All Forum Posts by: P.J. Bremner

@Brian H.

Great question, there are a couple ways to look at this.  One is from the cost perspective and the other is efficiency.  I have experience originating mortgages from a nationwide lender (call center, we did loans in 30+ states and most loan officers get certified in 10+ states each) and have plenty of experience getting loans from local brokers for personal use/investing.  From a cost perspective, the nationwide lenders will usually beat out the locals.  They have a business structure that runs very lean (they don't make as much profit per deal, but do thousands of deals per month.  Think Costco for mortgages).  But this cost efficiency CAN come at a price.  On new purchases, they may be slower and will often draw a negative stigma.  What I mean by this is - if the selling agent sees that your offer is being financed by a nationwide lender, they may be less inclined to take your offer due to complications with the financing.  I recently heard from another agent in Pasadena, Ca. that some agents immediately reject any offer coming from Quicken loans, Loan depot, etc. because they have had so many issues closing the loan.  Granted, Pasadena has a unique market where literally every property has 10+ offers and they are all over asking, so maybe in a slower market it may not make a difference but it is something to be aware of.  I would, however, HIGHLY recommend them for any refinance you are doing, personal or investment.  When I was originating, I would beat the pants off of any credit union, big bank and small broker's pricing and our refis would take 20 - 30 days at most.

So to sum it all up:

• Might make sense to pay more to use a local broker for a fresh purchase.
• Definitely makes more sense to do all refinances through the nationwide lenders.

One last tip: If you decide to call the big ones (Quicken loans, loan depot, etc.) make sure they know you are shopping their competitors.  There is a lot of ego in that business and they will cut deals to match or beat each other's deals.  Don't settle for the first pricing option they give you.  Generally, the best way to do this is to get a rate lock with the loan officer you feel most comfortable working with, THEN shop the rate.  Unless you have something locked, they could be blowing smoke in mirrors and/or the market can change daily (sometimes even mid-day if it's very volatile).  I could quote anyone 0% loan with 0 points today if I know you're not ready to lock, then you shop that rate and nobody can come near it.  You come back to me and my job then is to walk that other rate back saying, "Oh, yeah that was an amazing rate!  Unfortunately the rates have changed since then and it's now 4% with 1/2 points.  We should have locked that day... but let's not make the same mistake twice, let's get this locked in NOW."  You could literally cite anything in the news for the volatility, people don't really know what changes the markets etc. so just be aware of salesperson talk.  Hope this helps!

@Brian H.

Only one way: experience lol so either you know someone you have worked with or you find someone who has one they have used and you trust their judgement.  The loan officer makes a big difference, but also where they lend from makes a huge difference as well.  A great loan officer that works for a crappy bank with tons of overlays (restrictions on their loans, typically tighter than what fanny/freddy loans allow) means that his/her hands will be tied.  Just create a post in BP for loan officers in your state and get lots of references.  Make sure you check each reference, don't get lazy! : )

@Brian H.

Rental property income is used to offset your expenses and lowers the DTI. Every bank will have their own DSC ratio (Debt Service Coverage Ratio) which is the rent to piti payment. Some will even go below 1.0 (this means that your rent doesn't even cover the mortgage) allowing you to buy more than you really should. If the property as current tenants in the house, they will use the rent on the lease. If the house is being bought vacant, but you intend to put tenants in, they will use fair market rental rates (basically it's running comps but instead of pulling sold values, you pull rental values). If you've had the property for a year or more, they will usually base it off of the tax records. So in your example, if you qualify for $150k in mortgages, but your rentals pull in enough to cover the $150k, then you will be able to buy more after the purchase because your rentals will "zero out your debt" or cover your debt. Make sure you have an amazing loan broker to work with. They can make or break your deal for sure.

@Brandon Small

I can second that, I've used yellowletters.com several times now and i'm very happy with their services.  They are extremely professional, always available in case you have questions and have tons of templates to use if you're not good at making your own.  I purchased my own list separately, but they can also help with that if you need it.  @Michael Quarles has done an amazing job and should be commended!

@Jill F.

