Avery Carl [00:00:02]:
Hey guys, it’s your host Avery Carle with the Short Term Shop. And I’m really excited to dive into the Broken Bow market with you guys. We’ve got 10 episodes on everything you need to know about investing in short term rentals in Broken Bow. A couple notes that I want to give you guys before we get started. Any up to date purchase prices or income numbers on this market you can find on our website theshortermshop.com and if you’re ready to buy with us in any of the 20 markets that we work in, not just Broken Bow, if you want to work with one of our agents in any of those markets, you can email us at agents the shorttermshop.com be sure to follow us on YouTube and Instagram and Facebook at the Short Term Shop. And of course join our Facebook group. It’s called Short Term Rental Long Term Wealth. It’s just me and 60,000 of my closest friends in there talking about short term rentals all day, every day.

Avery Carl [00:00:50]:
Again, if you need anything from us, you can email us@agentshorttermshop.com let’s dive into Broken Bow. Hey guys, welcome back to another episode of the Short Term show special episode series on Broken Bow, Oklahoma. And today we’re going to talk about financing. So financing short term rentals in Broken Bow. So we’ve got Kathy, who you’re super familiar with by now the Short Term Shop agent in Broken Bow. But we also have Brenna from the mortgage shop. Brenna, do you want to introduce yourself real quick for those who might not be familiar with you?

Brenna Carles [00:01:35]:
Hey guys, my name is Bren. I’m the CEO and co founder of the Mortgage Shop with Avery. So we obviously specifically specialize in what you’re here to learn about short term rentals, long term rentals, and vacation home loans. So we’ll be going into a deep dive on this podcast for Broken Bow for your specific questions for that market.

Avery Carl [00:01:51]:
Sweet. So financing hot topic right now because interest rates are not our favorite. But first let’s talk about the different types of financing that you can get. So, Kathy, first let’s ask you, what types of properties do we see most often in Broken Bow? Is it mostly single family homes, no condos or anything like that?

Avery Carl [00:02:11]:
It’s all single family, no condos, no townhomes, no nothing. Just all. Not even any duplexes, just all single family.

Avery Carl [00:02:19]:
Okay. So that makes the lending pretty straightforward. Unless it’s like two cabins on one parcel or something. But we can get into that later. So actually I posted A video about this on social media recently about conventional loans and how they’re the easiest type of loan to find and that typically they just, you walk in, you walk into any mortgage broker, any bank, any lender in the country and get a conventional loan if you qualify. I got so much heat for that. People being like, it’s not that easy. It’s not that easy.

Avery Carl [00:02:51]:
This didn’t age well. And I’m like, I’m pretty sure you can still in 20, 23, walk into any where that does loans and get a conventional loan if you qualify. So yes, it is. It’s the easiest to find and typically I don’t want to say the easiest to get because it kind of depends on your, your entire financial picture. But Brenna, let’s talk about what, how you qualify for a conventional loan. What do you guys look at?

Brenna Carles [00:03:14]:
Yeah, so for conventional loans, it’s off of your personal income and personal debt. So we pull credit, we pull all three trade lines for your credit report, Experian, Equifax and TransUnion. And then we take the middle score and that’s the score we use to qualify you for things like interest rates. And then the debt shows up on your credit report and that’s how we get your debt. Then we verify your income, whether you’re W2 self employed, just living off of your Schedule E rental income and things like that. And that’s how we do it now. I think why people say it’s might have not aged well, it might be because a lot of, you know, banks became conservative once the Fed started increasing rates and so they started going back on, you know, the second homes and the investment properties because Fannie Mae did impose what’s known as LPAs or loan level pricing adjustments, which make those rates a lot higher right now for people to get. So it’s still possible.

Brenna Carles [00:04:10]:
It just, you just definitely want to do your research, do your homework, listen to Kathy’s recommendations in the market for the specific lenders that will specialize in that area. And a conventional loan should be easy peasy at that point for you.

