All Forum Posts by: Scott Beal

@Stephanie Simmons 

That sounds very interesting. Have you found something that you like?

I think @Brian Burke is on the right track here. I don't see a complete reversal in the trend towards density in residential real estate. It still makes sense for every other reason. The McMansion was a failed experiment, even if it did last 50 years. Some people will always want that lifestyle but the majority of people do not. We are very social creatures and much of our well being is dependent on contact with our communities. 

The major difference here is that the recession in 2008 was caused players within the real estate sphere. There was a lot of fear surrounding real estate and in 2020, that fear is mostly placed elsewhere. While the current administration doesn't seem to care much about protecting human life, they do care very much about protecting the economy and have taken rapid, dramatic action to do so. 

I am also with @Raju Balakrishnan, this event is going have a much larger effect on other industries and you are seeing that already. 

Let's talk about it. How is our situation in 2020 different from the 2008 crisis? What strategies worked then that will not work now; which ones will be just as successful? 

@Jeffrey De Los Santos

Like @Alex Deacon said, I think there is a loan out there for you. It just wont be coming from the first lenders you think of, likely. Good luck. 

@Jeffrey De Los Santos

You are at approximately 79% LTV on an investment property. You have a 711 FICO. You have 1099 income and a side business that shows losses (liability) in the last two years. There may be a lender out there that would lend on this but no large bank or mortgage company will likely get involved right now. The income verification is the main issue. The size of the loan is an issue too. Given the combination points and fees that lenders charge, a small loan on a high LTV investment property can be really challenging for them.

When you are on a 1099, you will typically need to show a full two year history to use this income to qualify and unfortunately the side business is only hurting your case. Most lenders require you to qualify on each of these three levels: loan to value ratio, debt to income ratio, and credit score. Missing even one out of three can make it very difficult or impossible to qualify. 

If you don't mind me asking, what are the terms on the hard money loan? Who holds the renovation loan?

@Jeff Byrne

In the past, no. It is based on stated income and assets. They will typically pull your credit, though. I am not certain how banks are operating at the moment, given the crisis. I would suggest reaching out to a local bank and also a mortgage company, like Quicken Loans. You can see how they compare in their process. 

@Jeff Byrne

No problem there. FHA will finance up to a four unit property and the size of each unit is not important. The FHA can be a little picky when it comes to the condition of the property; which is why sellers sometimes prefer a buyer that is pre-approved for a conventional loan. FHA also requires that the property be your primary residence for a year after purchase. Though if you have a good reason that you need to move, there is no trouble.

@Elliott Back

It can be that simple if there really is a massive room or some space that feels larger than it needs to be. Ideally you wouldn't want to damage the quality of the property otherwise in adding a room. As in you don't want to ruin a good living room in a family oriented neighborhood. Does the property have a basement or an attic? Is there a kitchen that could be combined with a dining room? Keep in mind, to advertise the property with the extra room, you'll likely have to pull permits, add egress windows, etc...

At the end of the day, you just want to make sure that your return on investment is good. If you have to move a wall or two, the costs can add up. You want to make sure you have a good idea of how much the project will cost, how much value it will add to the property itself, and how much you can increase rent based on your improvements. Then you can analyze whether or not to move forward.

Some more good info here https://www.biggerpockets.com/forums/52/topics/175907-adding-an-extra-bedroom-worth-it-for-a-rental

@Heath Jones

In this case there are a lot of things that you can consider, Heath. Tax returns are a good start but you will want two to three years of their first page and their schedules (A, C, E if available). Then get as many angles as you can to consider the full picture of who this person is. Our list often includes things like this: 2 to 3 years of tax returns, credit report, bank statements so that you can actually see their cash flow, rent ledger from previous landlord or a letter if they are not sophisticated in record keeping, and a personal description of their business and financial habits. 

Getting every single one of those is overkill but having a few of them is a must here. Go from there and if your tenant can put together a strong combination of documented info, and they make you feel confident that they will pay on time, then go ahead. Look at the big picture and let strong compensating factors average out weak performance in other areas. 

@Anthony Liguori 

Not on this scale, no. Forbearance has been offered as an option under extreme circumstances in the past, though, and it  has always been very detrimental to credit.