All Forum Posts by: Zack Karp

@Brant Jones Second homes are limited to 1-unit properties by definition by Fannie Mae and Freddie Mac. No lender will be able to offer you second home Conventional financing, it will be an investment property (unless you can live in one unit as your primary residence). It does not vary from lender to lender for Conventional financing, making that clear so you're not spinning your wheels and wasting your time by calling around to different lenders.

Also a Conventional 2-4 unit investment property loan requires 25% down. Not 20% down.

You might find lower down payments going with a non-Conventional loan, but the terms will be worse.

Best of luck!

Hey @Dan Gongora it's been a minute, hope you are doing well! So you ditched IL and moved to FL? Smart man lol. As far as the strategy, it depends on your interest rate on both properties, and how much cash out you need. I'm licensed in both IL and FL, so if you need any help mapping it out, feel free to reach out.

@Jordan Baker you are correct, you can be a licensed MLO and Realtor at the same time, and even on the same transaction as long as it's not a Govie loan.  But to @Scott E. point, yes it can be a conflict of interest for employment, and you must disclose it to each employer, and they must allow it.  Many banks and larger lenders will not let you be a licensed realtor, you'll have more luck with smaller companies.

Best of luck!

@Gonzalo Badillo yes, if you are buying the next property using a Conventional loan, you can use the rental income from the property you are vacating with just a signed lease (which can have a start date after you close on the new home) and no other restriction or documentation. If a lender tells you otherwise, run.

Best of luck!

Let's pretend it's 2005 again. Let's give fry guys at McDonald's $400K loans with no money down. What could go wrong?

@Luis Capriles

Yes you can rent the units to a LLC with a 1 year lease.

Yes you can use FHA + IHDA. However, the max DTI for IDHA is only 45%, which could significantly reduce your buying power. A better solution is doing it without IHDA, and getting a seller credit large enough, so that all you would need to show is the 3.5% down payment. As long as you have the 3.5% down payment in verified funds (which can also be a gift), then it's all about how you structure the offer to make the numbers work. The right loan officer and realtor can help you with this part.

Best of luck!

@Lucien Perreault why can't you use your VA loan again for some time? Did you know that you can use bonus/secondary entitlement to use your VA loan again without refinancing or selling your current property? Or have you already checked into that, and too much entitlement was already charged on the first one?

Your military income should make it so that your income isn't 0.  There must be more to the story...

I am a Military Mortgage BootCamp instructor (I actually teach VA lending). If you want a second set of eyes on this from someone who knows what they are doing with VA lending (and house hacking with FHA and Conventional too), feel free to reach out.

Best of luck and TYFYS!

@Michael Trueba let's clarify, are you talking about buying a primary residence, or investment property?

If investment property, you can throw the FHA 203K out the window, that's for a primary residence only.

Fannie Mae offers the HomeStyle renovation loan, which can be used for a primary 1-4 unit, or an investment 1-unit property.  There are some nuances for this program (i.e. no more than 50% of the loan amount can be rehab), but overall it's not as strict as the 203K.

Outside of HomeStyle, there is no other Conventional option for rehab.

For a regular Conventional loan, the loan amount is based off the lower of the purchase price or appraised value. So to your question above, the answer is no, if the property is worth $150K and you are buying it for $100K, you cannot just finance $110K. It doesn't work like that, no matter the lender, for Conventional financing. You would need another loan type, such as a commercial loan, DSCR loan, portfolio loan, hard money loan, etc, which will all likely come with much worse terms than a Conventional loan.

As mentioned above, your best bet is to talk to your lender.  If you don't have one, find one here on BP that specializes working with investors.  If they don't offer HomeStyle and you want Conventional terms, find one that does.  Just don't call the large online call center lenders, unless you want a guy who was working at Jiffy Lube 6 months ago quarterbacking your financing.

Hope that helps and best of luck!

@Jimmy Watson a key point that is being overlooked are your potential capital gains taxes.  Did you live in this property for 2 out of the last 5 years?  If so, if you sell now, you don't pay capital gains tax.  No need for 1031.  If that's the case, if I were in your shoes, I would sell and reinvest.  No brainer IMO.  It's not going to double again in 5 years, stop dreaming lol.  In fact, the way things are going, this market is setting itself up for not only a slow down or leveling off, but possibly even a retraction in certain areas.  We won't repeat 2007-2009, but certainly this pace will not continue with rising interest rates and the Fed managing inflation.  I like multifamily as a safer play heading into the next 2-5 years with the supply/demand housing chain.

How you choose to reinvest is up to you.  @Joe Villeneuve analysis is spot on.  Equity is dead money that's not working for you, so you should do something to reinvest and restructure.  You have lots of options of where, and what properties, and the only true answer won't come until hindsight.

TYFYS and best of luck!

@Anthony Parsons the reason you weren't/aren't getting good replies is because your initial post was too vague.  Garbage in, garbage out.

Now that you provided your real life situation and numbers, it makes it easier to everyone reply with better answers.

First off, it's a no brainer to sell your home after May 27.  If you lived there 2 out of the last 5 years, you won't pay any capital gains tax (for now, there are proposed tax changes on the hill, one of them is getting rid of that and everyone paying capital gains, period.  Hopefully it will get shot down.)

If you did decide to keep the house, and you get a heloc first, then you likely won't be able to refi after the fact.  The heloc would need to subordinate to the new first lien, and that would be a challenge.  So get that plan out of your head.  So if you kept the house, you would need to refi to Conventional first, and then get the heloc.  Yes you are going to lose your 2.25% rate and you would need to make peace with that, but the longer you wait, the higher it will likely be.

So if I were in your shoes, I would sell, and take those tax-free gains, and reinvest. You can buy another primary residence with 0 down with your VA entitlement, and use the rest for a down payment on another property if you wanted. You could also house hack, meaning you could buy the first home, live in it for a year, then use your secondary/bonus entitlement to buy another home with a VA loan with 0 down (or close to 0, depending on your entitlement), and keep the first one as a rental. For this, your best bet is to get with an investor-friendly LO who also specializes in VA lending, to map out a strategy. Now you have 2 properties and still have all your equity from your sale.

The good thing is, you have options, because you have capital and your VA entitlement, which can be a great combination if you want to have rental properties.

But as far as renting vs buying now, there is no crystal ball.  No one can definitively tell you right now if it's smarter to buy now or in 3 years from now.  Way too many variables and unknowns.  You will need to take a leap of faith either way, and the only way you can truly and accurately answer that question will be in hindsight, years down the road.

TYFYS and best of luck!