Avery Carl [00:04:22]:
Okay, so how. Well, actually, let me back up. I’m going to make a different point before I make the point I was about to make. So conventional loans, I think a lot of people run around out there going, what’s the rate, what’s the rate, what’s the rate? But it’s really dependent. The rate is dependent on your credit score, right?

Brenna Carles [00:04:36]:
It’s dependent on a lot of things. So it’s dependent on your credit score. Your loan to value. So what you’re putting down is your down payment, the purchase price, the loan type. So if you’re doing a second home, investment property, primary residence, for example, where the specific location is, because some, for some reason, if it’s in certain states or certain areas, you could have a higher interest rate as opposed to, you know, like New York City, for example, might have a higher interest rate than Broken Boat. And so it goes off of all of that. Your debt to income ratio as well, it goes off of that. So it’s based on a lot of things.

Brenna Carles [00:05:13]:
But your, your credit score does play the biggest impact on that interest rate.

Avery Carl [00:05:17]:
Right? Okay. So when you go to get a conventional loan, they’re looking at your debt to income ratio. So the number that you get approved for will be dependent on how much debt you have versus how much income you have as well as your rate. They’re also looking at how many properties you own. So if you’re getting a conventional loan, you can only have 10 conventionally financed properties. So if that’s you personally, you get 10. Or if you’re married and you both have jobs and you can both qualify separately, you can have 10 each. So if you’re buying with your spouse and you’re putting both of your names on the contract, then that counts towards both of yours.

Avery Carl [00:05:56]:
So if you’re putting both names on the contract, you get a collective 10. But if you’re able to alternate and put one spouse’s name on each contract and you can each qualify individually with your own debt to income ratios, then you can have 10 each. So a total, a collective 20. So keep that in mind. If you’re planning on buying a bunch of properties, maybe don’t put both of your names on every single contract because you can buy, get more conventional loans that way.

Brenna Carles [00:06:22]:
I do want to point out, so people hear finance, you know, finance, and they’re like, okay, well, I’ve got, you know, if they’re a doctor, they’re like, I’ve got my doctor’s office financed. That’s, that doesn’t fall under it because it’s residential properties. So if you own your practice or your dentist and you own your office and things like that, that doesn’t count because it’s commercial in nature. It needs to be residential in nature. Now, some of these properties can be zoned commercial, but it’s just because of where they’re located in the county, if they are primarily focused to be somewhere where you can eat, sleep, take a shower and stuff like that, then that’s residential. So those properties that you have that are actual commercial office buildings do not count against that. And then also keep in mind it’s finance. So you may own three properties that you own free and clear.

Brenna Carles [00:07:06]:
That doesn’t count against that number because you don’t have a mortgage on that property.

Avery Carl [00:07:10]:
Right. Okay. So you have to, you can have 10 open conventional loans. Right. Which is only for residential anyway. Yes, got it. Okay. And to get a conventional loan, so a lot of people will say, oh, do I buy in an LLC or do I buy in my personal name? Well, if you’re planning to get a conventional loan, you then that question is kind of answered for you because Fannie Mae and Freddie Mac do not lend to llc.

Avery Carl [00:07:32]:
They only lend to individuals. So if you’re planning to get a conventional loan, you are going to have to get get that loan in your name. Let’s talk about the different types of conventional loans. Brenna. So I think a lot of people mistakenly think that the minimum percent down you can put for a conventional investment loan is 20 or 25%. But what’s the actual minimum for an investment conventional loan?

Brenna Carles [00:07:56]:
For Investment only the minimum percent down. The 2023 conforming loan limit is 726 2. So 726,200.

Avery Carl [00:08:07]:
However, loan amount. Right. Not purchase price.

Brenna Carles [00:08:09]:
Loan amount. Yeah, the loan amount. So your purchase price would be higher. However, the FHFA comes out every year with the new conforming loan limit for the next year. Our investors predict off of what they’re going to do and we can certainly go a couple thousand under what we, we probably know that they’re going to do. So right now we are allowing up to $750,000 loan amount for the Conformin limit for 2024. Now the actual number hasn’t come out yet. The actual number will be a little bit higher than that.

