Creative Financing Strategies for Non-Owner Occupied Portfolios

Caeli Ridge recorded this episode on 1/2/2024

Creative Financing Strategies for Non-Owner Occupied Portfolios

Caeli Ridge discusses some really creative options that Ridge Lending Group can offer as it relates to purchases and refinances. Ever wondered about some alternative ways to get funding for your next home or investment property? Tune it to hear about all that Ridge Lending Group offers!

Check out the video with the screen share and the documentation in the Community and our YouTube Channel.
https://www.youtube.com/c/RidgeLendingGroup

You can join these live by following this link to join the call:
https://community.ridgelendinggroup.com/events/live-with-caeli

As always, give Ridge Lending Group a call if you have any questions at
855-747-4343 or email us at info@RidgeLendingGroup.com

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Karlie Smith: Hello, everyone, and welcome to calling all real estate investors for our live event today with Caeli Ridge from Ridge lending group.

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Karlie Smith: you can reach us at info at Ridgelendending group.com, or you can call us at (855) 747-4343. That's 8, 5, 5, 74 Ridge.

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Karlie Smith: and during today's call, live call. If you have any questions throughout. Please just drop those questions into the meeting chat, and then, as they come up, and then we will answer them as soon as possible.

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Karlie Smith: So today Jaylee is going to be talking about creative financing strategies, for non-owner occupied portfolios. So I'll go ahead and hand the mic over to Caeli Ridge now.

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CAELI RIDGE: hey, guys, Happy New Year! Everybody happy freaking New Year.

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CAELI RIDGE: you know. It's hard to believe for me that it's actually 2024. And I was just thinking about this yesterday. My husband and I were talking

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CAELI RIDGE: that it's 2,024 and given where we were. Let's say 2,019 at the end of 2,019, and then early, 2020, okay. And then everything that happened between then and now

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CAELI RIDGE: I feel like it's been. I've I've kind of been in this dream. And then when I look back. It's almost as if none of that even happened. Doesn't it feel that way to to some people I've been asking this question, and a lot of people have been saying, Yeah, it's like you were in this weird days. And now, you know, the smoke is cleared and 2024 looks bright. I'm feeling very optimistic, for whatever reasons. Maybe.

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CAELI RIDGE: You know, it's placebo. I don't know but I'm gonna take it.

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CAELI RIDGE: anyway. Thank you guys for being here Happy New Year's, I said, I want to start and just get this out of the way, because I know that everybody wants to talk about interest rates. If I could see you all I'd say, give me a show of hands, and I know everybody's hand is gonna go up so I'm gonna beat you to the chase. Let's talk about interest. Rates are if you have been watching the news, and even if you haven't been watching the news, chances are this comes up on your feed, and you have heard that interest rates are on the way down.

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CAELI RIDGE: Excellent news. Now, it may not necessarily be that the rate, is going to appear much lower than what we've seen, but the points associated with the interest rates that we have been securing and quoting and locking for the last year, especially. Are probably what you're gonna see. The biggest difference on something called premium pricing appears to be back. So the points that you would have to pay to get in the door for a non owner occupied.

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CAELI RIDGE: and the interest rate that you'd be locking are going to be lower. As a result I'm not going to go into. Why, we've talked about that several times before on these live sailies, so we won't get into that now, but I will give you guys an idea of where rates are today based on the following variables, because, remember.

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CAELI RIDGE: the characteristics of the loan itself are going to exclusively dictate where your interest rates going to lie. So the variables that I'm using to give you today's posted rate are as follows, this would be a purchase transaction, a refinance. Transactions gonna have a slightly different interest. Rate a cash out refi, one slightly different than a rate and term refi. Right? Those are the different variables we're talking about. So this is gonna be a purchase

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CAELI RIDGE: I've got my notes here. I looked it up before we we logged on here, it'll be a single family residence. My loan amount is 150,000. This is a 75% loan to value, or Ltb, assuming a 7, 60, or better credit score, 40% debt to income ratio or less on a 30 year fixed mortgage drum roll. Carly, do you have a drum back there somewhere. Drum, roll. I'm kidding. I'm teasing the interest rate you would lock today would be 6.8 7 5,

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CAELI RIDGE: and that would be at a 2.5 in. Total points, 2 and a half in total points. To get 6.8 7 5 on a 30 year, fix single family purchase 150,000 loan size, 75%. Ltv, 7, 60 score with 40% or less. Dti, that's where we're falling today. And I do expect my my crystal ball does seem to overwhelmingly tell me that we should see some additional improvement there in the coming weeks. Now

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CAELI RIDGE: you've also heard me say that interest rates come down a lot slower than they go up, so I would. I think that we sort of saw an initial fall today. They seem to be up from where they were last week, but that may just be coming off of the long holiday weekend. We'll see what happens tomorrow when secondary opens up. But anyway, it's great news. Okay, 6.8 7 5 on the variables that II listed before.

