All Forum Posts by: Patrick Roberts

Check the recovery (or breakeven) period on the refi. If it's two years or less, I would refi now if it was me. There's no telling what's going to happen with interest rates - we're currently on a roller coaster while wearing a blindfold. 

I second this - a bridge loan is probably your best option. Equity and retirement assets wont do anything for DTI unless youre retirement age, have a plan in place to create income via IRA distributions, and have a sufficient balance for the distributions to continue for at least three years.

 I'll see if I can assist with that. I know of a few places

My thoughts on this: 

- I wouldnt look at the cost savings over 30 years. Very few mortgages last 30 years before they are paid off or refinanced. 5-7 years is the average life of a mortgage right now, and 10 years isnt unrealistic. Cost savings over 30 years is irrelevant as it's unlikely to materialize. 

- No one knows what will happen in the future. The ten year yield dropped into the high 3's yesterday on a mix of optimism, Powell's commentary at Wednesday's meeting, and a particularly ugly jobs report yesterday morning. That being said, even if the ten yr yield stayed high 3's, the FFR would need to be cut by 175 bps just to normalize the yield curve. For mortgage rates to come down significantly more than where we are this morning, the ten year would need to come down even more, meaning at least 250-300bps in cuts in the FFR to normalize the curve. Markets are forward looking and price-in expectations, so much of what youre seeing right now is the bond market behaving in line with a guaranteed Fed pivot in Sept and major rate cuts over the next two years. If we dont get an FFR cut in Sept, I suspect the reaction will not be pretty. We saw this once already in the past twelve months and bond yields and mortgage rates climbed rapidly in a few weeks. 

- A lot of your decision will come down to your personal risk tolerance. Are you more inclined to speculate that rates will fall lower (they should, I think they are likely to, but they may not) and you can refi, or would you rather pay a fee/premium to lock in where you're at now and hedge your risk of not being able to refi into a lower rate?

If you're confident that you'll be able to obtain a lower rate in 6-18 months as rates fall, opt for the smallest prepayment and points option that you can find. If you're worried that may not happen, consider any points you pay to be like an insurance premium - it's the $ cost of making sure that you're rate is never above whatever rate you close at, no matter what happens in the market.

- Lastly, in you qualify for Conventional, it's almost always a better deal than a comparable DSCR loan. I love DSCR loans as much as the next lender, but the convenience they offer tends to come a premium. Just my $0.02.

If you will be there Tuesday, there is an REI meetup Tuesday night. Free to attend and there will probably be some agents there. I can introduce you to some as well, although I dont know if they have multifamily experience.

I'm both an investor and a lender in the BR market. Let me know if you need any market insight or info. I'll be in town most of next week and will also be at the meetup. 

If there is mold, it will usually be A) on the subfloor exterior, joists, and insulation in the crawlspace, or B) in any areas of water damage/water leaks inside the walls, behind tile in bathrooms, etc. Most older homes in SC are ventilated and breathe fairly well, so mold in the living space/attic typically isnt an issue unless there is a water leak where there is constant, excessive moisture. Also, air conditioning removes moisture/humidity from the interior airspace, and nearly every home in the Carolinas runs AC during the warm months.

Crawlspaces tend to be where the majority of problems occur. At a minimum, it needs to stay dry, which means getting any standing water out (sump pump and french drain), ventilation (moving air will dry out excess humidity), and a vapor barrier over the soil. Many people are moving to encapsulated crawlspaces that have a dehumidifier running to keep humidity down, as it will affect comfort and humidity within the living space above. Many foundation repair companies (and some pest control) offer services for crawlspaces, to include mold remediation, encapsulation, etc. Might be worth paying for an inspection from one of them during DD if you're concerned about it. 

Mold really isnt that major of a concern with one caveat - if you're buying a property that has flooded in the past. I would be extremely cautious about buying a property that has prior flood damage - you'll want to dig into the repairs and how they were completed. There are some mold remediation companies that offer "mold certificates" or "mold warranties", but my guess is that these arent worth the paper theyre printed on. When it comes properties with flood history, my rule of thumb is that if it flooded once, it will flood again. I usually dont even consider flood properties unless something drastic has changed, such as the house has been lifted several feet. I'm not even 40 yet and have already lived through three "1000 year floods" that should only happen once per millennia.

Looking at your original post, you said you have 1.5 years in business. A traditional loan (Conventional or Govt) might be in within reach. If you havent done so, find a lender competent in self-employed borrowers. 

If you've already done this, a bank statement loan is your best bet. I dont know of any private lender (generally meaning someone personally lending their own money) who is going to roll the dice on you for nearly the same yields that they can get by just buying fixed income securities. With a bank statement loan, if you have decent credit (700+) and 10-20% to put down, you can light your tax returns on fire and replace them with 12 or 24 months of bank statements showing your cashflow. The extra cash will help because it shows that you have reserves, but you wont automatically get a sweetheart deal just because you have X amount of cash. 

Not very common to have mold testing completed. If it's spotted by an inspector during an inspection or the CL100 (pest inspection), it will be noted in the report. Typically, if there is a mold issue, it will be caught by the private inspection - if it's caught at all. Definitely a very humid environment, especially near the coast, so expect to deal with all of the issues that come with high humidity - termites, bugs, mold/mildew, wood rot, etc. Crawlspaces/subfloors are particularly bad about humidity and moisture issues. 

I'll ask around with the closing attorneys I work with, but I dont know that there is a solid, quick workaround. There are tons of properties just sitting and rotting in downtown charleston because of this issue.

Very few banks will do Helocs on investment properties right now. I only know of one local bank who will, and with them, it's a commercial line of credit floating at Prime + 2.5% (11% is the indexed rate) and it has to be renewed every 2 years, including a 24hr rest. 

Some NonQM lenders are offering Helocs and 2nd's on investment properties, but they are tricky to get. The underwrites are tedious and the terms arent great. It would definitely be much easier (and probably about the same on total cost) to just cashout refi what funds you might need from you STRs and then park then cash in MMAs or 30 day treasuries until you need them. If you have a 1st lien with a low rate and a sizeable balance outstanding on the property, this strategy may not make sense. 

Lastly, network with some of the private lenders in your area and see if any would be interested in funding you quickly as needed. You'll probably find much more flexibility and speed if you build a relationship with a couple of them and get them familiar with you and the deal. When the time comes, getting them to fund you should be much quicker. I partner with two private lenders in Charleston who do this - they short-term fund 1st's and 2nd's in smaller balances if they're comfortable with the deal and the borrower.