Brenna Carles [00:08:37]:
But we won’t know the actual loan amount number until the FHFA comes out with that.

Avery Carl [00:08:42]:
Got it. Okay. So another type of conventional loan that people like to use for short term rentals is the second home or vacation home loan. Can you talk a little bit about that?

Brenna Carles [00:08:52]:
Yeah. So that is a minimum of 10% down. Now you’re going to be putting 10% down. But when you put just 10% down because Fannie may impose those pricing adjustments, you’re going to have a lot of points on that interest rate or what’s known as like a percentage of the loan amount. So let’s say you saw interest rate for 7.625 at two points, that means it would be 2% times your loan amount. So you’re essentially putting, you’re putting down your 10%, but you will have points. Now let’s say, you know, I pre approve you and then I send it to Kathy and I’m like, hey, are we able to possibly look in, in some offerings if they can get seller credits? That will be a conversation you would have between you and your realtor because your realtor knows the area, your realtor knows what the, you know, listing agent needs for a specific property. So if you can get seller credit, it’s great because then that’s less out of pocket for you.

Brenna Carles [00:09:47]:
If you can’t, it doesn’t mean that it’s not a good deal. Still, it’s just being open and honest with your realtor. Like, hey, it would be great if we could get some seller credits. I want to mention on a second home, guys, the primary intent for that. So your primary intent first has to be to vacation there. Fannie Mae allows you to rent it out when you are not occupying it. They used to have the rule, Fannie Mae used to have the rule that you had to occupy your second home for 14 days or more out of the year. They changed that rule this year and it just says you have to occupy it for some time.

Brenna Carles [00:10:22]:
So there’s no specific amount of days. You just have to go there and vacation at some point or some time during the year. But if you, you know, I know, I hear Avery and them say a lot. If you’re running spreadsheet numbers and that’s all you’re concerned about is just 110% doing it as an investment property, you definitely, you know, don’t want to skirt those rules and you want to do an investment only loan. But if you, you know, for first time investors, I always say, you know, if you’re wanting to get to know the area, the best thing to do is go visit. And if you want to go visit, get to know the area and vacation, then you are able to do that. Second home loan.

Avery Carl [00:10:54]:
Sweet. So second home loan, all of the conventional loan rules apply, plus a few extras about like you can’t have more than one in the same area. You can only have one per market and you do have to stay in it at some point during the year. So like Brenna said, if you guys are running spreadsheets and you’re really doing this as like a true investment, just put that extra 5% down to not be in that gray area of second home loans. One other Thing that I want to point out that I’ve seen people try to do in the past little while because interest rates are not fun at the moment is trying to get primary home loans on properties that they don’t plan to actually live in. Don’t do that, guys. That, that’s mortgage fraud we’ve had. I’ve seen a few people who have said things like, oh, well, I’m only going to put 5% down and I’m going to work remotely from this house for a year.

Avery Carl [00:11:42]:
And it’s like, I don’t, I don’t think that’s what you’re doing, which it’s not up to me to decide. When you commit that kind of mortgage fraud, you’re not only opening up yourself, like exposing yourself to potential. I think, I think there’s jail time associated with that. But if you do that and lie to your lender and lie to your real estate agent, you can take us down with you by committing mortgage fraud. So please don’t do that to yourself. Please don’t do it to us. Just follow the rules. Because nobody wants a mortgage fraud in their life.

Brenna Carles [00:12:15]:
So also, if, if they do commit mortgage fraud and it’s known and they find out, it will say that on their credit report for their life, their entire life. And, and then you will not be able to get any type of conventional financing and you will be very hard strapped to get any type of financing in your personal name that people have to see your credit report for. So just be careful with it.

Avery Carl [00:12:34]:
Yeah, I get it. You guys want good interest rates. You guys want to put less down. Don’t we all? But you do have to color inside the lines. You know, let’s not break the law here. All right, let’s move on to DSCR loans. So DSCR loans are not conventional. They’re also not commercial.