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CAELI RIDGE: Alright. So let's get into this. Carly got something. Yeah, before we dive in, we do have a question, is a cash out Refi always more expensive? And if so, why, yeah, yes, it is. It's going to be of the let's just go over the 3 different types real quickly. So if you've got a purchase, and you've got a rate and term refinance and a cash out refi. Let me define rate and term a rate and term just means we're simply replacing an existing loan with a new loan. So whatever your existing balances plus closing costs is what the new loan amount is.

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CAELI RIDGE: You're not getting any cash in hand. That's going to be a rate and term refinance. A cash out refinance is when you're actually going to get cash in hand.

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CAELI RIDGE: And yes, that's going to be of those 3 distinctions, purchase rate and term cash out. The cash out is going to be on the higher end of the interest rate spectrum. And the reason for that is is it's going to be higher risk for the investor or the lender that ends up picking this up. If you're leveraging and pulling cash out against an investment property.

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CAELI RIDGE: Let's say values were to fall or it could be a number of different reasons that that you know the property itself could ultimately default. But if you're actually going to get cash borrowed funds are non-taxable, it's going to look at as a higher risk than if you were just purchasing the property and putting 25% down.

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CAELI RIDGE: So a another example, let me give you a 4 real example. Let's say that and and it's gotta be the same across the board. Okay, so let's say that you purchased it for $100,000 and 5 years have passed, or 10 years of past, or whatever, and you haven't refinanced for whatever reasons that you have, you've got all this equity built up now, and you're just gonna pull that big chunk of cash out of it. That property. So from a risk, layering perspective.

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CAELI RIDGE: taking that property from whatever its initial use was and making it a cash out. Refinance investment property is going to be looked at as a highest risk level. And that's where the Llpa is gonna come in and it's gonna be a higher loan level price adjustment than it would be if it was just a simple rate and term. And then the purchase, as I said initially, isn't gonna hold either one of the refinance distinctions. Hopefully, that made sense. I kinda talked in a circle there. But cash out is going to be a higher interest rate. And those are some of the reasons why

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CAELI RIDGE: anything else real quick before I get into our topic. Carly.

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CAELI RIDGE: okay, so we're talking about creative financing, you guys,

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CAELI RIDGE: and I took some notes here, I'm gonna read off of them. First of all, let's talk about. You know, creative financing can mean different things to different people. So let me start by just def defining for myself what, how I will interpret creative financing. My definition is, gonna be any combination of traditional or non traditional means of leverage or financing to get you or to get us across the finish line. Okay, can be a combination of several different things. And then before we get into the different

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CAELI RIDGE: variables for creative financing, let's also take a minute and identify the why? Why, what? What would be the need for the creative financing? Because the answers are gonna vary, based on why you're looking to, or what the need for the financing is. Typically, it's gonna be, you know, 2 or 3 different things, or some combination of the following things. We've got, maybe lack of funds, or maybe lack of season funds

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CAELI RIDGE: for down payment or reserves. Maybe we've got credit issues, damaged credit, no credit. Poor credit scores. Perhaps, as an example. What if your credit score fell below the minimum required to qualify? 7, 20 is a benchmark that a lot of you are familiar with. What if you had something called rapid acquisition.

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CAELI RIDGE: where you purchased a bunch of properties in a small window of time? And as a result it temporarily dropped your score below the minimum required 7, 20 that could be. But you had to close on the next purchase, or you're gonna lose 10 grand in earnest money, right? That might be a scenario where creative financing would be necessary. You otherwise have good credit. But this might be a temporary bridge that you need to to secure

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CAELI RIDGE: so it could be credit issue related. Maybe it's debt to income ratio. And typically speaking, I find that the need for creative financing generally falls within more often than not the Dti debt to income ratio space. Maybe you're self employed like me. And you don't show a lot of income. Perhaps.

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CAELI RIDGE: Right? You've chosen to maximize the tax deduction. And as a result, you're just not gonna show the amount of income that you need to offset an individual debt to income ratio. Maybe you just change jobs and we can't use that income for another 6 months, another 12 months, or whatever it may be.

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CAELI RIDGE: Maybe your monthly liabilities are too high. You've cosigned for some kids or family members that are not making the payments, or cannot show that they've been making the payments. So you're on the hook for them. It could be any one of those those variables that could create the need for creative financing. And and there's many, many more. Okay? And I'm gonna get into some of those as we start talking about

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CAELI RIDGE: the different different layers of creative financing. So let's start with purchase. Okay? As it relates to creative financing, as it relates to a purchase transaction. These are in no particular order, you guys and I might ping back and forth between them.

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CAELI RIDGE: But the first would be seller financing. That's very creative. Right? You have really no means. Let's just say that you're in a situation where you really are having a hard time qualifying either yourself or the property

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CAELI RIDGE: right? Maybe the property is the issue where the creative financing is needed. Right? The property cannot pass inspection for XY. Or Z. Reason. And that's why we need the creative financing. Seller financing might be an amazing way in which you can secure this investment property. Now, if you have a property in mind. It's easy enough to go ahead and and

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CAELI RIDGE: put that out there for the seller. If you're using a turnkey, that's probably not likely. But if you're out there, you know, beating the pavement for yourselves and your your own purposes, and you're not using an agent, or maybe even if you are using an agent and you have this property that you wanna purchase. But there's issues with XY or Z. All the things, and maybe more that we already discussed.

