All Forum Posts by: Steve Q.

Can anyone recommend a commercial lender offering 20-30 year fixed rate at 3-4% for a 4-unit investment property? I've heard stories of it, but can't find one so far. 

More info:

I have a great 4-unit building with a mortgage at 5.8% - 30 year fixed. I'd love to get it refinanced down towards 3% but I can't get a residential loan right now because my industry is furloughed due to Covid. (I work in live events.) So my debt to income ratio is currently terrible. So I need a commercial lender to just look at the property and not my tax returns.

The building is in great shape, cash flowing, fully leased, estimated equity of 25%-30%, I have healthy cash reserves, and a 780 credit score. I could increase my cash flow $500 a month if I could find a lender. I plan to hold it for a long time, so not looking for any 5 or 10 year balloons. I've reached out to some local commercial lenders and get unattractive quotes like 5.6% with 3 points.

Feel free to private message me if you have a lead that you don't want to share publicly. Thank you for any help!

Good point on the interest deduction, Tom. 

Federally backed loans are offering 180 days forbearance. A hold on payments until October. After that they will arrange a payment plan or a loan modification. 

I know this won't show as missed payments on a credit check.  But if an investor wants to buy another property in the next couple of years, will lenders see this and take it into negative consideration? What are the ramifications?

Looking likely that many lenders are going to offer Mortgage Forbearance such as reducing payments for a few months or suspending payments for a few months. Landlords may lose some rent or need to allow delayed rent payments.  It's my understanding that this forbearance is not free money - rather, you will either extend the mortgage longer at the end, or catch up with increased payments on a payment plan after the crises resolves.  

And interest would still accrue during the forbearance, so when you return to making payments, the first few might be all interest to catch up there.  So you get out of payments for some months, but stop paying down the principle and probably pay more interest overall. 

So assuming you have the recommended healthy reserves that can cover six months of payments, and mostly stable renters, what's the strategy?  

1.) Skip some mortgage payments and take on more interest and/or time for the loan? 

 2.) Spend down your reserves for a bit if rent is lost/delayed, and stay on track with your mortgage sched - keep knocking down that principle?

Obviously circumstances will vary, but is there an overall financial strategy to one or the other?

Looking to refinance a non-owner occupied 4-unit in Rhode Island. Need a lender or broker who can do 80% LTV, no cash out. Found plenty that will only go as high as 75% and only 1 or 2 that will do 80%. Would like to get more to compare rates. Thanks for any help!

Help me out here please, smart people!

Is there a tax savings to live in one of your own units vs renting your primary residence somewhere else and renting out all your units?

Scenario with fake round numbers: 

3 Unit building cost basis for depreciation: $300k

Each unit rents for $1500 - Total $4500 a month: Annual $54000 (Let's assume that includes vacancy for simplicity's sake.)

Tax deductible expenses:

Depreciation : 300k / 27.5 = $10,900

Mortgage Interest 4.5% on 300k balance: $13400

Property Tax: $5000

Insurance: $2600

Maintenance:  $3600

Total: $40,000 deducted from $54000 income.

Leaving $14000 in taxable  income.

Assuming all of it in the 22% bracket + 4% state: 26% Tax = $3640

If I live in one unit - I lose that $18k annual rental income, but also lose 1/3 of the deductions:

Income:    $36,000

Deductions:  $26,666

Taxable income: 9,334

26% tax: $2427

So, let’s say I’m currently living in one $1500 unit. If I were to go rent a place somewhere else to live away from tenants. And I spend the same $1500 a month on that rental, I would be losing $2427 a year, $202 a month, to taxes. So, I would actually have only ~$1300 to go spend equally to live elsewhere.

Is this right? Am I missing anything?  Is there a $200 value a month in tax savings by occupying one of the units in this scenario?

Management costs would be the same.    

Thank you!

These stairs are the only access to the basement for laundry and storage.  I'm in New England, so it's going to be covered in ice and snow come winter.   I'm going to be living here myself and eventually renting it out down the road and want to hire someone to build a solution. 

What's the cleverest/most affordable way to improve this?  I don't think I can afford a full addition to the house.  Three season porch? carport type roof on poles?  Thanks for any help!

I've got a property in Warwick Rhode Island with a small separate single family home on the lot.  It's got parking and its' own basement.  Nice quiet street near the water. 850 sq feet.  3 beds 1 bath.  Cramped and shabby inside and currently rented for only $1000 to an inherited messy tenant. 

One bedroom is decent sized, the other two are 9x9 kids rooms with small closets.  I'm planning to redo the kitchen and all the flooring.  To me it would be more appealing to take the wall out between the two small rooms and make it a two bedroom with two good sized rooms each with nice closets.   

Is this foolish? Am I definitely going to lose rent value going from cramped 3 to nice 2?  One plus for the 3 to 2 conversion is a I might get easier/cleaner tenants like a professional couple or retirees rather than a family with kids squeezed into small bedrooms.

Thoughts?

Anybody done a 3 to 2?  

Has anyone gotten a second Home Possible loan while still holding the first?

My goal was to acquire a portfolio of 4 to 5 small multis (3-4 units) over a few years. My strategy was to owner-occupy three of them for one year each, as required, while saving enough funds to put 20%-25% down on numbers four and maybe five if needed. I bought the first one with a state housing program for 5% down last year, and I'm about to buy and move into number two for 5% down with Home Possible. I'm getting the feeling from lenders that doing this a third time will be difficult. I'm trying to avoid using FHA since the up front MIP and permanent MI seem to negate the advantages gained by the house hack.

Refinancing out of the first two loans doesn't make strategic sense since that would give up the low interest rate obtained by owner occupying for a year.  I want to hold them for a long time with great rates.

I'm in the northeast, so the difference between 5% and 20% on a building that cash flows is considerable.

So, does anyone know if you can take on a second Home Possible loan? 

Any other ways I can use my ability to move each year as an advantage? (Not gonna airbnb rooms in a SFH residence.)

Thanks for any help!

I tried three agents, only policy I was able to find that would allow short term rentals was about $1500 more per year than normal landlord insurance, which wasn't worth it for my location.   Lien, is Progressive aware you are running AirBnB in the property? If not, that may be in violation of your policy and you may not be covered for any claims if they find out, not just claims related to the airBNB guests.