Avery Carl [00:12:49]:
They’re kind of in between. In between they’re what’s called a portfolio product. And Brenna, do you want to. These are a little bit harder to find. So you can’t walk into just any old lender, mortgage broker, bank anywhere and be able to find these. Only a handful of lenders. You can get these from Mortgage Shop being one of them. Brenna, would you like to explain what a DSCR loan means?

Brenna Carles [00:13:09]:
What’s.

Avery Carl [00:13:09]:
What is DSCR mean?

Brenna Carles [00:13:11]:
Yeah, so DSCR stands for Debt Service Coverage Ratio. So, you know, we talked about conventional, where it goes off of your personal debt and personal income. Well, this one doesn’t. It goes off of the property or purchasing’s proposed monthly rental income and the proposed monthly mortgage payment. Usually you want to have a ratio of one to one. That means let’s say your mortgage payment per month is going to be $4,000. Then that proposed rental income needs to be $4,000 or more. There are many different avenues for DSCR loans.

Brenna Carles [00:13:41]:
We have many different investors. There’s some with prepayment penalties, which means let’s say you have a three year prepayment penalty on it. That would mean if you sold or refinanced before three years after you close, you’d have to pay that amount back in interest on the loan. It is not a qualified mortgage loan or a conventional loan. So they can have prepayment penalties. There are options that don’t have prepayment penalties. Those are my favorite because you don’t have to have a prepayment penalty. You can do a 30 year fixed if you wanted to.

Brenna Carles [00:14:12]:
And once rates lower, you know, whenever they will lower, you can refinance without, without any trouble. Dscr, you know, is also basically an asset based loan because it looks at, it does pull your credit just to make sure you’re coloring inside lines and, and that you’re paying your bills on time. And then they look to see if you have enough for your down payment, closing costs and reserves. So 6 to 12 months reserves for your monthly mortgage payment. I have actually a lot of people doing DSCR right now even though they qualify for conventional because oddly enough some of our DCR products have lower interest rates than your conventional interest rates, which is crazy to me. But you know, if they qualify, great, and I think it’s a great product Also if you, let’s say, you know, you switch from W2 to self employed and you have to, you don’t have those two years of self employed income. You can do a DSCR loan. If you have more than 10 finance properties, you can do a DSCR loan.

Brenna Carles [00:15:07]:
So it’s a great option. Also dscr, you can close in an LLC as opposed to conventional, you cannot.

Avery Carl [00:15:13]:
So I know a lot of DSCR loans have prepayment penalties. So I know some don’t ever. I know you guys have a product that doesn’t have it. But that’s something for you guys as listeners when you’re shopping for loans to pay attention to that if you’re planning, you’ve got to be really sure about a property that you’re buying with a lot of these DSCR loans because you will have to pay a hefty penalty if you sell it before that prepayment Penalty. So what’s the average or like what, what do you usually see with prepayment penalties on these things?

Brenna Carles [00:15:44]:
For us, usually I, I send most people through the one that doesn’t have it. But if you do have to, if you’re closing in an llc you will have a prepayment penalty unless you buy down your rate, which I don’t recommend because buying down your rate at that point it becomes too expensive. But usually it will start at a five year prepayment penalty and then you can buy it down to a three year prepayment penalty or one year if somebody is hard set on buying it down. I recommend only buying it down to the three year and not the one year because you would pay less in interest if you did the prepayment penalty versus what you’re paying in points to lower that prepayment penalty, if that makes sense.

Avery Carl [00:16:23]:
So DSCR loans are pretty cool because they’re not based on your own personal debt to income ratio. So this would be really good for people who have the down payment. Like maybe you’ve got a little bit of an inheritance or something. You, you have that cash in the bank ready to deploy, but you don’t have that income to support buying that many properties or something like that. Or maybe you’ve recently switched from W2 income to 1099 income. And with 1099 income you have to show two years of income to get a conventional loan. So these are the types of things that DCR loans work really well for. Or if you’re a professional real estate investor, DSCR loans are probably what you’re going to be using to buy a short term rental.