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CAELI RIDGE: We can ask the seller if he or she might be willing to provide seller financing for a year or 2 years, or whatever under the precipice that you will refinance at some point. Let's say, you bought yourself 2 years. The seller is gonna go ahead and fund. You've got a little bit of money down. You can throw a couple of 1,000 bucks at it, and the seller will give you, or you will secure. They're Ca, they're gonna kind of be the bank. Okay, they're gonna say that they're gonna fund this, or they're going to provide

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CAELI RIDGE: financing at 6% interest rate on a 30 or even an interest only basis. And after 24 months there's a balloon feature on it. Okay, on this this note that you've recorded with the seller, and after that amount of time you have to refinance this loan at the predetermined purchase price.

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CAELI RIDGE: Okay, whatever the market value is down, the road isn't going to be probably not part of the conversation. But you're going to refinance

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CAELI RIDGE: and pay the seller off at that point. That might give you all the time in the world to repair credit or to save, for you know, the extra down or debt to income ratio, or your new job is now been seasoned, and you can show the amount of income that you need to qualify all of those things. So seller financing is is a pretty popular one. It's probably the hardest

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CAELI RIDGE: in which to secure right? There's not going to be a lot of sellers out there that are. Gonna say, sure, no problem. I'll go ahead and finance this for you for 2 years or 5 years, or whatever it is, chances are that that'll be far and few between

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CAELI RIDGE: for those that are interested in how to find this from a lending, or excuse me, a an investor perspective. Here are some tricks that you could impose.

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CAELI RIDGE: You can do title searches you can get with a title, company, title, or escrow company and do title searches that will provide lots and lots of data. Really, it's customizable to whatever information you want about the property and the demographic of the property. The history of the mortgage on the the home.

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CAELI RIDGE: But what you might be looking for is a first payment default, which is public record. You can get this from a preliminary title report, and if you were to go to any escrow or title, company fidelity, Wf. G. Chicago title right, all of the the big names.

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CAELI RIDGE: and say that I want a title report. It used to be called a farm.

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CAELI RIDGE: I don't know what they call it now. But you can give them a Zip code for the area in which you're looking to acquire properties from. And you can get the data that you want. It has to have this bit of information, this bit, this bit, this bit right? You can kind of customize what you want on there. But specifically.

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CAELI RIDGE: it might be to your advantage to pull those that would be in distress. Right? The ones that have that that public record, first payment, default, or are in default, or maybe even in foreclosure.

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CAELI RIDGE: The foreclosure process. In most states it can be lengthy. So there's probably a lot of time between maybe missing a mortgage payment, and when that that property actually will fall on the courthouse steps for the foreclosure process, so you may be able to get that information. Get in touch with the seller and say, Hey, listen, you know necessity is the the mother of all invention.

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CAELI RIDGE: You're having some issues. I would buy this property. You can get some, so you might have to bring it current right. There may be some different things that you have to do, but that might be one way that you can get into some creative financing. If you've got some your own issues over here that are precluding or prohibiting you from getting a traditional financing, so that would be one. And if you guys have questions about any of this along the way, please jot them down, we'll get to toward the end. Okay.

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CAELI RIDGE: the other thing would be a Jv. A joint venture. So I see this one a lot, and I would say, Let's start by by let me preface by saying

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CAELI RIDGE: for me personally.

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CAELI RIDGE: This can be tricky. Okay, to get into a joint venture, even with your best friend or a family member carries, I think, extra liability. So make sure that everything my advice to you would be is that if you're going to get into a situation where it is a joint venture. Make sure everything. Everything that you can possibly imagine has been written out for both parties. There's no question as clear as crystal about

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CAELI RIDGE: the the

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CAELI RIDGE: equity splits the cash flow, split the tax advantage, split the appreciation. All of those things need to be identified, and you may want to. If this is the first time you've considered doing something like this. It's not always just a simple 50 50. Let's just say you've got a Jv. A joint venture with one other person.

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CAELI RIDGE: It's not as easy as to say everything is split 50 50. It's really going to depend on who of the 2, if there are only 2 is taking the higher risk. If the one taking the higher risk, I'll give you an example in a second. That one should probably get more of the

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CAELI RIDGE: X or Y right? That's going to be for you guys to to judge or determine. But I wouldn't just get into a Jv. And and say, for sure it just would be 50 50 under a joint venture.

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CAELI RIDGE: Let's say that you have lacking credit, you don't have any credit. You've got poor credit, but you've got money. Okay. You've got the money, but you don't have the credit. You want to get into a Jb. With somebody that doesn't have the money. They've got great credit, but they wanna get into real estate right? You guys can fill in the blanks there. It might be a a opportune way in which you can propel yourself into your first or second, or your third, depending on what your scenarios are? Where do you find people like this.

