Establishing a LOC/Making Cash Offers - Posted by ODD
Posted by ODD on September 14, 2008 at 09:40:32:
My situation: My wife and I both work full-time and both make around $100K/yr, with my credit score being around 680 and hers around 720. I currently have 5 rental properties, each with roughly 15-20% equity. I had purchased my principal residence 3 years ago with an 80/20 loan, so I don’t have much equity there. One of my rentals was purchased with seller financing, the rest of them are conforming conventional mortgages in my name only (so that we could put new purchases in my wife’s name only when we hit the FNMA/FMAC max number of mortgages).
My goal is to continue with building up passive cashflow (and equity) to the point where we can replace my wife’s income and allow her to care for our daughter.
The last 3 rentals that I purchased were REO’s. I purchased them at a discount with conventional financing, rehabbed them, then refinanced to pull out my costs, and rented them with roughly $200/mo. positive cashflow each. This method has worked pretty well for my gameplan so far, but I am concerned with my ability to continue with this method due to the recent changes regarding conforming loans/cashout refi’s/seasoning requirements.
My ultimate goal is to have a line of credit available to me so that I can buy houses for cash, then refinance with a conventional mortgage after fixup is complete. This would save me the hassle (and cost) of having to go through the headache of conventional financing twice (on the purchase and then the refi), 2 appraisals, etc.
My question to the veterans out there is, what is the best way for me to get accomplish my goal (given that a HELOC likely won’t work with the small amout of equity in my principal residence). My understanding is that Fannie has now reduced the number of allowed mortgages to 4 from 10, and has tightened up the cash-out refi requirements to the point where my previous method likely won’t work.
I’ve considered writing a business plan to take to a smaller bank to see if they would give me a line of credit, but wanted to hear other suggestions before going through the time and effort of writing it and pitching it to banks, and dings on my FICO from them pulling my credit.
Sorry this is such a long message, but I want everyone to understand the full picture. Basically I want to be able to write cash offers, close quickly, and still be able to pull my costs back out through a refi if possible. Any suggestions?
Thanks in advance for your time.