“If you paint in your mind a picture of bright and happy expectations, you put yourself into a condition conducive to your goal.”–Norman Vincent Peale
Last week, I wrote about the challenges of getting loans for non-owner occupied investment properties. But as always, there is light within the darkness. Somehow, we can always find creative solutions.
Dr. Dan is a dentist who was referred to me by my friend who is his patient. He came to my office very well prepared with all the necessary documents. His middle credit score was 815 (this is excellent) and he has a good income. Besides his own residence, he owns a second home and two rental properties. He is a typical middle class professional, who can easily handle his mortgage payments.
His objective was to lower his monthly payments by about $300/month. First I showed him that he can get savings of about $370/month, just by getting a 3.50% fixed rate loan with no out of pocket closing costs for his home. He was very happy, but I suggested taking a look at his other properties. At the beginning, he was reluctant. But after I compared myself to a good dentist, who not only fixes one tooth, but also examines the whole mouth, he accepted my suggestions.
After reviewing the monthly payments on all of his properties, I offered to increase his loan amount on his house to $417,000 and get a cash-out of about $120,000. Then I suggested refinancing his rental property with the maximum of $50,000 cash out limited to 75% loan to value. After that, he would combine both amounts and pay off a loan of $165,000 on his second home. As a result, this mortgage payment on his residence would only be $200/month higher, but his rental property would be $100/month lower. After paying off the mortgage on his second home, it would be free and clear with an overall savings of about $1200/month. If he would apply this amount to the mortgage payment, he could have his own home free and clear after 14 years.
Dan’s response was, “You exceeded my expectations.”
As it happened on the same day, one of our new agents brought a loan where the client wanted to refinance a $130,000 loan. He owned six properties, which created a limitation (only a few lenders can lend up to 10 properties).
When I analyzed his entire portfolio, I offered a completely different approach–to consolidate all the mortgages into two. One for the owner occupied home for $417,000 at 3.500% and another for $230,000 for his single-family rental property at 3. 75%. By doing that, four properties will not have any mortgage and the overall savings on the monthly payments would be $1,413.
How impressive is that?
P.S.
By the time you read this email, I will be in Havana, Cuba with my wife and a group of photographers. To improve my photographic skills, every year I take a week off to attend different photo workshops. This year will be a completely different experience.
Americans can go to Cuba on a cultural exchange or through other countries, and this will be my first trip there. So far, most of the images I have shared with you were without people, and I’ve mentioned that I do not specialize in any particular photographic field. This is only partially true; I love to photograph people, and not only when I travel. As a matter of fact, my photo exhibition titled “French Baguette” is still on the walls of the restaurant Chouchou. You can see more of my older images atMannyKagan.SmugMug.com
The images you see today were taken recently in the Britex fabric store in San Francisco, when I accompanied my wife to buy some fabric.
Please let me know which one is your favorite. You will see images from Cuba upon my return.
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