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CAELI RIDGE: They could be friends, they could be family. There's all kinds of real estate investor chat rooms and blogs, I mean, that's a little sketchy. I think I don't know how how secure that would be, or how I feel about that. But if you have groups that you belong to for any length of time. And there is a level of integrity and trust within that group. It may be a good place to look for a Jv, that would be another way of creative financing.

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CAELI RIDGE: You've got private loans or bridge money loans. So those are going to be much easier to secure. You're gonna pay through the nose for them. But if you have to get something done, for whatever your reasons are, those would be a creative way in which to get your foot in the door. You'll buy yourself 6 months or 12 months to then refinance into more permanent financing, or sell it right. Make sure that in any situation. Whether we're talking about

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CAELI RIDGE: short term, long term, fix and flip, fix and hold whatever it is. You guys have your backup plan. I know you probably already know that. But it it doesn't hurt to reiterate that point. Have plan B and C, just in case something about plan. A doesn't go well, I see it every single day, even for seasoned investors that know what they're doing. But didn't have a back up plan for their their short term rental, and now they need one.

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CAELI RIDGE: and it may not be a viable one, so they they could put themselves in harm's way, and it can be significant again. I see it regularly.

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CAELI RIDGE: What else do we have here? So we're all we're talking about. Purchase right? Creative financing for purchase. Let's say that your scenario is that you don't have the down payment. Okay, if you were to plan ahead, you could use a line of credit and unsecured line of credit. A secured line of credit is is sources funds

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CAELI RIDGE: and you or let's say that if you had a secured line of credit. It's tapped out, and you don't have any more a equity to access. So maybe you're gonna look at an unsecured line of credit. Okay, this just means it's based on you, maybe other some other asset that's not real estate that you could. You could

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CAELI RIDGE: secure it against. But for our purposes. It wouldn't. It wouldn't count. But if you can get your hands on an unsecured line of credit for a down payment and or reserves that would be fantastic. However, remember, you have to plan ahead. Those have to be sourced in season funds. So if you did find yourself with unsecured line of credit 50 grand 20 grand. Whatever the amount is, you're gonna have to pull it out. Pull all the cash out

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CAELI RIDGE: off the line, drop it into a checking or savings of your own, and let it sit there for a full 60 days to where we no longer see the deposit.

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CAELI RIDGE: because if I see that large deposit. I'm going to question it.

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CAELI RIDGE: So I don't want to see the deposit. I want 2 months worth of bank statements that just show the balance. Now, those funds are sourced in season. Now in that scenario you're gonna have to probably pay interest, right interest payments on that. Unless you can find an unsecured line of credit that that has a teaser, you know 0 interest for 6 or 12 or 18 months whatever. That would be amazing. If you can do that.

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CAELI RIDGE: But if it's for a purchase, a down payment on a purchase, different conversation with a line of credit credit, if we're talking about a refinance for the burst strategy, for example, and I'll get to that shortly. But if it's for a purchase and your down payment, the rules say that if you can get the financing, otherwise you just don't have that down payment. They cannot be borrowed. Funds, gift or borrowed funds are not allowed on non owner occupied. So if you can get your hands on an unsecured line of credit, you're gonna wanna do that.

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CAELI RIDGE: Draw the money down, stick it into an account. Let it sit there for a full 60 days. We do not want to see that deposit, or you won't be able to use it. Then you've got your source and season funds.

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CAELI RIDGE: Another thing that we can look at for creative financing is house hacking, and I'm seeing a lot more of this lately, and I think it's amazing. I absolutely love it.

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CAELI RIDGE: Ideally. You're probably doing it on a 2 to 4 unit house hacking on a single family has some limitations, but for those of you that are looking to purchase their first primary residence, or maybe move out of their their existing, and turn that one into a rental you can get

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CAELI RIDGE: very high leverage on an owner occupied Fanny. Now, Fannie, Freddie, now have 95 on a 2 to 4 unit. This is coming up one. I just spell this really quick for anybody that saw that headline, that 2 to 4 units are now available for Fannie. Freddy loans that is only for owner occupied gang that does not apply to an investment property. You cannot get a Fannie Freddy duplex triplex Fourplex at 5 down as an investment, you'd have to buy it as a primary residence. But that goes into what I'm talking about here. So for house hacking

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CAELI RIDGE: you can creatively purchase a single family. But ideally, I think the 2 to 4 works. Better.

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CAELI RIDGE: 2 to 4. Unit property live in one of the units for a year, or whatever it ends up being, and then have the other units as rentals.

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CAELI RIDGE: and then you move on or move up to the next right. You keep that property as an investment property. Maybe it's appreciated. Maybe you do a cash out refinance after a year or 2. Pull the equity out, and then you've you've kind of

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CAELI RIDGE: jump started your investing process by by house hacking. I love that. I love the new investors that get into that or even seasoned investors that get into that. I think it's a a very smart way to start real estate investing.

