OK, I am hoping that all the other little banks out there are watching this little bank's example. If they are, YOU could be a winner!
The reason I am writing this is in response to a PM I got today:
"I have a question for you: How do you manage to keep buying properties without lowering your credit score, and without increasing your income-to-debt ratio?"
I wanted to share this exciting secret I have found by using my local bank. I can use this for purchases as well, but the "plan" works better this way:
1. Purchase a property with short-term seller-finance or private money (try to find ones that won't take a lot of extra money or time to get rented out)
2. Do your fixing and get a renter in there ASAP.
3. Once I have a signed lease and KNOW that I got a great deal on the property, I go in for the refi. (It helps to know your comps at this point).
4. The bank orders an appraisal. If possible, let the appraiser know why you got the property so cheap to start, with or how your improvements have added to the value of the property.
5. This particular bank right now will refi up to 80% of the FMV (not purchase price), at 5.5%, amortized at 30yrs, which makes the payments extremely low.
6. To figure the income they will consider on a rental, they take the gross monthly rent minus 25%, minus PITI (principal, interest, taxes, insurance). The net after that is either income or liability. If you have found a great enough deal, you will be helping your debt-to-income ratio while getting more than you paid for the property, and at the same time having someone else make the payments for you.
new appraisal $70K
gross rent $750mo
-25% bank subtracts $187.50mo
-new refi payment PITI $317mo
income $245.50mo + $5000 cash in pocket after closing costs and paying your seller or private money
Of course, the better the deals and the more you pick up, the more you add to your income base, and the more you can take out to use toward more deals! YAY!
This particular bank has no limit to the number of these in-house loans you can have through them. I feel like I found a gold mine!!
I would encourage everyone to be checking in with their little local banks (like Matt, Nathan, Lloyd, and so many others have said). You never know what new programs they might be offering!
Best wishes to all and happy investing!!!!
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249