All Forum Posts by: Anna M.

Way to go @Amit Patel!  Your due diligence and determination clearly paid off.  Congrats!

It is my belief that rental properties are good for at least 4 reasons:mortgage pay down, cashflow, tax benefits and appreciation.Which of this is most important to you?Personally I would rather a property that allows for all 4.  As a buy and hold investor, appreciation is the last on my list, it will come over time, am not too worried about that.A positive cashflow is a must for me as otherwise it defeats what I am trying to do, which is to essentially use real estate to find financial freedom.

Great news all!My determination paid off, the credit union will honor my request and give me the maximum LTV, 80% for the duplex property and will consider my rental income despite initial hesitation, yay!!!!.Now the next thing is to take the property out of a trust to complete the closing, but that I felt was coming so I was ready for it and finalizing that. I am very thankful to you all for the great advice and am thankful to the Credit union for where we are at present. Fingers crossed!

Not entirely sure, but I do believe that as long as you are putting down less than 20% (regardless of where the money is coming from) expect PMI. I could be wrong.

Thank you so much all :). @Brad L., certainly never a situation I have been in.On a previous purchase, there was at least two more months left on the lease so I just took the existing lease and upheld it until the 2 months were over then we switched to mine. Am generally not a fan of inheriting tenants and if I do, I prefer that my lease be implemented, but clearl y that is not always realistic.Thank you though for this suggestion and I am going to try to see if working it from your suggested angle will work here in Colorado.In the end, I want to set up a lease that does not have holes, that an attorney, God forbid we ever have to evict (though these tenants do not seem like the type to cause any issues and I generally am a good landlord and stay away as long as you are following policy, so thus having a detailed lease that covers most all and then just backing off.My inspections are generally once a year, outside of the move-in, move out.I also stay very engaged in the running of my property, thus self-managing as in the end, I strive to provide a place I would enjoy living and I actually live on one of my properties.Long story short, don’t care for the very vague lease that the current property management company has running.Additionally I have little confidence in the way they were managing the property.The property has so much potential but has clear signs of neglect and I intend to change that as I never simply abandon my properties.

On the question of current lease, I have combed through it repeatedly and do not see any mention of what happens at lease expiration only what happens when tenants are seeking to terminate their lease, “30-day written notice required”.No stipulation on what is required of landlord at end of lease and/or automatic renewal, both items that I cover in my lease and another reason, why am not a big fan of the existing lease.Leaves out a lot.I prefer having systems in place where there is little chance of misunderstanding, so thus the nerves on this one, but I will get through, thanks to you all for all your great advice!

Thank you so much for all the input.Yes I was extremely confused on this one because tenants are great tenants and Seller does not want to leave them in a bind and I think that is very nice of the seller.Tenants have been pleasant thus far and appear to take great pride in their unit.When you walk in, it appears as if you are walking into a catalog, they pay on time, have stable jobs and overall no complaints.One less vacancy at purchase would be great so thus being willing to make this work for all, without being tied to a lease agreement that I do not support fully as it is simply too vague for my comfort.I do however remain very conscious of the fact that I do not yet own the property so any such requests would really be overstepping my rights, if any at this time.Seller contacted us for input and thus the initially displayed approach, but I really do like and appreciate the comments here.I like too, that they in part support my decision to provide the lease ahead of time for review.So now I know that, I just cannot ask them to sign it, but have to wait.Thank you all.

Follow-up Questions: According to Colorado Law, the lease will revert to a month to month once expired so @Deanna McCormick, can I then use January as the 30-day notice period or would I need to make that January and February?We close on 1/2/18.So I do not take ownership until 1/2/18.By then they will have gone to a month-to month for 1 day that being 1/1/18 and still under the old rents of $995.They have the copy of my lease which I prefer to use over what they are currently using and was also going to raise rents to $1045 and complete much needed repairs to this property (their unit is fine but, the others need work and so does the property in general).

If I cannot execute until 1/2/18, can I then come in immediately with a 30 day notice?Technically the notice has already been given as of 11/20/18, but I understand by all your comments (thank you by the way), that my outreach cannot be considered “Notice” but rather simply “Intent” at this point.So if I am to provide an official notice would 1/2/18 be okay, or do I have to let them live on property through January and then give them the 30 day notice?Sorry, I have never taken the time to educate myself on month-to-month as those are leases I do not care much for, clearly I will have to learn so I can do it right.Going to jump into looking at this and will appreciate any further input on the most recent questions asked here, thanks

Tenant’s lease ends 12/31/17. We close 1/2/18. Tenants want to stay. We prefer they use our lease (less vague than existing belonging to property management company running the show currently). So Planning on inheriting these tenants though not always preferred I.e. inheriting tenants, but makes sense at this point. We are also planning to self-manage so have no intention of keeping existing PM company.Can we provide tenants with our lease for review and request now, “before closing” that tenants sign our lease to go into immediate effect after closing, that is if they plan on staying? We are Including a clause that explains that though signed now (on/or before 12/1/17), lease only goes into effect closing. 👀.