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CAELI RIDGE: Let's see, what do I have here? Alternative financing. I'll just take a minute because I think most of you. We've talked about it so many times. But I'll just touch on it. Creative financing technically should include the debt service coverage ratios for those that can't qualify conventionally or full. Doc, we have the products that allow us to go to point 7 5

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CAELI RIDGE: on a debt service ratio. So if your rents were 750, and your mortgage payment was a thousand that would equate to a point 7 5 debt service coverage ratio that would be eligible for financing.

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CAELI RIDGE: Okay, the lower the Dt. D. Sc. R, the higher the rate. But it's it's available the other 2 that we don't spend a ton of time talking about that I'll just touch on really quickly as more creative financing. Let's say that you can't show tax returns, whatever. For whatever reason.

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CAELI RIDGE: We can look at bank statements or 1099 statements. Okay, if you're contract employee

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CAELI RIDGE: and your tax returns. Just you write off too much. We can take 12 or 24 months of bank statements. We're going to add up the sum of all the deposits that you've got, or that you've received, and then we're going to divide that by the number of of months and bank statements that you've supplied. So if it's 12 we'll divide by 12. It's 24. We'll divide by 24. That number is the amount of income that we're going to give you to offset

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CAELI RIDGE: your monthly liabilities. Okay, so if your tax return, you've got just too many deductions on there. But you you are a strong income earner. Bank statements might be a viable way to do that asset. Depletion is another one that a lot of people get confused about or unaware of. If you have substantial assets. Okay, depending on the asset type. We can use those funds

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CAELI RIDGE: and do well, there's 2 ways we can use them. The first would be a regular distribution income. So let's just say, at a million dollars in a Stock Exchange.

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CAELI RIDGE: If you were to elect to take a regular distribution, you'd actually have to take the distribution for at least while we're doing the loan, the amount in which we have already identified for you. That says this is how much money a month you need to show in order to qualify you if you had enough in the asset.

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CAELI RIDGE: so that there's at least 36 months of continuance from the monthly income that we have assigned to you for qualification purposes.

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CAELI RIDGE: That's actually a Fanny, Freddy long

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CAELI RIDGE: right that actually qualifies conventionally. So let me give you an example. let's say that you need $10,000 a month to qualify.

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CAELI RIDGE: Okay, as long as the asset account has 360,000 right? 36 months worth of

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CAELI RIDGE: accessible asset. Then that's really a full, Doc, Fanny Freddie Loan. You'd actually have to take the distribution. We'd have to see the 10 we'd have to see the form. There's a form that you fill out with your with your asset. Who's your guy?

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CAELI RIDGE: You know what I'm talking about. You. You fill out the form. You take the 10,000. We'll see the 10,000 coming in. What you do with it. After you have it is entirely up to you. You can put it right back if you wanted to, but we actually have to see that paper trail, and then, once the loan was closed, you can remove the the distinction of

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CAELI RIDGE: receiving that regular distribution of income that might be another creative way that you guys actually now have access. You just didn't realize it was. It was a thing.

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CAELI RIDGE: you know, obviously for down payment gang. You can. You can look to leverage a second lien on your other rental properties, or even your owner occupied, if you haven't considered doing that as a means of harvesting equity for down payments. Second, lien is an option. You know that we have those 2. Any questions about that put them in the chat? We can talk about it again. And then finally, on this list, cross collateralization. So this is a means of taking multiple properties.

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CAELI RIDGE: putting them into one blanket commercial loan. A lot of you are familiar with at least the concept of this. But what most people don't know is that it can be used. It can be used for both purchase and refinance at the same time. So let's say that you don't have. You've got this package of properties that look great, and you wanna buy them. But you don't have any cash, any liquid cash. It's tied up in these rental properties over here. We could actually refinance cash out, let's say, 2 of your rentals

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CAELI RIDGE: that are going to yield enough in the cash for the down payment. On this, you know 5 bundle of properties over here, all 7, 2 refis, 5 purchases, all 7 properties would be in that cross collateralized

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CAELI RIDGE: Loan. So that might be another way creatively, that you guys can access leverage that you didn't otherwise know was available to you. Let me just take a quick pause here.

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CAELI RIDGE: and before I go into hold on gang before I go into the refinance side of this.

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CAELI RIDGE: Where is everybody? Here we go. What about questions? Or if you don't have questions? Does anybody have anything that I have not mentioned yet in a in a way of creative financing that you have done, that you'd want to share with the group.

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CAELI RIDGE: Let's let's share sharing is caring

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Karlie Smith: we can start out with some questions because we do have a few. So Terry asks, what about seasoned funds coming from a stock sale

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CAELI RIDGE: perfectly acceptable, Terry, as long as the the stocks are yours.

