All Forum Posts by: Spencer Harvey

@Ryan Harsche I read the homestyle loan allows for diy rehab if it is less than 10% of the ARV, otherwise it also has to be completed by contractors. It didn't really clarify what exactly that meant. Do you have experience with this type of loan?

@Andrew Postell My plan was actually to use the HELOC for both the down payment and rehab. I opened the line with the same bank that preapproved me for the conventional loan.

The I spoke with another lender at the same branch regarding the rehab loan but to me, the conventional loan just seemed cleaner. I plan on doing the vast majority of the work myself, but with the rehab loan they needed bids from contractors for the entire rehab, a longer time to close, which I'm assuming means higher fees, and a longer seasoning requirement to refi. I wanted to move as quickly as possible to get the rehab completed and cash out refi to pay back the HELOC without having to worry about rates going higher and higher.

On top of that, I am fairly inexperienced and truth be told, I don't told know a whole lot about the lending aspect. Essentially, I am trying to complete the BRRRR method but instead of purchasing the property with cash, I'd be financing the acquisition using the HELOC and refi out of it.

@Ryan Harsche Interesting, I have never heard of that. I just did a quick search and it looks like that is a viable option. Does it require all the work be completed by contractors, or would I be able to do it myself? I'll have to look further into that.

@Corby Goade the consolidated commercial loan was another option I weighed. From those I have already spoke with, their terms weren't nearly as good and would make it the deals difficult to cash flow. Something to keep in mind though.

@Andrew Postell I suppose I should have clarified, my plan was to do a cash out refi in order to get the most amount of my initial investment back during the refi. If you don't mind, will  you share whatever info you have regarding the cash out refi and possibles ways I can make that work?

Spencer

@Pete Woelfel and @Max Gomeniouk Thanks for the references. I'll give them a call tomorrow and see what we can work out.

Hello,

I posted a similar question in another forum and it was suggested I ask in a local form to get others opinions who are nearby. 

I'm am trying to get financing in place for a BRRRR deal. I am already prequalified for a conventional loan for the acquisition aspect. My plan is to use a HELOC I have open on my primary residence to fund the 25% downpayment and then use the remainder to fund the rehab. After that, I planned to refi at the new assessed value and get as much of my money back out to pay down the HELOC balance while adding another rental to my portfolio.

I ran into an issue with the lender I spoke with who mentioned there will likely be problems with qualifying for the refinance if I'm not able to complete the rehab/refi before my 2018 tax returns are submitted. They stated if the other two rental properties I own show a loss on paper, it may cause DTI issues.

What alternative options do I have on this for the refinance aspect? Business loan? Portfolio lender? I’d appreciate any advice on who or where to go with this. 

Thanks!

@Andrew Postell Wow, thanks again for the detailed explanation! Regarding #2 from your list of questions to ask, is that the same as a seasoning requirements that lenders have? 

The bank I’m working with now requires 6 months. From my understanding, that’s the same across the board for conventional loans. I’m guessing with a portfolio lender those same rules wouldn’t apply, correct?

Looks like I have some phone calls to make this morning. 

@Andrew Postell I appreciate all the info!

Two things....

1. Related to your first point, are you aware of lenders who allow 15-20% down for non owner occupied properties? The ones I have talked to all required 25%.

2. The example of the returns made perfect sense. Is this something you can call around and find out before going through the qualification process? I'd hate to have to keep getting credit pulls and dings on my credit score only to find out they will only look at it as a loss.

Thanks for the info! Is this something a portfolio lender might do?  

I am confused as to what is holding up other banks with allowing it. I get the tax return shows a loss, but in actuality they are cash flowing monthly. Is it a Fannie/Freddie issue?

Hello,

I'm currently in the process of trying to add a rehab property to my portfolio and use the BRRRR method on it. I have a HELOC on my primary residence that I plan to use as the 25% downpayment, then finance the rest of the initial purchase price with a conventional mortgage (already preapproved). I plan to use the remaining balance of the HELOC to fund the rehab, then refi the property after the 6mo wait and hopefully pull out the majority of the money, pay back the HELOC, and repeat.

It was recently brought to my attention that if my 2018 tax return shows a "loss" for the other two rental properties I currently own, I may not qualify when the lender runs their numbers for the refinance after the rehab 6 months down the road. I have my tax returns mostly complete, and show roughly $10,000 loss between the two properties, but in actuality both properties cash flow slightly above the 1% guideline. 

Since this will likely be the case, the lender suggested I wait to file the returns and try to rehab and refi the property before tax returns are due. I'm not sure I would be able to complete that in time. 

Here is my plan of what I'm trying to accomplish 

-purchase $100,000 house (25% DP from HELOC = $25k down)

-rehab for $20k with funds from HELOC

-new appraisal, ARV around $150,000

-refinance to 30yr fixed, pull out majority of rehab/dp, pay off HELOC balance, repeat etc.

Are there any other options I'd have available as far as obtaining a new loan at the ARV if I would no longer qualify for a conventional mortgage? Commercial loan?

Any input would be appreciated!

Hello,

I posted a question similar to this in the past but can't seem to find. Here is my current situation...

I have approx $100k in equity in my primary residence. I recently purchased two investment properties, both with 20% down payments (totaling around $100k) which used up essentially all of my available funds. I am looking to purchase more rental properties, but do not have any cash available for a down payment.

I am undecided as to what would be the best course of action to take. Should I take out a HELOC or HEL on my primary residence, and use the funds from that to make a down payment on additional properties and then obtain a conventional mortgage on them? Or would a cash out refinance make more sense?

Any help would be appreciated!

-Spencer