All Forum Posts by: Shane Haas

If the purchase is made via cash and without any liens on the property or funds borrowed against the property, your cashout options are:

A) Delayed financing within six months of purchase, which is treated like purchase money financing. It's based on the purchase price and will not include any improvements, reno, or increase in value since the purchase. This can be conventional or DSCR

B) Conventional cashout refi - will need at least 6 months on title if no mortgage on the property (I think - going off of memory), 12 months seasoning if there is any kind of mortgage/lien/loan with the property; will be based on improved LTV

C) DSCR cashout refi after six months of seasoning (most cases), and this will include any improved value of the property in the LTV

Most cashout refi's will be limited to 80% LTV. Also, for delayed financing, you may have to source the money used to buy the property. If it came from your parents, you may need a gift letter from them stating that it's gift and does not need to be repaid. A six-figure gift will likely have income tax implications. If it's not a gift, more documentation and explanation will be needed (are they also owners, is there a loan, etc).

A word of caution related to any kind of mortgage: if you get money from your parents and you plan to repay them, then it's not a gift. Do not use a gift letter/claim it's a gift if it's not a gift. If the money is yours forever and you dont have to repay any of it, then it's a gift.

Given that info, I would think it makes most sense to quickly do a delayed financing to recoup most of the initial investment, or if I am wanting to get back some of the renovations and such, I should wait the 6 months and do a DSCR cashout.

Really helpful info, thank you! Exactly what i was looking for

0 Votes

Gatlinburg/Pigeon Forge, Tennessee

Quote from @Chris Seveney:

Quote from @Shane Haas:

Looking at purchasing a foreclosure cash (with help from parents), and then financing the home shortly after renovations are made.

3 questions:

Are their issues with them giving me funds to assist with purchase?

Will I only be able to mortgage the purchase price and costs, or will I be able to do a full cash out refinance and tap into some of the added equity of renovations? I do not want to wait 6 months-1 year to repay them.

Can I leave them off of the original purchase since they are gifting me the money (6 figures) or do they need to be on the original deed and then when I get the mortgage remove them?

They would not be recording a lien or anything, just giving me the funds to purchase cash. I will have no problem getting the mortgage afterwards, I just have some other projects rolling at the moment that tie up cash.

Thanks!

1. There are not issues with giving funds, but you have to define how they are given - are they a gift, a loan etc... Your accountant will need to know this as there is tax implications. Since you said there is no lien, it may be considered a gift. Definitely speak to your accountant.
2.When you go to refinance, the lender will look at several factors - the value of the property, use of property etc. If its a rental you could get a DSCR loan which is different than a conventional loan.
Depending on how much equity in the property would be key as you cannot borrow 100%, if its investment property 80% is max typically.

Yep, it will be a short term rental cabin.Thanks

0 Votes

Gatlinburg/Pigeon Forge, Tennessee

Looking at purchasing a foreclosure cash (with help from parents), and then financing the home shortly after renovations are made.

3 questions:

Are their issues with them giving me funds to assist with purchase?

Can I leave them off of the original purchase since they are gifting me the money (6 figures) or do they need to be on the original deed and then when I get the mortgage remove them?

Thanks!

1 Vote

Gatlinburg/Pigeon Forge, Tennessee

Quote from @Dave Foster:

@Shane Haas, I'm not the mortgage guy. But you may be able to work around with private money still. The model you're looking at is a great way to combine the adrenaline satisfying fix n flip model with the tax savings of a 1031 model.

If you can slow down that first flip so that you rent it and then refinance to get your next property. You'll find that you can do this forever. And once some time has passed you'll start to 1031 your first properties. And voila! You've got renovations going that the same time sales and 1031s. And life is just as busy as you'd want it. Tax free spending money comes from rental cash flow (offset by depreciation) and refinance cash (tax free anyway).

