All Forum Posts by: Sean Bramble

Is it credit score? Do mortgage rates for FHA/ VA not change with credit score, while the standard 30 year does? Just trying to understand how the 3 relate to one another

Just go direct to the source and call town halls. But keep in mind the most important questions to ask isn't "are STR's allowed?" .. it's "is there any talk of limiting or banning STRs in the future?"

Unfortunately the way NY is carved up into “towns” .. which aren’t really what you would consider a town … more like a county within the real county. … raises the regulatory risk significantly. In many other states the counties couldn’t care less and you just have to avoid city limits. But NY state just isn’t carved up that way 

I'm looking at a multi-cabin STR deal that pencils out well from % a return perspective, but would involve an annoying amount of complexity managing guests when I consider the actual return in dollars I would be receiving. So outsourcing some degree of property mgmt would be a must... but the deal won't work paying a local property manager a large % of my revenue...

Instead, I would set up my "boots on the ground" (cleaners, handyman), and would need an offshore virtual assistant to manage guests and coordination of my local team. Then I could step in if sh*t hits the fan, but otherwise would be hands off.

Does anyone know what an offshore virtual assistant would cost for this per month? They would be managing 4 to 5 cabins, and I would be setting my daily rates dynamically to maximize occupancy, so this would be a consistently significant workload for the VA(s).

If the deed is in your name you won’t lose the home, but if it stays in the sellers’s name you could lose it (plus any money you paid the seller along the way)

I'm interested in doing a DTI-based construction to perm loan to build property. I qualify today based on my DTI, but have a large untapped securities backed LOC that I am planning to use temporarily for another investment (I will pay it off soon after ... before applying for the construction loan). Question: will using the LOC and then paying it off BEFORE I close the construction to perm loan count against my DTI for the construction loan? I technically will pay it off before I apply, but just curious if there is some sort of lookback period lenders underwrite with that I need to be aware of. Thanks!

UPDATE: I've been digging into this topic for several weeks now and have learned some things that I feel are important to share since I was the author of this post. I've spoken to a handful of people on the topic, most notably 2 separate well known investors in the creative finance space. Won't name names, but one owns a creative finance education platform, and the other is a well known creative finance podcast host (neither are Pace Morby).

Both told me the same thing: Not disclosing the second position lien to your first position lender is mortgage fraud, regardless of how it's structured

This method is certainly interesting, and may in fact be allowed by your lender if you disclose it, but it seems disclosure is the name of the game. Would they catch you if you didn't disclose? Who knows ... but I personally would not risk it.

Hope this helps to orient anyone reading this post in the future - best of luck investing!

Thanks everyone! I'll definitely take this all into consideration. I think for the right property, it could still be a good deal, but I do believe your potential pool of customers shrinks with this requirement (even more so w/ a larger house with guests coming in 2 or more cars). You can obviously manage occupancy through pricing, but your pricing may just end up lower than similar properties nearby without the 4wd requirement due to a smaller pool of potential customers. I'll make some assumptions and underwrite accordingly. Thanks again!

Anyone have experience in mountain markets where a lot of the properties require a 4WD/ AWD to access? Seems like this would cut your potential customer base in half. Would love to get the input of anyone with first-hand experience

@Allan Smith thanks! I've wondered about that as well - seems kind of ridiculous to count an unused LOC against DTI, but a lender I was chatting with a few months back casually mentioned this to me. You could apply the same logic to credit cards with high unused balances, but my hunch is the typical underwriter wouldn't count that… so why count a secured LOC when they wouldn't count an unsecured one?

I know I’m preaching to the choir here 🙂

Question for lenders (or anyone who understands how construction loans are underwritten). I'd like to know how to strategically order a series of transactions in order to qualify for a construction loan from a DTI perspective

Context:

I'd like to build a short term rental property, but don't have the DTI to qualify for a construction loan (left my job awhile ago). Commercial lenders also won't lend to me bc I don't meet the experience requirement (never developed before).

Enter my mom, who can qualify for a construction loan herself to get the process started (side note: I’m sitting on a mountain of cash, which de-risks this for her in case things don’t go according to budget).

She qualifies today based on her DTI, but plans on using her securities backed loc (margin acct) in the near future to temporarily fund unrelated investments. If she does this, it will alter her DTI such that she doesn't qualify for the construction loan anymore, but she plans on paying off the margin account soon after. So her DTI will increase temporarily, then go back to where it was.

Question:

What order of operations is necessary to qualify for the construction loan? Should she close the construction loan first before touching her line of credit, or is it alright for her to use the line of credit and then repay the amount, then apply for the construction loan? Is there a lookback period underwriters use where they count debts she's had within the last x months towards her DTI (even though she may have paid them off before applying)?

Thanks everyone!