Avery Carl [00:17:03]:
So just keep in mind though that like yes, these products are super, super cool, but they are making their money somewhere because they’re giving you the loan based on the idea that you are going to be a good enough manager that you’re going to be able to cover that mortgage with your income. So the interest rates on DSCR loans are higher typically than on conventional loans. So keep that in mind.

Brenna Carles [00:17:26]:
I do. But they point out that with dsdr, yes, it’s not conventional loan. I hear a lot of people are like, well it won’t count against my debt to income if you’re closing in your personal name, it will count against your debt to income ratio if you go back and do a conventional loan. So keep that in mind. It’s not a free for all where it won’t count against your debt to income ratio. Because some people do half and half. Right. Your debt to income may be capped for this year because you’ve bought two short term rentals and you need to show that on your schedule either before you can apply for another conventional loan.

Brenna Carles [00:17:55]:
So some people do a dscr. Well, what you need to realize is if you’re doing it in your personal name, it will show up on your credit report. And even if it doesn’t, we have ways that we see everything that’s in your personal name and so it will be counted against your debt. Now if you close it in an llc, it would not count against your debt unless for some reason you default it on payment.

Avery Carl [00:18:16]:
Okay, good to know. So let’s talk a minute about true commercial loans and then we’ll talk about creative financing a little bit. So a true commercial loan, this is going to be the hardest type of loan to find for a short term rental. And it is also based on the ability of the property to make money. It’s not based on your own personal debt to income ratio. The problem with finding and they’re out there, they do exist. I’ve heard of people getting them, but they’re real hard to find. So typically commercial loans, there’s not really like a national commercial lender.

Avery Carl [00:18:49]:
It’s going to have to be a very local bank or credit union that you’re getting this from. And they’re harder to get in. They’re both harder and easier to get. But the reason that they are harder to get, in my opinion is because you have to convince the bank. It’s like a movie they take. You have to send them a full personal financial statement. So you have to show them all of your businesses, how much all your businesses make, how much debt is on all of them, what your income is, all of your real estate, what the debt on those is, how much those are making. Like all of this stuff, you have to set this up and send it to.

Avery Carl [00:19:21]:
And once you build it, it’s easy, but you have to send this to them. And then you have to send them a business plan of here’s what I plan to do with this property. Here’s the property I plan to buy. This is what I expect it to make. And if you’re only planning to buy one or two properties in a market, they’re probably not going to approve you. Because the thing about local banks is they want to build relationships. They want your money in the bank so they can go lend it to other people. That’s the way that these local banks work.

Avery Carl [00:19:45]:
This way at any, any bank works actually. And so the bank’s going to have to either be local to you or local to the property. Most likely it’s going to need to be local to the property. So if you’re trying to buy in Broken Bow and you live in Florida, you’re probably not going to get a loan from the bank of Nebraska. They’re going to say no. These local banks want to be lending on local properties. They’re going to want you to put your money in their bank. They’re looking for a relationship, they’re looking for long term.

Avery Carl [00:20:11]:
So if you go in there and say you only want to buy one property, they’re probably not going to give it to you. And. But you would have to really do some tap dancing to show, hey, you know what? I want to build a business here. I want longevity in this market. I’m going to buy 20 properties. But a lot of them still don’t like short term. Like here in Destin. It’s still like we, we’ve got a couple local banks we use for things.

Avery Carl [00:20:33]:
They’ll do long terms all day, but they are just not into short terms and they won’t do it. So they’re out there, they exist, but you have to send them all this crazy stuff and it’s like a movie. They take it to what’s called committee. That happens usually once a week. And a bunch of people in suits sit around and decide whether they’re going to give you a loan or not. So it can be a really great thing if you can find it. But you really have to be ready to like invest in a market and not just be buying a property. So something to think about now I want to talk a little bit about creative financing.

