patrick.net

I too am interested in this. Can anyone shed some light? My loan officer told me that it cannot happen if I were to purchase an SFH for rental purposes. They will not consider rental income of the subject property.

What about a multi-family complex?

I listed the scenario above in order to evaluate my best option. The reality is that my wife, daughter, and I have been living in our paid-off Condo in a nice part of Pasadena, CA (Madison Heights). I bought that Condo from a Fannie Mae foreclosure in 1998 for $165k...now it's worth around $470k...based on recent sales by several neighbors.

We've been sitting on the sidelines, waiting for the higher-end homes (around $1 to 1.5 million) to come down (to $750k to $1.1 million) from the bubble state that they've been at. My wife is pregnant with our second child so we will no longer fit in our nice condo, and ideally we'd love to purchase our home next year. We can sell our condo early next year and rent until 2012 if absolutely necessary, but we've already been waiting for this bubble to pop since 2006. Our patience is running thin, and the government and banks don't appear to be in any hurry to kick the squatters out of the homes they lied/deluded themselves into with Option mortgages and the like.

While we've been waiting for our higher-end home to drop to reasonable levels (I'll be happy when they get back to 2002-2003 prices), meanwhile, the low-end has come down to the point that it's more expensive to rent than to buy (as I can see by the sample investment property I listed in the Highland Park area of Los Angeles...5 minutes from downtown L.A.) I have no interest in living in sub-$400k SFR areas, but do see the potential for those areas as investments.

So, is it easier for me to purchase the above properties, claiming that I'm going to live in one of the 6 units, with my 0% DTI (no mortgage & all debt is paid in full every month), then 6 months to 1 year later, purchase my high-end home? That way, I would assume I would qualify for a Fannie/Freddie government 4.2% loan on these properties & on my higher-end home. Then, since we have more than 25% equity in the rental properties, I can use the 75% of the rental income to offset the PITI...which would actually leave me at 0% DTI again for qualification purposes of my high-end home.

I can just keep on playing this game of buying a different set of income properties and claiming them as "primary homes" (up to the 4 total property fannie/freddie limits), right?

That's just ridiculous that I would have to go through these little games instead of simply qualifying with my 30% down/815+ fico/rental covering the PITI/large reserves, properly as an investor...which is what I am. I guess the banks and Fannie/Freddie don't appreciate honesty, but will allow me to claim these properties as my "primary home", then move to a different place a couple of months later, as long as you have at least 25% equity in your current "primary home" & the 75% of the rent covers the PITI.

What do you think?

E-man says

Mark,
I know for a fact that BofA would count 75% of rental income.

Would they only count 75% of rental income on a property I already own and claim to be my "primary home", or would they count on a Non-Owner occupied loan, based on the existing leases? I'm just trying to figure out if I'll be able to continue to qualify for loans on rentals after my wife and I purchase our home that we'll actually live in (forever, hopefully), as long as I have 30% down & 75% of the rental income covers the PITI.

E-man says

Based on my experience, interest rate for investment properties will be about 1 pt. higher than market rate for duplex and quadplex. On the unit you claim to be owner occupied, you can get away with 20% down. On the other one, putting down 30% will get you the best interest rate.

If I claim the quadplex to be owner-occupied, wouldn't I be able to get the current 4.2% 30-year fixed Fannie/Freddie conforming market rate on it?

So maybe the trick is to buy a quadplex, one at a time, claim it as my primary home, until I purchase 3 (for a total of 12 units), then my final purchase will be our family home...that'll still keep me under the Fannie 4 max loans limit total & assure that I get the lowest fixed rates on them.

So so many better investments that are far more certain, and less complicated, and yield oh so much more, except in the FEELINGS one might want to have in being a land lord, At least that is my opinion. But who really knows, If you do it, good luck, but I do hope you consider the many many more possibilities.

Cvoc13 says

So so many better investments that are far more certain, and less complicated, and yield oh so much more, except in the FEELINGS one might want to have in being a land lord, At least that is my opinion. But who really knows, If you do it, good luck, but I do hope you consider the many many more possibilities.

Like I mentioned above, this is in order to diversify my investments, not my main investment by any means.

This is a great way to hedge against the possible coming rampant inflation that we'll get due to QE and QE2, and other excuses the Fed uses to run the printing press 24x7.

Go ahead, devalue the currency Mr. Bernanke...that just means I get to increase the rent while my payments stay fixed at historically low interest rates. Furthermore, the millions that I borrow now will be devalued as well, so I'll be paying a lot less back in real terms (actually, the renters will, not me).

Trying to get this type of loan through a bank will always takes a lot of effort and you may still be denied. Another route to take is getting a short term investment property loan from a hard money lender. As long as you have a sufficient down payment of at least 30% the approval process will be quick and easy. Funding generally takes 2 weeks but can happen faster if needed. These types of lenders don't have limits of 4 loans per investor. If you shop around you can probably get a rate of 8-9% in Los Angeles.

Once the property is secured you can then shop around for long term financing at a lower rate.