Wow, @Chris Mason, thank you.  This is so much information that I had absolutely no idea about.  I love the idea of re-zoning into a triplex and will chase that a little more to see if I can do that.  I reached out to the lender yesterday and will see what they say today following my explanation.  "No News Maybe Good News right?"  All in all, going to see what they say.  On the positive side, I had at the time also been working with a second credit union in the event that I run into hurdles.  So if this credit union does not work out, I am hoping the second will.  Thanks again Chris, I really like your input and have actually saved this post to my zoning folder to use. 

Thank you @Andrew Postell and @Brayan Sandoval. I totally agree with you about opting for smaller banks and interesting enough that is exactly what this is, a small bank. It is a small credit union with only one other location in Colorado. I did however approach another credit union when I started this HELOC process, so I am waiting to see what this other credit union says. This credit union did give me an offer but it is $30K less than what I was applying for based on the income to debt ratio and upon further investigation, it is when I found out that they will not use my rental income despite it being rental not boarder income. I think what may actually be going on here is that because of how small they are, they may not be familiar with the guidelines and thus the decision to reach out to them to try to see what can be done. In the end, I will go with the one that is able to meet all criteria including being able to allow for use of my rental income. Thank you both, I really do appreciate the response.

HELOC Application - Boarder vs. Rental Income: Unable to qualify for higher Equity credit line

I initially requested a set amount on my HELOC application but lender has capped it at $30K less than requested based on debt to income ratio and refused to use the rental income. My guess is that underwriting may be considering my income as “boarder income” in which case I can understand that, because the lender might view the income as not stable enough to be counted like a regular rental.I do however have full leases and it is not “boarder income” but rather “rental income” and hits my tax returns without any issues, so I am just a little confused. So to give you a little insight into my living situation:

I am house hacking in one of my duplex properties. I figured I don't need the extra space in the upper unit plus needed to bring in more cash, so came up with the brilliant idea of renting my upper unit and moving into basement.The property is an official duplex property with approved ADU as registered by Jefferson County.One unit (the one with crawl space) has one address we shall call 1225 Bell Street but falls under the main property address (suspecting this is causing some of the problem) - which we shall call 1235 Bell Street. The second unit, is 1235 Bell street (which also happens to share the name of the property under JEFFCO records) and this comes with approved ADU which is where I live and then rent out the top.The unit has separate entrance, separate bathroom, kitchen and entirely different living space.I never see my tenant who lives in 1235 Bell Street top unit while I live in the basement unit, so my lease is an official lease not a "roommate" lease so essentially providing "rental" not "boarder income".

The challenge: Lender does not want to consider rents from either units in evaluating my debt to income ratio. I have great credit, stable income (10 plus years with same employer and great pay), and I have lived on this property for 2.5 years now.

Oh boy, I am so trying to fight this with my HELOC application and appeal to lender. I got online and decided to goggle to understand this and have decided to reach out to this community to see if there are any suggestions. Perhaps the obvious suggestion would be to try another lender in the event that it is determined that current underwriting guidelines are incorrect, but I am so hoping that my appeal to lender will be taken into consideration. I was nice and provided the facts in a professional manner and generally appealed to have their underwriting team reconsider based on this. This HELOC means a lot to me, so it is a little disappointing to get this far and hit this seemingly brick wall. Any suggestions and/or comments of similar experiences and how you got around this will be greatly appreciated. Perhaps am just uninformed on this and need to self-educate. I have heard of stipulations requiring staying in the home for about 2 years (been there 2.5 years) and that some lenders will use 75% of the income. Current credit union will not even use 1%!

My loan officer seems nice and she is trying to go back and fight for me, but at the end of the day underwriting calls the shots. Waiting patiently. Worst case scenario, I just go with the HELOC amount they approve (as I really do not have time to start another application at this time) and try again next year or two with a different lender. The explanation I got was, "they will not count rental income for the same property that you live in ...", which is what got me to think they may assume it is one unit and a roommate type situatio so I figured I have nothign to loose by trying to appeal by explaining my situation. They also have a copy of the appraisal that explains current setup which supports the above so we shall wait to see. Just really dissappointing is all.