All Forum Posts by: Stephanie P.

I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.

I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.

Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.

Thanks

Just curious. Did you get an owner occupied loan on this property with the intent of renting it out?

No. Is a conventional loan.

Conventional loan means it is backed by Fannie Mae and Freddie Mac. Fannie and Freddie do owner occupied and investment loans, but they have different guidelines.

Did you tell the lender you were going to move into the property and then not move in?

That's not what "Conventional Loan" means. A conventional loan by definition is a loan that is not an insured government loan.

A lot to unpack here after 8 months.
Conventional absolutely does mean a Fannie Mae or Freddie Mac loan. Read a rate sheet once in a while and you'll see what I mean. Does it mean "not an insured government loan"? I guess you could say that, but it would be wrong. A DSCR loan is not an insured government loan, but it surely isn't considered conventional.
Some would say we're hacks, but most would just say we're calling out mortgage fraud when we see it. Cooperating with the original lender and having them sell the loan to a new lender won't cure the issue of occupancy or the overall intent to defraud. One of the stipulations cited skims over the issue, but there's a whole lot more to it than just saying "I want the loan in my LLC now and oh, yeah, I don't live there; Never have, never will." Read the whole section of the servicing guide, not just the top paragraph. Not something to "preach" about.

0 Votes

Quote from @Richard Goore:

I just purchased a 4-plex in IN with cash. I would like to put a loan on the property to pull out as much of my cash as possible to use for other property investments. Wife and I have high credit score and we are high income earners (her W-2 & 1099 for me). Was looking at DSCR so it was easier than compiling so much info on our personal finances. I believe we would hit the >1% ratio for this. I am thinking I will keep this long term as I focus on improving rents, so a holding period is not a big deal as long as it is not too long. Longert term goal is to purchase larger apartment complexes.

Am I missing out on other options? TIA

A lot is going to depend on the value/loan size and whether the town in IN is going to be considered rural or not by DSCR lenders. Good credit is putting DSCR loans that are fully leveraged in the high 7's on a 30 year.

2 Votes

Quote from @Curtis Cecil:

So I have a non-primary house that is valued at $220k on Zillow (just a reference point), what options do I have to finance around 100k out of it to renovate the house? Credit is fair but not great, I have access to a strong co-signer if I need to. My Primary residence has some equity but I would rather figure out how to collateralize the non-primary house.

Any ideas???

If cash is the quest, just do a short term bridge loan. You'd spend a lot of money to reduce the prepayment penalty on a DSCR loan if you're just going to sell it.

1 Vote

Quote from @Josh Trup:

Hello all,

In the middle of acquiring my first rental duplex in Ohio as an OOS investor. I have two major questions.

Should I open an LLC for it?
Should I open a new checking and savings for it? (mostly what ive read online says to do this)

- Should I put the checking and saving under the LLC? (can i open the accounts now and then put them under the LLC later? )

- I'm wanting to open a HYSA for holding the two deposits and then a checking account for the house as a whole for repairs and income collection etc... Im looking at the current highest percentage HYSA's which are Upgrade, Bask, wealthfront and Everbank. Unfortunately I don't think I can get checking accounts with these companies. Does anyone know of one that will do a HYSA of 4.5% + and can do checking accounts? That would be the ideal software but don't think it exists.

Thinking in the future if I wanted to scale and buy more properties I'd like to have the ability to open more accounts for each property.

Any input appreciated on the best way to set this up!

Lots of discussions on BP about this; to LLC or not.

I'm in the "not" camp. No need for it to get a loan. Just get an umbrella policy to defer liability if that's your main concern.

You may be able to get a HYSA through American Express Business Checking if you go the LLC route.

1 Vote

Columbus, Ohio

Quote from @Laith Al-Tamimi:

Hey fellow investors!

My partner and I bought and rehabbed a house w our cash and now looking to pull our cash out. What banks do you guys like for this method? What are the rates if you've done one recently? Is "DSCR" the best option? Thank you in advance!

-Laith

Hey Laith,

If you can go conventional, that's the least expensive way to go. Get a few quotes from lenders, brokers and credit unions. Be careful to not get your credit score lowered because you have too many inquiries.

If you can't go conventional, then DSCR is your next best bet. Rates for max cash out are in the 8% range. I say a range because a lot goes into the rate; LTV, cash out or not, rural or not, number of units, DSCR percentage and of course credit score.

Hope that helps

Stephanie

0 Votes

Chattanooga, Tennessee

Quote from @Jacob Sherman:

Investor is cashing out to get into the next deal . the 1% difference in rate won't make break the deal is the money is being used to make more money in new deals . Thats real estate

I get that he's cashing out to get the next deal. In the DSCR world, there's more than a 1% difference between a 70% cash out refinance and an 80% cash out refinance and with that increase, the rents may not carry the mortgage payment at 1.25%. If he's right about the escrows, it may, but like I said, it's math; it may work and it may not work. That's lending.

