All Forum Posts by: Parker Kenneth

@Kevin Romines
super helpful response. I can finally see a pathway to pulling this off now 


just making sure I understand completely before I begin calling around for funding:

1. Because of the value of the property when completed, I should be good to go with obtaining funding that isn’t based on my current income. I’ll have to pay the lender every month, usually based on the construction funding draw amount.  May have to fund utilities myself, but this is a developed area so there are utility lines around my plot 

I should call real estate investors and hard money lenders to shop around and pick one that’s right for me 

2. once the home is completed, I need to pay off the investor/lender as agreed.  Here, I will take out a dscr mortgage that again, isn’t based on my current income, but the projected rental income of the property.  I will have this loan for at least 2 years as I continue to rent out the property and show a rental income trail on my tax docs 

3. after two years I can use the tax docs with income flow to take out a conventional mortgage on the property 


is there anything I’m missing or things to be aware of?   does anyone here have recommendations for a lender or investor licensed in Arizona? 

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I also have a slightly unrelated question about the DSCR loans, what's the catch with them? They sound like a really easy way to build a rental portfolio for someone who has construction experience.

With a DSCR, I'd be able to find a cheap property i could enhance with my own funds and skills to make profitable, and a DSCR would allow me to do that solely based on what I will make once it's rented?

I wish I knew about all of this stuff before I sold my lat property!   But hopefully on to better days from here on out. 

Hi everyone. Posted once before and have since visited an investment meetup and have structured my plan a bit better but need further help still. 

I own my own business as an architectural designer and have designed and built houses with various GCs over the years.  I am not a GC myself but with my experience I will be doing a lot of the work on this project myself which will keep costs low. 

My credit score is 832 and I have no debt. I own the land outright (valued at $100-$150k) and the projected value of the house after being built is expected to be upwards of $800k.   I have decided to use this property as a rental income, as it seems like a good exit strategy if I can use the rentals projected income to qualify. The rentals in the area are set around $6-$12k/month depending. 

Here’s my issue: I was told previously by a loan officer that in order to secure funds for this project, I needed to sell my existing home. So I did. That turned out to be severely misguided advice as I was then told that because I sold the property, which was an income property and made up half of my income, I no longer qualified for the loan!  They told me,” we can’t use your previously noted income because the rental property no longer exists therefore the income doesn’t exist.” I don’t want to make anymore mistakes like this and believe this means that I now need a no doc approach. 

I found information on lendingtree as follows:

“NO INCOME, NO ASSET

Available only for investment properties, current no-income, no-asset (NINA) loans are approved based on projected rental income for the property being purchased. Typically, as long as the rent covers the new mortgage payment, no income or asset documentation is necessary.

Who they’re best for: 

Real estate investors with enough cash for high down payments may be able to quickly build a portfolio of investment properties with this type of loan”

This sounds like what I’m looking for but I’m wondering what the caveat here is? I don’t want to rely on calling another lender who may lead me down the wrong path again, so I wanted to ask an audience of people for their thoughts. 
 

If this isn’t viable please do let me know, along with any ideas you might have, and I’ll get back to the drawing board and visit some more meetup groups to continue learning about the financial aspects of this journey. 

Not willing to give up on this project yet.   Thank you for your time! 

@Ryan Normand

thank you, that clears it up. Would you say a better approach may be to find a GC and pay them to use their sub connections? That way I’m managing it as owner/builder and I hire the subs for just the work I need completed?

@Ryan Normand

can you clear something up for me. I think I may have misunderstood something earlier. 

Are you saying you were literally able to pull a construction loan as owner/builder? I guess my question is why would they allow that? It seems to conflict with your initial comment about needing a gc to do it otherwise it’s too risky for banks.  

But yes, I was personally unable to locate a traditional construction loan which allowed someone other than a gc to go through with it 

Also, since I think I need a no doc approach now, I guess that’s likely off the table 

Wondering if you, or anyone else reading, has any further ideas as far as getting a no doc mortgage which I may need (?). Because of the equity in my land and the fact the final build will be worth $600-$700k the hard money lenders don’t seem to take issue financing it… but what about securing a mortgage in order to pay back the lender after the home is built? 

@Ryan Normand

to your question about splitting things between myself and a gc. Because a big part of the pleasure, and reason, of this project for me is doing the interior on my own as I’m amazing at it. And secondly, if people hire me to design their homes and make it pretty - why would I contract this out to someone else to do my job for me? When they’ll likely do worse than what I pump out. 

Not even sure I want to work with a gc. I’m leaning towards pulling the permit as owner/builder.   

So that’s why a construction loan won’t work. You understand how they function and they’re not applicable to my situation. But as you also mentioned, yes that would otherwise have been the most streamlined and easiest way.  

I’ve since found a hard money lender who will lend to an owner/occupied unit under owner/builder permit which is great. I’m thinking this is going to be the route I take. 

I’ve no problem paying a lender or investor a premium for letting me borrow their money. My main goal is being able to just get the shell built by someone else and finish out the interior on my own 

thanks for sharing your insight!

@Kevin Romines

It was helpful, thank you! 

I wasn’t aware hard money was strictly for investment properties. Maybe I’ll use the equity in my land to invest in a property if this doesn’t work out for me. 

The thing is, when Covid hit I went and lived out of country for awhile so my Income trail looks limited. This, coupled with the rising market in Arizona is working against me as far as conventional loans go. 

So I thought a loan that didn’t require proof of income would work temporarily. That’s why I was thinking hard money, as they’d use my assets 

b lender mortgage would be a great option for me as well, but I’m unsure if that’s strictly a type of mortgage in Canada. Is there a USA equivalent? 

essentially I’m at the point where I feel I need a construction bid for the work I want done, a pre approval from a mortgage company … then a private lender (?) to fund the actual project for a year

just not sure the exact steps or the best route I need to take    

Anyone have any further ideas or know how?

Hi everyone. Glad to have found this place and hoping to obtain the correct information for some creative approaches to my project!  The quick-changing Arizona market has thrown a rock in the tracks of my project and I need help  

Background: I’ve owned a rental property for 7 years which I sold to pursue this project.  I design custom homes for a living. 

About my project: I own the land outright and it’s valued at about $150,000.   The blueprints are finished and ready to go. The intention of the home is that half of it is to be used as a live+work environment for myself, and the other half as a vacation rental.  I’m going to have the foundation, doors, windows, roofing, exterior sheathing, rough in plumbing and electric, done by a contractor.  I am going to complete the interior finish work as owner/builder. 

I’m not sure how to obtain funding, or rather, what the best way is.  Construction loan is out of the question as they don’t like owner/builder scenarios. 

Originally I was thinking private lender (I’ve spoke to some in the past and they were ok with me doing the work myself) but with construction and home costs skyrocketing in Arizona I’m not sure I can afford to do it this way anymore. 

So I wonder if there are better options out there? Like, could I go the hard money route and use my land asset as collateral? 

I’m willing to make whatever adjustment(s) necessary to pull this off.  Meaning, if I have to turn it into a full rental property, I can do that.   I’m willing to also find an investor who can help finance the build and who would then share in rental profits but I’m not even sure if that’s viable or how to go about finding such a person. 

I’m opened to anything. Just need some creative input!