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CAELI RIDGE: or whomever is going to be on the loan, let's say, for example, the stocks are in your wife's name. Okay? And you're the only one on the loan, in which case no, you would have to add your wife to the loan in order for those to be your source and seasoned funds. Otherwise, if they're your stocks, those are already sourced and seasoned. I can very easily show the paper trail for that

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Karlie Smith: perfect alright, and then we have a question here for loan underwriting. Would the money and a first lean Heloc already be considered seasoned if they were in the Heloc for 60 days, or greater?

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CAELI RIDGE: Or what sorry? Or would the funds need to be transferred into a business personal account for greater than 60 days to be considered seasoned. Good question so secured lines of credit is going to be a Heloc. Anything that is attached to real estate. Okay, a secured line of credit versus non secured or unsecured is just a signature line like a credit card is an unsecured line of credit. Okay, a Heloc home equity line of credit that is attached via a lean

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CAELI RIDGE: on a property, first, lean, secondly, and it doesn't matter. Those funds are already considered seasoned liquid and seasoned. You do not need to pull them and deposit them and wait 60 days. You would simply grab them at closing. And those that's your down payment, or your even your reserves, source, and seasoned as it is, as long as you are on the property, and

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CAELI RIDGE: the Helic is in your name, or at least you're on that loan. Another thing that happens quite often, and people don't realize that married couples, for example, is is a common one. Let's say that you're both on title to the property. You're both on the first mortgage, but one of the spouses only is on the Heloc and second lian position.

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CAELI RIDGE: The spouse that is not on that, Heloc.

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CAELI RIDGE: to use those funds might seem in in theory like it would be acceptable right. This is my property. I'm on it with my spouse. It is my spouse, etc. If you are not on that, Heloc, those funds are not admissible as your source in season. Do you either have to be on the Heloc, or in that example you'd have to draw what you need, then deposit it into an account

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CAELI RIDGE: for seasoning purposes 60 days and seasoning purposes. And let me add one more thing, since we're talking about

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CAELI RIDGE: the a large deposit.

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CAELI RIDGE: So let's say you're a really high wage earner. You make $20,000 a month. Okay?

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CAELI RIDGE: And there was a $10,000 deposit in the accounts that you had provided for your down payment or your reserve, or whatever

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CAELI RIDGE: or let's say it was 9,500. Okay, and you make 20,000 a month.

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CAELI RIDGE: That's not going to be questioned. The only time I'm going to question a large deposit for source and season purposes is when it's over 50%

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CAELI RIDGE: of your income. So if you made $20,000 a month, I'm only going to question deposits at 10,000 or more anything below that. Those will not be questioned, so I don't care where they came from. So there's a little bit of a a I guess a

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CAELI RIDGE: a hidden gem. If you guys wanted to deposit smaller amounts that are below that 50,000 enough so that it equated to the amount that you needed to show for the down payment, etc.

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CAELI RIDGE: right? And you you chunked it out that way.

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CAELI RIDGE: Then you're good. There isn't going to be any source and seasoning issues. If you guys have that scenario, or that's not resonating with you, I would say, let's not spend too much time on that contact me personally, and we'll go over your particular scenario, and I'll guide you through how to do it.

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Karlie Smith: We had one from earlier, too, about when we were talking about cash out refres so jack asks, isn't that the same as taking a mortgage out on a property versus a 60 cash out mortgage?

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CAELI RIDGE: Not sure, Jags, can you? Can you unmute and say the question, I'm not sure I'm understanding.

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Karlie Smith: Oh, yeah, let me

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Karlie Smith: oh. you know.

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Karlie Smith: don't see her in her anymore. She must have had to pop out. So we'll just have to ask her

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Karlie Smith: but that's all the questions. But if anybody has anything else, pop them in the chat.

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CAELI RIDGE: Okay, so let's go to creative financing. Carly. Just interrupt me if it comes up, honey. Let's move on to refinancing and creative ways. So, you know, refinancing the assumption would be that you're having issues refinancing for any one of the reasons that we have described above. So everything that I've kind of talked about would still apply. One thing, though, that I would add to that, for the refinance sector of this

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CAELI RIDGE: is, if you know, you're gonna have a hard time qualifying. Let's say you inherited a property. Okay? And it's free and clear. But there's nothing that you're gonna be able to do, because either your credit is is not where it needs to be. You don't have any income, or you don't have any funds for reserves, or whatever it is. Okay, let's say that all those things are an issue, or one of them are an issue. You know, you're not gonna get financing. And you really wanna tap into that equity?

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CAELI RIDGE: I would say, to plan ahead. Add the appropriate person to title. If you're gonna try and do a cash out refinance on an investment property, and you cannot qualify. And you want to add a person that can qualify. Maybe it's a a family member or a spouse or a partner business partner, whoever it is, get them on title asap, depending on the product that we look at. You're gonna need at least 2 months with that person on title.

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CAELI RIDGE: and up to 6 months with that person on title. If you're gonna pull cash out and you cannot qualify yourself if you don't do this in advance. If you don't have that forethought to add that person that can qualify, if you can't, to the title, and you just decide to just do it.

