All Forum Posts by: Vaughn K.

Hi Tom,

Thanks for the info. I got a Discover Personal Loan several years ago and fully paid it off a few years back. They were solid to work with, but I don't know if they would do it now with my exact situation as it sits... With SoFi and Discover what kind of documentation did they ask for? That's part of my problem. I'm self employed, and cash flow/bank statements are a lot better and a lot more reflective of my real income/financial situation. So anybody that demands full tax returns for years and/or crazy accounting stuff is probably going to be a no go.

Hello! So I've been looking at some properties to owner occupy (But turn into a rental in short order! Hopefully I'll find something good for a live in BRRR), and with how screwy everything is with financing right now I've run into some interesting issues. I'm self employed and due to a few factors traditional plain vanilla bank loans are off the table for now, but I have the income and cash to get something done. I'm looking to buy in an area where prices are pretty low (A certain part of Northern Idaho), I am moving there myself to cut costs so I can invest more. Think 3 bedroom fixers under $100K to just above $100K, nice/bigger houses can still be low $100s depending on size/quality/location, up to maybe $200K for pretty large/nice and renovated places.

Other than finding a straight up owner finance situation, I'm basically looking at bank statement loans (For those not familiar, basically basing income off of the cash flow you have in your bank accounts for approval process) or private money, unless I'm missing something even more clever! Feel free to throw out other ideas. But really I'm hoping for some good tips on bank statement loan companies that are actually still lending right now.

Basically with the 25-30% down with private money I have found I'm pretty limited in what I can buy because I don't want to go over $30K down, not to mention the rates... But bigger lenders that do bank statement loans @ 20% down (was 10-15% before Covid) don't want to finance under $150K. So I have a big hole in what I can purchase RIGHT at the price point I probably want to purchase in! There are sub $100K deals, and I just got swooped by a fast close offer on one literally yesterday (Unless the deal falls through, I am official backup), but they're just rare enough that I'm worried about the timeline for my move. Needing to be closed within say 2-2.5 months means I can't dilly dally TOO much with waiting around.

I tried and found some companies that do bank statement loans still, but their criteria right now is a little wacky as mentioned above. Sprout Mortgage and HomeExpress are both doing those products again (They weren't for awhile), but they've changed criteria because of Covid. Basically you need to be at $150K financed, 20% down, and probably some reserves too. IIRC one or both of them were also going down to $100K financed before Covid. UGH! I've heard basically nobody else that was doing these is back into the game yet, but I'm hoping some others are and I just didn't find them yet.

So does anybody know of a company that does bank statement loans of under $150K that's actually going right now? Obviously it would be amazing if they were still doing lower pre Covid down payments, but 20% even would help me extend my buying power to right where I need to be, and the rates are still much better than private lenders.

Thank you in advance for any advice for recommendations! 

Well south it is then! Good luck!

I dunno why you said not to the north, maybe where you work is south Seattle and worried about commute time? But if you have to stay in the Seattle area, Everett or other areas up that direction would be good to look at. Also, of course, south. Tacoma and the other south side cities. East you have to get pretty deep for prices to drop, so north or south is probably the ticket. 

Keep in mind if you go for a house hack, which is probably the best move because of the low down payment and preferential financing terms, IT ISN'T FOR FOREVER! If you move into a place with 3-5% down, live there for a year, and can show a signed lease (get your current roommates to sign a lease for the whole place upon your "moving out" date essentially) you could use that income to purchase another SFR to house hack in a mere 12 months if you can come up with another down payment. So ask yourself if you can deal with a meh commute for 12-24 months, not for forever. If the answer is that you can put up with that to move your financial goals forward, then you may be able to consider a wider area than you think.

Redfin national numbers showed average listing price down a bit over $20K, which is a bit shy of 10%. So there's that even already. The number of homes sold is also down dramatically. The main reason that prices haven't cratered is because the drop off in the number of listings has been greater than the drop in buyers, yet they still registered that asking price drop. What do you think would happen to prices if everybody had listed their homes as they had been planning to right now??? Prices would have dropped like a rock. Bear in mind all those people are people who either want or need to sell for various reasons, so they can probably only hold back so long before they need to list them... Will the buyer demand be rebalanced with that number of listings when they do? Who knows. 

But the truth for the economy overall, not just RE, is that it just hasn't sunk in with most people just how borked the economy will be yet. Many normal people (not business people, investors, economists etc) are still thinking V shaped recovery in their heads... When that ain't gonna happen. We're in for a proper decent recession, with a LOT of jobs lost for a long period of time. We were overdue for one with or without Covid. Covid just added a ton of fuel to the fire.