Avery Carl [00:21:06]:
So there’s a lot of creative financing chatter out there right now because the interest rates are not cool at. I think they did just hit 8% this week. And creative financing. Are things like owner financing subject to assumable mortgages? Things like that. So first let’s talk about owner financing. Owner financing typically will not work unless the seller does not have a mortgage on the property. So if you’re looking for owner financing, the first question you need to ask is, do they own it outright? If they don’t, you’re not going to be able to get owner financing. So you can just kind of stop right there and not waste your time.

Avery Carl [00:21:41]:
It’s. It can be a little harder to get sellers to agree to that in a market like this where basically all the owners in these types of markets are. And Kathy, correct me if I’m wrong, but most of the properties that people would be buying for a short term rental are properties that are owned by investors or these are people’s vacation homes. So typically those. Right, okay. So typically those types of sellers don’t want to be wrapped up with you for X amount of years chasing down payments from you. They just want to take their money, they want you to just pay them and leave and go on about their lives. Typically, if they’re an investor, they’re probably trading up, they’re probably 1031 exchanging.

Avery Carl [00:22:18]:
So you know, they, there’s a lot of situations in which they can’t do that. So you’d have to be an owner who owns it outright and who isn’t trying to 1031 exchange or trade up in any way. Now the, the thing that a lot of people are doing lately, or not doing a lot of people are talking about lately is what’s called subject to. So it’s very similar to owner financing, but it’s when the seller has a mortgage on the property and typically a mortgage at a lower interest rate than what you would be able to get a mortgage for today. And the way that typically works is they will sell it to you subject to their existing financing. This can get a little bit hairy and I’m not here to debate whether it’s allowed or not. It’s not something that I do personally, but I’ve seen it done where the owner will sell you the house subject to their existing financing. So you’ll take over their existing loan at the interest rate that they have and then you’re paying them the equity in cash or maybe they’re financing you that equity in another second loan, typically at a higher interest rate.

Avery Carl [00:23:21]:
So this is a way you can get in to a property for a lower interest rate. But there’s, there’s some things here that we need to talk about because I know you guys have probably heard it a lot of places. There are a lot of things that have to perfectly fall into place for a subject to, to work. And there’s a lot of questions that have to be answered that I don’t have the answer to. So the debt that the seller already has, their mortgage is staying in their name even though they’re transferring the property to you. And there’s a lot of legalities there that I don’t have the answer to that scare me. And it can be done. But again, there’s a lot of things that have to fall into place really perfectly.

Avery Carl [00:24:01]:
It can be a really creative way for a distressed seller to get out of something and for a buyer who may not have the personal financial statement to be able to get a more conventional style of loan. But you know, there’s a lot of questions that happen, like what if the buyer stops paying that mortgage? What if the house gets foreclosed on? What? There’s a number of questions that I don’t have the answer to surrounding this. So another thing that I want you guys to be wary of because it can work. Sorry, something just fell off my desk and scared my dog. It can work. I’m not by any means telling you that it can’t. It’s just the situation in which that’s a great solution is very few and far between. I’ve seen investors pay 25% over the value of the house just because it was a subject to option.

Avery Carl [00:24:50]:
So don’t get so excited because you found that unicorn that’s going to be able to do subject to so that you’re now 25% underwater the second you close on that house. So don’t get so excited that somebody is willing to do something creative for you that you then forget that the rest of the deal has to work. So this is another situation where in these types of markets you don’t see it happen as much. I think subject to can work really well if you’re buying like C class primary home in like a medium sized metro market. But in these types of markets, most of the time these sellers are going to be selling so they can 1031 exchange or trade up or have some kind of reason that they can’t do this strategy with you, that they just want to take their money and go. So I just wanted to make sure that we touched on, on creative financing because it can be done. This is a time in the real estate economic cycle that it’s done more often. But I just want to set the expectation that you’re going to have to ask a hundred sellers before you find anybody who might consider it.

Avery Carl [00:25:49]:
And even, even then they may not. Even then there’s a whole lot of legal things that you’ve got to figure out that may or may not be technically allowed.