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CAELI RIDGE: put it, put him or her on title today, and then go refinance the next day. Not gonna happen, especially if it's a cash out. If it's a rate and term refinance, then it's fine. You can add someone the same day, while the day before you take the application, or we take the application. No seasoning is gonna be required in that case to refinance out of a you know, a higher interest rate loan or an adjusted rate loan, or whatever it may be, whatever your circumstances are, no seasoning will be required. But if you're gonna try and refinance

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CAELI RIDGE: and pull cash out, you do not qualify. But your spouse does, or your business partner does, or whoever else does, you're gonna wanna have to plan ahead and put that person on title at least 60 days in advance of

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CAELI RIDGE: submitting an application, and up to 6 months in advance, depending on the product type. So if that's your scenario, I would say. Also, let's not spend too much time on that. Just contact me directly, and let's go over the particulars, and I'll I'll advise and tell you where we want to plant the seeds, and what we want to do with that

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CAELI RIDGE: also on a refinance similar to what we talked about on the purchase side. A bridge loan might be a real handy tool. Now, it's gonna incur, probably more closing costs. If you've got to get 2 loans, let's say, you gotta clean something up. You need to buy yourself some time. You have to refinance, for whatever reason, whether it's cash out getting out of a a hard money loan that's called. Do whatever it is.

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CAELI RIDGE: And you're just not ready to do that. You might want to get another bridge loan or a new, just a bridge loan to buy the appropriate amount of time needed to clean up credit assets debt to income ratio, etc. If that's the case for you. I wanna talk to you specifically about the strategy there, and and what needs to happen between

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CAELI RIDGE: securing a a bridge loan 6 month or 12 month bridge loan, and making sure that we're hitting the milestones necessary, so that in 12 months down the road you are ready to get out of that and and submit for permanent financing, or you're prepared to sell and do a 1031 exchange. And what does that look like? Right? If we go down that rabbit hole. If you let's say you get a bridge loan, and you know best efforts are made, you you? You can't refinance.

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CAELI RIDGE: You can't refinance out of that bridge loan or that private money loan and the balloons is due. The node is called and you have to sell it.

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CAELI RIDGE: Okay? What if there's a bunch of equity in there in that property? And if you sell it, you're going to pay massive capital gains tax if you don't reinvest it. So no thanks. So let's just assume that you're going to go reinvest those monies.

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CAELI RIDGE: But you know you can't qualify what now. in that example, I would tell you the planning of that would be you better add someone to title

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CAELI RIDGE: of that property before it sells.

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CAELI RIDGE: Okay. As long as you've added someone that has some means of qualification, whether it be, you know, a debt, service, coverage, ratio, loan product or a Fannie Freddie product, or whatever, so that the proceeds from the 1031 exchange can then be redeployed in the way that would avoid the cap gains tax.

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CAELI RIDGE: Those are some of the things. A lot of this is going to be subjective right to your individual needs and and circumstance and qualifications. So I would say that from a creative lending or financing perspective. It's probably best to have some one on one conversations with me or your loan officer here. Just to make sure that we're not missing some detail, or there's something that you didn't know to look for, that we might that could change the dynamic considerably. There could be a lot of things that are involved there. But

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CAELI RIDGE: yeah. So let's see, do I have anything else?

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CAELI RIDGE: Hmm.

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CAELI RIDGE: we.

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CAELI RIDGE: I'll leave that one. I'm gonna leave that one. II don't know that it's it's necessarily relevant. I think it takes us down with a rabbit hole that I don't think is necessary, so those are some of the the details that I would share with you guys creative financing. I do wanna really quickly ask a question, Carly, if you could get a poll ready? Here is the question, and I think I'm gonna add this to one of the the upcoming live with chilies

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CAELI RIDGE: as we start seeing interest rates fall. Woo

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CAELI RIDGE: I want to know how many of you are familiar with the math. What does it take in in order to decide? Is now the time to execute a refinance, the cost of the refinance versus the benefit of the refinance, whether it be the savings

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CAELI RIDGE: or the reduction of interest or cash back in hand. Right? All of those different variables. So how many? We've got enough people in here? This should be a good one. So how many of you?

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CAELI RIDGE: In answer, yes or no, know what the math is in determining?

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CAELI RIDGE: When is it time to refinance an investment property?

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CAELI RIDGE: So let's do, we'll we'll just take that poll. So it's a yes or no. Who knows? Yes, you know the math that tells you. When is it appropriate to refinance.

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CAELI RIDGE: and then no, you don't know the math.

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CAELI RIDGE: When is it appropriate to refinance as we start to see interest rates come back down because that's going to be on topic, I think, for a lot of you as as rates continue to improve.

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CAELI RIDGE: All right. I think they were, I think they

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CAELI RIDGE: I think they were the the polls up, you guys, if you could just answer one more time on the poll, let's just take a peek at that.

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CAELI RIDGE: Yeah, I think overwhelmingly, people are are. No. So that I think that's a good topic. So, Carly, if you want to just make a note, I think what we'll do is at some point here this month or next.