Both small businesses and big businesses have just lost massive sums of money, and many will go BK never to return. The number of businesses that have publicly announced they will never reopen already where I live is pretty crazy... Many are fairly large and previously highly profitable. Who will have the capital to even reopen new things in those spaces when the economy is in recession? Not many people I suspect. Big companies have laid off tons of people too, many won't return for a long time. It's a downward spiral situation, as with all recessions. One thing sets it off, but it spreads knock on effects all over the place.

Will that cause a 10% drop in RE? 30%? Who knows. I'd lean towards the low to mid end of that range if I had to guess. Obviously will be market dependent either way. But given that all asset classes were at historic highs, that weren't supported by fundamentals to begin with, I find it VERY hard to believe that with many millions of job losses that everything will just bounce back overnight. I would lean towards this being more of a regular recession, with Great Recession 2.0 being a less likely worst case scenario. But one never knows. All I know is that I wouldn't be buying much of any asset class right this minute, I'd give it a bit of time and see what happens. I'm stacking cash myself. Even if prices don't crater, they're VERY unlikely to go up much/at all with the massive levels of unemployment we're going to have even after things are allowed to open again. So there's little potential upside to buying in right now IMO, and maybe a lot of upside to having cash to buy in over the next 6-12 months. 

I mean get a 2nd mortgage on the property without paying off the 1st. I don't know how banks are about doing that sort of thing nowadays, but in other times it's been common to have an initial mortgage at a certain rate, and get a 2nd mortgage that is completely separate, but is a long term loan as well. I guess with rates becoming ever lower people haven't done this sort of thing lately, as it was better to refinance the whole loan at a lower rate, but it used to be dirt common, especially if rates had gone up since you got your initial mortgage.

Let's say you bought a place for $150k, paid on it for years and now only owe $100K, and the place is worth $200K now. In recent years everybody just refinanced the whole thing into a new $160K mortgage or whatever, but you could also just keep the original $100K mortgage balance, and get a 2nd mortgage for $60K. You now have 2 long term, fixed rate, loans at different rates, with different terms, and different payoff dates.

The HELOC might not be bad either... But getting a 2nd, if banks are still doing that sort of thing, would provide long term stability that a HELOC would not.

EDIT: I just googled to see if these have completely gone out of vogue, and it seems more like that people have changed the term they like to use to refer to it. See this link:

https://www.usbank.com/home-lo...

I guess more people like to call them "home equity loans" now than just use the old school term "2nd mortgage," but they're still out there, and carry some advantages potentially over a HELOC, but also downsides.

Is it possible to get a 2nd on a portion of the equity and leave the initial chunk of the loan at the lower rate? Or just try other banks.

I absolutely agree with a lot of the stuff being said here. Selling is really an art AND a science if you want to get really good at it. I've never done this with RE, but have done sales gigs before and was pretty good at it. Not the best in the world, but solid. I was always kind of a soft sell kinda guy, and pretty good at reading people and adjusting my own behavior and words accordingly. Most of building good rapport comes down to being able to figure out the best approach to deal with a particular person. That will only come from studying sales techniques and experience if you're not a natural. Some people like direct conversation, some people don't. You need to learn how to tell the difference FAST. I was good at building rapport and getting people to open up, but will fully admit I wasn't always the strongest closer as I don't like pressure selling.

So definitely try to read people, and see what the best way to handle yourself is, because that will vary by person, especially if you're meeting in person. I would probably suggest starting out with non business-y, non sell-y kind of demeanor and words. Something more like "Every time I drive past the house at 123 A Street, I can't help but notice this property has seemingly been vacant for awhile, and was curious about the house. I really like the look of the place." As opposed to "I noticed this place was empty and would be interested in buying it." right off the bat.

After that, read their response, respond accordingly. Be direct if they are, more round about if they are, speak at a similar speed as them, folksy or proper fancy words to match etc. I have done this stuff on auto pilot even in non business settings for quite a few years at this point, but a lot of people don't realize how big a turn off it is for some good old boy to have somebody talking AT him sounding like a pretentious fancy man, or how turned off a snooty lawyer will be if you sound like a hick or a fast talking shiester from the Bronx in 1975! You don't want to come off as a fake or a parrot, but just subtly around the edges try to make the way you're speaking and acting a little closer to the way they are. It'll never hurt!

One thing I haven't seen anybody mention in this thread that seems obvious to me is: Just ask them things! For instance after choosing a proper way to intro, "Hey, so since this place has just been sitting for a long time, is there a particular reason you're still holding onto it versus selling it or renting it out yourself?"