I'm sorry to hear you're going through this, it's never easy.  Especially when they are so young and needlessly lost their life.  I had a tenant OD January 2016, very similar circumstances that you are currently in.  As long as the house isn't being used as a crime scene investigation, get it all cleaned up, sterilize everything with cleaning supplies and move on.  I didn't have to have a specialized team come out as he had passed away on his bed, so I threw away all the sheets and the mattress and cleaned everything else up like normal.  Personally, I contacted his parents directly (he was a college kid and his parents were out of state) and made arrangements for them to come out and grab his belongings.  I gave them a week or two to make those arrangements, worked with them to make sure it would go smoothly as I'm sure they were already stressed enough about the ordeal and then moved on with life.  He was young, 23 years old, but nonetheless he was an adult and made his own decision and paid the consequences.  I was able to rent his space out within 2 weeks of his passing, told the new tenant what had happened and a year later here we are.  Don't pay $1,500 to do some BS voodoo cleansing.  At best, pay a normal house cleaning service.  At worst, clean it up yourself and get some bleach.  Best of luck and I hope it all works out well.

@Matthew Ware

Give Bank of the West a call. They do HELOC on rental properties in California and they go up to 60% LTV (65% with some a manager override). I was in your same predicament, but came across another BP post that was asking this same question and someone recommended Bank of the West. I have not closed my loan yet, but from everything I have seen thus far the outlook is bright.

@Gabriel Benavidez

I have a close friend and business partner that is an engineer, so your post resonated with me. She makes a very strong income and spends her free time investing in real estate. She is already amassed several properties in multiple states, loves her job, loves real estate investing and probably wouldn't be able to either without the other. Most people that have only one main source of work in life get bored. If you have multiple projects to work on (houses, pipelines, etc.) then you spread out your interests, which generally extends the "honeymoon phase". The W-2 job will give you plenty of savings for down payments as well as income on the application for your DTI. Here is how I would look at it if I were in your shoes:

• Keep the W-2 job for now, build real estate skills and portfolio part time
• Increase real estate portfolio until it equals or exceeds W-2 income
• Continue to work on what YOU enjoy doing, be it engineering, real estate, or start a completely separate venture

Most likely it will take you years to get to this point, which means you will have many years of saving cash, buying assets, increasing your knowledge about the industry (real estate and engineering) and really getting a feel for what you want out of life.  It's really easy to make a snap decision based on how you feel today about something.  Real estate can really turn into an addiction, even when you've never bought a property yet!  Give it some time, get into the market with your solid income to help bail you out when you make mistakes and if you still feel passionate about real estate in 5 years as you do now, then ease yourself out of the job and slide into full time investing.  At least you'll have a solid base of assets AND knowledge to base your decision off of, rather than that "love at first sight" feeling you get when you're first introduced to real estate.

On a side note, I've heard of engineers that have lots of experience leaving a big company to consult on their own part-time (making almost the same income as full time) and running other businesses on the side.  That may be something to look into and plan for?  Also, if you want, I could shoot your contact info over to my engineer friend, I'm sure she would love to give you her experiences.

@Lauren A.

I have a really good lady that i've used for the last several years, whom i've also referred out to other family members and friends (business owners/investors) and they are all very happy with her work and knowledge.  I own several rentals and has always given me great advice on how to structure things, what I can get away with, where my risks are, etc.  She isn't the type to "tell you how this should be done" but rather give you the options and let you decide what is best for your future plans.

On a side note, I'm more of an email/online kind of guy so I've always done everything electronically.  She is very quick to respond and doesn't charge me to email her quick questions etc.  Very reasonable for the level of service that she provides.

Her name is JoAnne Hoffmann, located in Covina (East LA County) and she has my thumbs up for sure : )

http://www.hsrdscpas.com/

@Maurice Bunn

Pros: more cash flow compared to traditional rental, 0 vacancy in 5 years, 0 evictions (students don't know how to be professional tenants), more control of your investment.

Cons: Increased repairs, more work compared to traditional rentals, city can shut you down if you do it the wrong way, exit strategy is tougher because a home that would work as a great student house is generally not a good house for 90% of families looking for a primary residence.

@Maurice Bunn

For me, it can certainly be BOTH or NEITHER.  I run a student housing business, which is certainly hands on and very much a business rather than an investment.  Granted, the homes I own have all gone up in value significantly since 2012 and there are investment elements there, but if I were to stop managing my student homes, they would fall apart and I would have nothing left.  If I were to buy a turnkey rental somewhere, have another company manage it, pay my CPA to handle all the numbers and make sure they are profitable, it would very much be a passive investment.

On the flip side, someone who has no clue what they are doing and buys the wrong property at the wrong time with the wrong financing, etc. is neither running a business nor are they investing.  They are throwing money away.  Prime example of this: look back at 2003 - 2006 when people were buying homes that made no investment sense.  Most certainly thought they were investing, but really they were speculating.  I prefer my speculation to include a mixed drink and involve playing cards (Vegas, poker, i'll speculate all day long lol).  Hope that helps a little?