All Forum Posts by: Zack Karp

@Jackson Vasey this is called the BRRRR method. Buy, Rehab, Rent, Refi, Repeat. But here's the catch...you cannot have more than 1 FHA loan at a time (unless you relocate 100 miles away).

So if you buy with FHA and put 3.5% down, in order to refinance out of FHA into a Conventional loan, for a 2-unit it's 85% max LTV and 3-4 unit max 80% LTV. And that's if you refi as a primary residence, and starting a new 1-year clock. Otherwise if you refi as an investment property, it's 75% max LTV for a 2-4 unit.

Kind of changes things a bit, huh? So you would need to create anywhere from 11.5% - 21.5% equity in order to do the "Repeat" of this BRRRR method. Which is why the Rehab part is essential to this method working, because without forcing appreciation, it's pretty hard to gain that much equity in 1 year.

There is also another loan product called Home Possible which is a Conventional loan that allows 5% down on a 2-4 unit, as long as your income is below a certain cap (depends on geographical area of the property). The great thing about HP is that it allows you to buy another 1-2 properties with a low down payment in addition to FHA, as long as you can stay under the income cap.

The most critical thing to using any of these strategies is to align yourself with the right investor-friendly loan officer so that you don't get stuck. Without the right advice, you might have just gone and bought that first property with FHA, and then found out later that you couldn't just buy property #2 with FHA.

If you want to map out a strategy that pertains to your situation, I'm happy to discuss further, feel free to reach out.

Best of luck!

@Paul I. 6 months but it sounds like you're already past that

@Paul I. the Conventional loan limit just went up to $647,200 for 2022, you might want to consider cash out refinancing again and pulling more cash out that way, instead of putting it into an adjustable rate heloc with the Fed already preparing for a lot of rate hikes the next 2 years.

@Kerry Baird First Midwest is 75% LTV, 1st position lien only.

Might be helpful to note on your list whether it's 1st lien or 2nd lien position.  I would guess that 90% of the people asking for an investment property heloc are looking for 2nd lien position, while less than half your list likely allows a 2nd lien position heloc on an investment property.

But this is a great list, super helpful!

@Andy Ronquillo if you are preapproved for a $100K single family, but then also only preapproved for a $100K 2-4 unit, then you need a different loan officer.  Clearly they weren't using rental income to qualify you on the 2-4 unit.  You should be approved for a much higher price on a 2-unit than a SFD, and then higher on a 3, and even higher on a 4.

Sounds like you need to get that part in order first, you might be making a terrible mistake because of an idiot LO that didn't preapprove you properly.

Best of luck!

@Christian Fregoso for that small of savings, it's probably not a great move. You also need to factor in the cost. Not only the closing costs, but another upfront mortgage insurance cost (UFMIP). I don't know your numbers, but it likely would be better to refi to a Conventional loan and drop the mortgage insurance. If you're not at 80 LTV yet (75 LTV if this is an investment property), my guess is that you'll be there soon the way the housing market has been increasing.

Bottom line is that on the surface saving $100/mo might sound good, but overall I am going to guess that the cost won't be worth it.  Happy to break it down further if you need an unbiased set of eyes from a mortgage veteran.

Best of luck!

@Simone Douglas no you would just do a cash out refi Conventional loan once you're done with the rehab.  Assuming there's equity now for you to pull out.  Since this is a 2-unit property, if it's still your primary residence, your max loan amount for a cash out refi is 75% of the new value.  If you aren't going to be living there, and moving on to the next house hack, then if you refi as an investment property the max loan amount is 70% of the value.

Hopefully you ran your numbers with this exit strategy in mind.  If you didn't, you're working with the wrong LO and realtor.  You should always have the exit lined up before you enter into a deal.

Best of luck!

@Simone Douglas refi to Conventional, no brainer. If you are planning on using FHA again for another property, then you need to refi out of FHA, because you can only have 1 FHA loan at a time (unless you relocate 100 miles away). So you would need to free up your FHA eligibility. And don't do a heloc first, or you will ruin any chance of refinancing. Only do a heloc AFTER you refi to Conventional first, if you can find anyone to go over 80% LTV on a 2-unit.

Best of luck!

@Adonis Yancey this is an impossible question to answer without knowing more information. Both Conventional and FHA have their place as the better option. It depends on your credit score, the property type, your income, down payment, and future plans if you want to buy more properties.

Get with an investor-friendly loan officer to map out your plan and strategy.  The right ones will help guide you on this path, looking out for your best interests.

Best of luck!

@Weng L. no it's not a sub-category, it is completely different.  With Fannie/Freddie, every lender has to follow their guidelines (and can impose harsher restrictions if they want, but not looser).  With jumbo, any lender can make their own guidelines and do whatever they want.