Brenna Carles [00:25:57]:
So I do want to mention for that, keep in mind, guys, how do you take over that loan you get? You have to go to that same bank that has that loan and they have to qualify you for it. Remember what I said in the beginning of the podcast that sometimes like after, you know, the Fed came in and increased interest rates, a lot of these banks are like one size fits all right, which is great if you got low debt to income. Great credit. Perfect. But some of them have changed their guidelines from when that seller initially got their loan. So you want to be very careful with that. And if you do find a deal like that, you definitely want to talk to your realtor and get a longer closing time than normal because you may run into hiccups with that. That type because that specific bank that has that loan has to approve you for it.

Brenna Carles [00:26:42]:
And you have to follow their current year to date guidelines as opposed to what it was back when the seller closed on that property. I think a lot of.

Avery Carl [00:26:50]:
I think again, I don’t know, I don’t do these types of deals really, but there’s lots of resources out there. Pace Morby is like the, the, the guy, he’s got a book out. He’s like, go check it out. It’s called wealth without Cash. So if you want to learn more about that, definitely this is not the place to learn more about that. But I don’t think that with subject to Brenna that they’re actually going and getting approved. I think they’re just doing it and not hope not mentioning it to the bank. But again, I don’t know.

Avery Carl [00:27:22]:
I’m not the subject to person. I don’t know anything about that. I mean I know some things about it. I’ve seen a few of our clients be able to do that kind of a deal. But it requires a lot of lawyer in.

Brenna Carles [00:27:32]:
Yeah.

Avery Carl [00:27:32]:
And I’m not a lawyer. So you have to have an attorney. You do have to have an attorney get involved that knows what they’re doing about all this stuff. But anyway, I just touch on it because I know that a lot of people are interested in doing things that way at this point in our economic cycle. But I also want to set the expectation that these are not the types of markets where that stuff that’s particularly easy to find a seller who’s willing to do that. So what next? Do we have anything else regarding financing? So Kathy, have you ever had a client get like. Or a lender? Actually maybe not a client. Is there anything out there that they get tripped up on ever? Like if they’ve.

Avery Carl [00:28:08]:
If they’ve never done a deal in Broken Bow like any alligators to watch out for?

Avery Carle [00:28:13]:
The only alligator we really have is there’s only about four appraisers in the entire county. So in Oklahoma it’s very difficult to become an appraiser. You have to apprentice for a year unpaid. So they’ve got it locked down. So there’s only about a 4 appraiser so unless you know the market like Brenna and them do, or a few other local lenders, you really get tripped up by them getting an appraiser from Dallas or Oklahoma City or someplace that doesn’t understand it. Other than that it’s, it’s not. We haven’t had any issues. Everything’s still to right now appraising over what we’re paying.

Avery Carle [00:28:57]:
And we’re getting a lot of. We do get seller concessions. A lot of the times we’re getting the best possible price and then going back and adding in what we need versus asking for it up front. Broken Bow is the kind of market where if you ask for it up front, you typically don’t get as good a deal. So we get the best price and then go back and add in what we need. That way, you know, you’re kind of getting both sides of the coin. But we’ve been getting lots of seller concessions and people are buying down rates. So it’s, you know, it’s.

Avery Carle [00:29:35]:
Everything’s kind of clicking when it comes to broken bone, that kind of stuff.

Brenna Carles [00:29:39]:
I also wanted to mention cabins. So a lot of there’s, you know, cabins in broken boat. And there’s some banks that think they hear log home, and they think Abraham Lincoln’s cabin. And these, these cabins are, are not that. And a lot of times they’re not true log. They’re tongue and groove, which means it’s a certain way the floor and the, the joists of the wall meet, but they just see a log look, and they think it’s, you know, this chinking and all this stuff. And so if your, your lender is not familiar with the area or what that type of home is, you could get caught up because they may say we don’t lend on fabricated log homes or, or things like that. And it’s really not that.