In the sales I did one would often ask what people were looking to accomplish with the purchase. They'd usually have their mind set on a certain product, but sometimes it was out of reach financially, or even if not out of reach they weren't sure it was worth the cost... BUT if you could find out what they really wanted to accomplish, you might be able to suggest an alternative that suited their needs and was more in their budget.

In short: What is their motivation? What are their sticking points? What do they want to accomplish? What has held them back from selling or renting it in the past?

I'd be surprised if you didn't get pretty straight forward answers along the lines of things people have already said if you just asked people why they haven't sold or rented. "It was my parents house and I'm keeping it for sentimental reasons," "My brother and I jointly inherited it and can't come to an agreement on what to do," "I want to sell it but don't have the cash to get it in saleable condition," etc.

Once you know what's been holding them back, you can find a way to solve their problem! "Oh, so your brother is the pain in the butt one huh, give me his number and I'll see if we can work something out." "This was your parents house, well wouldn't it be nice to spruce it up a bit and pass it along to a nice young family so they could raise their children in the same house you grew up in." "You don't need to have the cash to rehab it yourself, I would be willing to buy it as is, or maybe we can even be partners on the project." Stuff like that. Once you know their sticking point or motivation for not selling you can think of a way of getting them unstuck or solving their problem. Probably best to rapport build before even getting into that stuff, but I think just asking could be a painfully obvious way to get to why they haven't sold already. 

Nothing works on 100% of people, but I'd bet my behind if you just outright ask why they've held onto the property you'll get a lot of honest answers that give you somewhere to start in figuring out how to create a situation in which they might be willing to sell. 

And did you miss the rest of my post? I fully admit I should have pulled the trigger several years ago, but for reasons that were perfectly valid at the time I didn't. I'd probably have made an extra million and change if I'd done that and been able to leverage into another couple properties. Oops! No Ferrari by 30 for me! Hindsight is 20/20. I'm not beating myself up about it too bad, because I'm fine now anyway, and will be even better in the future! So why dwell on it?

But RE isn't my ONLY priority in life either. I didn't just blow the money on avocado toast like most urbanite 20 somethings, I invested more capital in my business. As I said I hit some bumps in the road in the period in between, and I had to get in a good spot again financially. Mind you I was never out on the streets, or even making a mere 5 figure income, but I had stuff to deal with. Maybe if you're a cubicle worker for some big company you don't understand what it's like to actually run an active business, to be the guy who HAS to make everything work, to keep things afloat at all costs, have responsibilities, have to take care of employees, obligations, etc. If you do run a business then you should know better! Everybody has their good years and bad. My industry had some massive changes across the board which killed a lot of people in my biz, which was out of my control. I managed to get through to the other side just fine though at the end of the day. I dealt with it, adjusted, and got back in a good position again. S*hit happens. Because of things I've done in the intervening years I now have a far more stable and diversified income than I did then, which is pretty nice. I'm sailing through the CV right now with basically zero drop in income thus far! Not a lot of folks can say that. I have more or less passive (Still have to do the accounting!) income of maybe ~$60-70K a year ... Not bad for somebody in their early 30s. I suppose technically I could retire on that right now if I wanted to, but why bother? THAT is what I accomplished in the years I didn't buy RE in between. I'm okay with that outcome.


Would it have been better for me to go in all hair brained and without enough capital to responsibly cover my rear end if something went wrong? If I'd made some GENIUS move like that a year ago in Seattle, with Covid hitting now, I'd really be in a GREAT spot... Probably running negative cash flow, with a property set to drop in value, in a spot I don't even want to live in anymore. THAT would have been a GREAT move. Since I did the intelligent thing FOR MY SITUATION, and have just been strengthening my position, I should be in a really good spot to capitalize on the mess that is currently being made of our economy, and in a market I actually want to live and invest in. No regrets there from this guy.

I wish I'd snagged something in 2012-2013, but there's no way in heck it would have been a smart move for me to try to snag something in most of the years in between. With the current situation I'm glad I didn't buy anything in the last couple years either, as I expect things will only get better for buyers heading later into this year.

So you can kindly keep your comment about just indiscriminately buying and if you don't you're an idiot to yourself. People have different situations, and in many situations going into RE before getting other things straight it NOT a good idea. There's more to the world than RE, and going into situations half cocked is probably a worse idea than not going in at all much of the time. I plan to be buying plenty in the near future though! So I suppose you'll be pleased with me then, and it will make me feel so, SO warm and fuzzy inside knowing I have your approval :)

And fundamentally this is my main point :) The area I'm going for may be a nice mix of both IMO, but probably not EXTREME cash flow or EXTREME appreciation. Just solid on both, and will probably average out about the same overall as areas that are real strong in one or the other. There are a lot of markets out there like that too.