0 Votes

Hartford, Connecticut

Quote from @Jacob Sherman:

Definitely want someone NMLS licensed loan officers specializing in investor products such as bridge, fix and flip, ground up construction and DSCR . Reviews and such are always a good reference point as well . Also want to confirm that they are a direct lender

If the poster is trying to get a loan is in the DSCR arena, licensing is not a requirement (and could be a detriment) and being a direct lender would restrict them to just the loan products their company has access to. Maybe mix the quotes up with direct lenders and brokers, licensed and non-licensed and see what they get.

I've seen more DSCR deals made into God-awful sausage by licensed, direct lenders than I can count. Everybody's got a lane...and I'm a good example. My company only does DSCR loans and the first thing I ask borrowers is if they exhausted their conventional options. Conventional is going to be cheaper and a better way to go if they can and we refer them to lenders that we know can get them closed. If not, sadly, the allure of low rates and no points is taken off the borrower's table, but so are the licensed LO's that have little to no experience in DSCR.

2 Votes

Huntsville, Alabama

Quote from @Michael Nelson:

I have a few deals coming down the pipeline and want to free up as much capital as possible.

senario

property appraised value 430,000

amount still owed 220,000

Maxing out your LTV is going to make your rate go through the roof and may compromise your ability to max it out. It's a math problem more than a qualification problem, but you may want to cap your loan amount to get a better rate (and cash flow) vs maxing out and having a little more cash, but really bad cash flow.

1 Vote

Hartford, Connecticut

Quote from @Jacqueline Bruen:

Hi there!

I've started an LLC to buy my first residential investment property. I will be able to provide a 20% down payment through the LLC, but the question I have is: don't I need to personally guarantee the loan because the LLC does not have credit history? I've heard it is bad practice to personally guarantee a business loan.

What do you pros recommend? How can my LLC get a loan?

Hey Jacqueline,

Welcome to BP.

If you're going for a DSCR loan for a residential investment property, you don't need an LLC; you can do it with most (if not all these days) DSCR lenders/brokers depending on your state.

All DSCR lenders/brokers will require you to personally guarantee the loan, but you can do it either way, with or without an LLC.

Stephanie

0 Votes

Quote from @Joel Diaz De La Rosa:

Does anyone know of a good lender that offers DSCR Loans for a multiuse property in Wisconsin. I'm looking to do a cash out refinance on a 2 unit property. 50% residential/50% commercial. I bought it for $71,000 and is now worth $193,000. The lender that currently approved me seemed overpriced (High Fees & Interest Rate). Attached is a photo of the offer. Is this exaggerated? My credit score around 746.

Your rate should be 11.24 on a purchase with 2 points max.

Your appraisal costs, environmental fee and underwriting fees quoted are correct.

It's a mixed use property with no income from the borrower. It's going to be expensive. Just hope they can find comps (make sure to ask them to check BEFORE you order the appraisal).

0 Votes

Madison, Wisconsin

All Forum Posts by: Stephanie P.

Stephanie P. has started 186 posts and replied 4623 times.

Post: Lender won't let me move the property to my LLC

Post: Loan options on 4-plex in IN

Post: What financing options do I have???

Post: Advice on Finance setup for first rental property Duplex

Post: Cash Out refi

Post: Are there any cash out refi options at 80/20 LTV?

Post: Tips on finding great local lenders?

Post: Are there any cash out refi options at 80/20 LTV?

Post: Mortgage for an LLC?

Post: DSCR Loan- Multiuse Property

Stephanie P. has started 186 posts and replied 4623 times.

Biggerpockets Logo Post: Lender won't let me move the property to my LLC

Biggerpockets Logo Post: Loan options on 4-plex in IN

Biggerpockets Logo Post: What financing options do I have???

Biggerpockets Logo Post: Advice on Finance setup for first rental property Duplex

Biggerpockets Logo Post: Cash Out refi

Biggerpockets Logo Post: Are there any cash out refi options at 80/20 LTV?

Biggerpockets Logo Post: Tips on finding great local lenders?

Biggerpockets Logo Post: Are there any cash out refi options at 80/20 LTV?

Biggerpockets Logo Post: Mortgage for an LLC?

Biggerpockets Logo Post: DSCR Loan- Multiuse Property

Post: Lender won't let me move the property to my LLC

Post: Loan options on 4-plex in IN

Post: What financing options do I have???

Post: Advice on Finance setup for first rental property Duplex

Post: Cash Out refi

Post: Are there any cash out refi options at 80/20 LTV?

Post: Tips on finding great local lenders?

Post: Are there any cash out refi options at 80/20 LTV?

Post: Mortgage for an LLC?

Post: DSCR Loan- Multiuse Property