000 on the mortgage, or possible more with a VA or FHA loan which has the upfront guarantee/mortgage insurance added to loan amount, then the "equity" available to give would be less than 0%.

The $10,000 note would become a 2nd lien against an over collateralized at 102.2% LTV.

However, I suppose the the investment is small relative to the future appreciation potential.

Wondering, is this money needed for closing costs or reserves to close on the loan? (I doubt the lender will be ok with receiving outside capital to qualify for a VA loan. Be careful).

Yes I believe rates are going up 25 bps once or twice more before end of year based on the feds plan to control inflation. 

I do understand that a 90 day lock is often times significantly higher priced than a 30 day lock depending on the investor lender. However, the higher cost will compensate for the protection and peace of mind having the rate secured now while knowing the probability is higher that rates will go up than it is they go down. 

At some point, the 30 fixed consumer mortgage rate for primary residence will come back down to 5.5% range (perhaps within 6-18 months), followed by further reduction down to 4.5% 12-18 months after that).....Yeah, so 6-36 month horizon from today.    But not yet... JP is still fighting inflation and must stay the course to avoid the entire fed committee looking like fools by yoyoing the rate up and down in such a short period of time...

Hi @Andrew Syrios

Thinking this through.... it may be possible. Potential lenders will consider the net cash flow of the HOA (HOA dues collected minus total budling expenses + 10% to reserves for future unknowns). Suppose the HOA were able to get a 400k @ 25 year amortization at 10% with a 3634 principle and interest payment. That's $43,608 additional line item expense to that HOA budget.

How many units are there? What is the total HOA revenue now? Is it enough to cover the expenses of the building + the additional 43,608 loan expense + 10% reserves? How much would the HOA need to increase the owners HOA monthly to cover the loan payment? Last question which will be lender specific, what debt ratio will a lender feel comfortable lending on? Certainly not more than 50% which means the total HOA income must be at least double it's expenses (which is unlikely).

In addition, what will be the collateral for the loan?  (entire building?)  Not likely, Therefore we need to make the deal more appetizing for the bank. For example if there's 100 residents, maybe we could convince 100 residents to open their personal checking account at the bank. Far fetched I know, but if that's what it takes to get the deal done The residents might decide to do it.

How many residents are there? Maybe half the residents have 50k set aside for a cash call And the other half do not. For the half that don't have the money, maybe we can do a HLOC equity line of credit or cash out refinance for each of them.

jim

Do you want to buy existing or build new? 

@Annushka Alicea

Generally a higher score will be needed. 

Best plan is use gift funds to pay off all your credit card balances. Wait 30 days before pulling credit with any lender.

Your scores will then be in the best position to qualify for a HLOC or fixed rate 2nd lien 30 fixed with best rates.

Will be 80% of the property value. After you close on the refinance, you can pay back the gift funds.

To refi only 2nd lien to new 2nd lien, for better rate or credit line increase, there should not be a waiting period.

To cash out or pay off both loans you typically have a max loan amount of 80% on the value.

To cash out shortly after renovating, typically there is 6 or 12 mo. seasoning to use higher value.

Just check if there is any prepayment penalty written in the mortgage note signed at closing. 

@Ryan Heilig - Curious how did you arrive to those 3 states? I like all 3 of them by the way and when evaluating the same question 3 years ago when moving from Chicago, we decided on Florida. Check out this video. Lmk what you think!