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CAELI RIDGE: Maybe next. If if January is already set. Let's talk about

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CAELI RIDGE: wh? What is the math? What do we need to be looking for? An app to determine when refinance is is appropriate?

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CAELI RIDGE: Thank you, my dear. Any more questions for me.

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Karlie Smith: Let's see, here we do have one jeff asked. If I just closed on a property, how long would I need to wait to refinance with a Heloc

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CAELI RIDGE: hi, Jeff!

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CAELI RIDGE: So the answer is going to be, it depends on your current loan terms. Is the current loan have a prepayment penalty? And if it does, how much is it gonna make sense? Is it worth it to eat a prepay if it doesn't have a prepayment penalty? And we want to be using an appraised value versus the purchase price that can also hold part of the the answer. So let me ask a couple of questions before I can. I can answer specifically to your scenario.

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CAELI RIDGE: what was the the property? Was the purchase price and the appraised value? Roughly, the same number

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Jeff colgate: of the purchase price was 3 70. The appraised value is 4, 20.

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CAELI RIDGE: Okay, so that's a nice chunk, right? That's a $50,000 swing, assuming you want to take advantage of the force for 20. Right? I'm assuming you don't wanna leave that equity tied up. If you want to get use the appraised value. You're gonna and you want to

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CAELI RIDGE: leverage the heloc to maximize it in that example, you're gonna have to wait 12 months. Okay, if you are okay to use the 3 70

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CAELI RIDGE: then you could go right away. Nothing would preclude you from doing that, unless perhaps, there was a PA. Pre. Payment penalty that we wanna look at. There's some other variables that I would wanna to

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CAELI RIDGE: include before I could answer specifically. But you could do it right away. depending on whether or not that was to your greatest advantage.

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Jeff colgate: Okay, yeah, no. Pre penalties. I just know that the eloc works better for me, because I can dump money into there, and I still reuse that money right away if I need to dump it on the mortgages. It's locked up, and I can't use it so

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CAELI RIDGE: absolutely. Yeah, if you're so, Jeff, if you're not familiar with the All in one, that would be something that we should, we should spend some time talking about. That's exactly the concept that you're describing velocity, banking, or infinity banking. And you don't necessarily need the all in one product to do it. You can do it really, technically, with any heloc. It just the other. Heloc's come with some disadvantages. They're not 30 years.

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CAELI RIDGE: They don't have banking features that make it real simple. And streamline just deposit all in, and it's just one kind of checking savings all in one with the the heloc. That's why they call it the all in one. But yeah, man, as long as qualifications are there there, and we can use the 3 70. We're not trying to use that higher value. You could do so right away as long as all the other variables fit within the product. Guideline matrix.

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Jeff colgate: Okay? Sounds good.

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CAELI RIDGE: Yeah. Send me the scenario and and we'll look at it together, sir.

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Jeff colgate: Yeah, actually, if we have a meeting on the fifth. So we can go over it all day.

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Jeff colgate: Okay, perfect, perfect. Look forward to it, Jeff. Thanks for the question, sir.

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CAELI RIDGE: What else we got? Carl's

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Karlie Smith: no other questions currently but pop them in the chat if you have them.

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CAELI RIDGE: Does anybody have any? Fun, anecdotes or stories about creative financing that they've used along the way, and their their real estate adventure or journey. Anybody have anything fun that that might be useful to other investors

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CAELI RIDGE: that you were able to employ employ for creative ways to secure properties.

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Okay.

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Karlie Smith: well, then, that does it for me. Gang. Thank you for being here. You guys, what's currently, what do we have next? And when when's the next one? Yeah, so on. Let's see here, January sixteenth, we're gonna have a special guest speaker. His name is Sam Parker. He works with my credit guy.

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CAELI RIDGE: Okay, very cool. So this guy, I would say, you guys definitely wanna be here for this one, whether you've got perfect credit or not. I think Sam is gonna be able to shed some valuable insight on how to optimize credit. I know some of the tricks that I share one on one in our certified power buyer. education that we provide. But he's gonna he's gonna level up on that

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CAELI RIDGE: and for those that have, you know, maybe good credit at the 7, 20, or 700 mark, even 6 80. That's a good credit score Sam is gonna come with the the tips and tricks and tools that will show you how you can increase that which means maybe

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CAELI RIDGE: higher buying power and or better rates in terms. So that'll be a really good one. Sam is a find for sure, very excited to have him part of our our kind of Associated team.

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CAELI RIDGE: Okay, that's it for me from from

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CAELI RIDGE: rainy Portland, Oregon. Happy, happy, happy, happy, happy New Year! Everybody! I'll see you guys in a couple of weeks and if you need us in the meantime, Carly, take us home.

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Karlie Smith: Yes, please. Email us at info at Rich Lendingcom with any questions that you have. You can also call us in our office 855,000. 747,434. That's 855,747 rich. Thanks, everybody bye, guys. See you soon.

Calling All Real Estate Investors

Creative Financing Strategies for Non-Owner Occupied Portfolios

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