If I could caution you on one thing. In my view your numbers are really too tight to make a true flip work for you as a first investment. Most folk will over estimate what the property will be worth and forget about costs of sale. And they also underestimate the costs of a reno (there's a rookie tax of 30-50% that all of us have paid at one time or another). And then you also have to figure tax on your net gain. I don't think there's a lot of meat on that bone without some holding period.

The longer you own the property and generate rent, depreciation, amortization, and appreciation the more it will smooth out those potential hiccups that would otherwise impact a quick sale.

Much appreciated. The closest comp is around the corner and sold for 550 last month. My purchase price was 400, and the renovations will be done in 2 weeks (they started the day of closing). All in renovation costs under 20k, should settle in that upper teen mark. Think selling for 520 range is too tight?

The original part of what you stated was my goal, hold and maybe 1031 in the future, but being stuck parking all this money for 12 months is really really frustrating. I wanted to refi a chunk out and move to the next

0 Votes

Tampa, Florida

Got off the phone with rocket and you all were correct, 12 months. Ridiculous that they can tell me one thing and when I close it’s another. Now they want to pitch me a home equity loan at 10%!

So now the question is if I should just flip it? Can a dscr loan with another lender pay off my original loan with rocket and get me some of the cash back? In the process? Apologies if that’s a dumb question, but have to learn somehow

0 Votes

Tampa, Florida

Quote from @Jay Hurst:

Quote from @Shane Haas:

Little help here as I am torn on what to do. I'm 27, owned my current home for 3 years ($200k equity conservately) and just closed on a nearby investment home.

The home was offmarket/by owner and I purchased it for $400k in a very desirable area, it appraised for $457k as it sits and is very dated, all the comps are in the 500's. I am fully renovating it (paint, floors, appliances, kitchen counters, etc) and am torn on flipping it for 515-540k or renting it out. My renovation costs will be under 20k.

If I rent it, I have two dillemas. One is that the market rent is realistically around $3k, 2-300 more if I get the right person, so cash flow is pretty minimal witha mortgage of $2800. And two, is that I did a conventional loan with 25% down so I have to wait 6 months until I can pull a good chunk of my money out and move onto the next. And even if I do pull money out with a cash out refi, I'd have to hope rates go down enough to offset the higher loan amount/monthly payment.

My gut says keep it the 6 months, get my money out, and move onto the next. But that 6 month seasoning is putting a damper on things. My long term goal is a portfolio where it can be a full time "job", whether I stay in residential or mix in commercial.

I'd hate to wait 6 months with a large chunk of my money tied up before I can get another property. Moving forward I think I should have used a hard money lender to purchase, but hindsight is 20/20 and I'm learning. I have thought about a HELOC on my current home to go and buy another, but that amount of debt has me a little uneasy

Long story short, do you flip it and try to 1031, or rent it and 6 months later refi and keep it given the market rent.

@Shane Haas Hate to be the bearer of bad news but to use a conventional loan you have to wait 12 months to use the improved value to pull cash out. That changed back in April of 2023 from 6 months. https://capitalmarkets.fanniemae.com/mortgage-backed-securit... There are non-conventional products that will allow 6 months (or possibly less) seasoning but they will be worse terms then a conventional loan.

I can double check, but I talked with the lender (rocket) before closing, and was told 6 months. Even have it in writing when I asked, so that would be interesting

0 Votes

Tampa, Florida

Little help here as I am torn on what to do. I'm 27, owned my current home for 3 years ($200k equity conservately) and just closed on a nearby investment home.

Long story short, do you flip it and try to 1031, or rent it and 6 months later refi and keep it given the market rent.

2 Votes

Tampa, Florida

All Forum Posts by: Shane Haas

Shane Haas has started 2 posts and replied 7 times.

Post: Buying a forclosure cash with help from parents, then financing. Any complications?

Post: Buying a forclosure cash with help from parents, then financing. Any complications?

Post: Buying a forclosure cash with help from parents, then financing. Any complications?

Post: First Investment SFH, Flip or Rent?

Post: First Investment SFH, Flip or Rent?

Post: First Investment SFH, Flip or Rent?

Post: First Investment SFH, Flip or Rent?