Brenna Carles [00:30:21]:
So you always want to also check if you are using a local lender or anything. Check with Kathy and be like, okay, you know, look at the pictures. Give those pictures to your lender and be like, can you lend on this? Because in the third hour they may say, oh, wait, we can’t do this. The appraisal came back. It says log home.

Avery Carle [00:30:38]:
Yeah, we don’t. We haven’t really had any of that issue. Luckily for us, the mortgage shop does a great job with just making sure we’re using the local lenders. And we’re all kind of local appraisers. We’re all working together. And so it’s, we’ve. It’s been Pretty streamlined. But out of state lenders, you never know.

Avery Carle [00:30:58]:
You know somebody that’s not familiar with the area at all, you have no idea what they’re going to come up with.

Avery Carl [00:31:03]:
Yeah, yeah. So, well, cool guys, is there anything else related to getting financing in this market that we haven’t gone over that you think the listeners could benefit from hearing HELOCs?

Brenna Carles [00:31:13]:
But I want to, I want to be, I want to preface, you can get, if you need some down payment, you’ve got equity in your primary residence or sometimes in your second home, investment properties that you already own. You can use what’s known as a HELOC or a heloan’s home equity line of credit to pull some equity out of your property and use that towards down payment. You can’t use things like credit cards because those aren’t secured lines of credit. A HELOC is a secured line of credit which means it’s attached to a piece of real estate that you own. However, when I say that I don’t want you guys to go and pull out all of your equity and, and be strapped for cash and try and pay that debt back because your home equity line will be a higher interest rate than your primary mortgage. So just be careful with that. Make sure if you do use a HELOC to pull those funds out that you can make that payment, that monthly payment for that heloc and you were okay with that monthly payment as you’re trying to get this other property.

Avery Carl [00:32:12]:
And one, one note on a HELOC that I would like to mention. So the, the sellers that are, well, used to be buyers, now sellers that I see with us that come to us to sell that like have need to sell the most urgently are ones that used a HELOC to, for their down payment and plan to use the income from that HELOC to, sorry, the income from the property to pay off the heloc. And they’re like, hey, I’m not cash flowing. It’s like, well, because you have a, you know, you’re losing 3, 500amonth to the HELOC. So what my recommendation is if you’re going to get a heloc, don’t make it a huge one. Like don’t, please don’t pull out all $300,000 worth of equity in your primary home. Maybe pull out like 50 if there’s 300, if there’s a hundred, maybe don’t pull out 50. Pull just the smallest amount possible if you do this at all.

Avery Carl [00:33:04]:
But make sure that your primary job that you can cover the payment of that HELOC with your primary income, not with income necessarily from the property because it’s the people who stack themselves up with HELOC and then just try to pay it out of the cash flow. Like you can knock yourself out of having any cash flow by helocing and leveraging too hard. So if you’re doing any sort of HELOC for a down payment, make sure that you’re able to make those HELOC payments out of your primary income and not trying to make the property work harder than what it can actually do to pay for that. So just make sure that you pay attention to where that HELOC money is going to come from at the beginning. It’s not a great time to be he locking but if it’s just a fraction of what you’ve got, you know, just don’t over. Don’t over leverage yourself is all I’m saying. All right, well guys, thank you so much for listening. Thanks so much for coming.

Avery Carl [00:33:53]:
Kathy and Brenna, if you guys are ready to buy and or finance a property in Broken Bow you can email Kathy C A T H y@theshorttermshop.com you can email Brenna@mortgageshop co not.com we didn’t quite make it to the domain game there. If you’re interested in financing, you guys just aren’t ready to go that far yet. But you have some more questions, you want to just learn some more. We have a few ways you can do that. We’ve got a great online community on Facebook. It is called Short Term Rental, Long Term wealth. Same title as my book back there on the wall. Or you can join us every Thursday for a live Q A.

Avery Carl [00:34:31]:
Brenna is on there also and you could sign up for that@strestions.com it’ll be me, Luke and Brenna every Thursday also I just started if you want to talk to me Personally I have four 30 minute slots while I am on a walk every Thursday and you can sign up for that@talktoavery.com Thanks y’ all.