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Real Estate Investing School Podcast
212. REAL DEAL: How to Get a $13k Credit on Your Next Deal with The Cowboy Consultant
00:26:44
Welcome to the Real Estate Investing School Podcast. In this episode from the “Real Deal” series, Brody introduces a unique educational snippet from a live coaching call featuring Jason Griffin, a financing expert at Real Estate Investing...
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- [00:00]
Brody Fossett
What's up everybody? Welcome back to the Real Estate Investing School podcast. This is your host, Brody Fossett. And today is a Real Deal. This is our Real Deal series where we talk about one real estate deal so that we can learn from it and apply the things that we've learned. So today is going to be a.
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Jason Griffin
Little bit different of an episode for.
- [00:23]
Brody Fossett
You and it's actually going to be a segment of a call. It's a little clip of a recording that we have here at Real Estate Investing School. We have calls every single week on different topics and focused on different things. And the last probably 15ish minutes of this call I thought were really impactful. Just different insights and things that we talked about that I wanted to share with you here. Now it has to do with one specific deal, which is why I wanted to touch on it. I'm going to intro this so, you know, kind of some background because obviously you missed the hour before that of what that call was about. Essentially we had Jason Griffin who he does our finding calls with once a month. He's a killer when it comes to funding real estate deals. I said finding funding. He does our funding calls. He knows ins and outs of pretty much everything when it comes to financing, real estate and lending and all the criteria and hoops you need to jump through, yada yada yada. So we give our students access to him to be able to book some one on one time and strategize with him with their specific scenarios and where they're at personally. And so one of the things that he talked about throughout this call were some of the options and things of available. When it comes to just changes we're seeing in the market. When it comes to change, we're seeing obviously we have a new president was just elected that comes with a lot of different things, right? We want to be aware of what's the market doing, what are the Feds doing, what are the rates look like, how does that affect us as investors and impact us as investors who are on this mission of ultimately going out and building more financial freedom and independence for our family and just being in control of our lives. Right? Because that's what we, that's the purpose. That's why we do what we do.
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Jason Griffin
Right?
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Brody Fossett
So awesome call, amazing insights. But towards the end he shared a few tools, I guess, and resources that are available. One of those things is a program that it's a solar program. Sounds kind of strange, but essentially if you get solar on your house, that's part of this fha Loan, which is really cool. So it's actually like a Fannie Freddy type program. But if you get solar through this company, they'll give you a $13,000 credit towards your down payment. Now the cool thing with this is the solar is actually wrapped into your home loan and it's not just a lot of solar companies will do different things, but it's just nice knowing that it's aligned with this program so that it works hand in hand with the actual loan. So really cool there. It's able to help people get into homes, it's able to help, you know, you leverage your money a little bit better, which is what we focus on and talk about. And so part of that it led into what is an FHA loan, what are the guidelines behind it, why do we have it, these different things. And then ultimately how do you go and maximize it? How do you go and maximize it? And Jason shared some interesting insights on evaluating where you're currently at. And it's so powerful when he talked about this and you'll get to it in just a second. But what was powerful is it allowed you to look at where you're at, where your situation is and how do you go leverage that that led into. What does it look like to be able to maximize this? Fanny not Fannie Freddie, what does it look like to be able to maximize this FHA loan option and how can you do that? So specifically we kind of, this is real and raw, but we went through a hypothetical deal scenario on how we can take this information that we just learned about and go and maximize this opportunity. And what you're going to find out as you listen to this recording is it's not as difficult and as crazy and as hard as it actually seems. So many times we have all these reasons why we can't get in the game. We're going to show you specifically how you can go acquire a million plus dollar asset in most of your cases and do that with around $20,000 and get a 50 plus percent cash on cash return. Like I said, this is a hypothetical scenario, but very, very real. Very, very like they're everywhere. Right. So with that being said, let's jump into it and we'll catch you guys in there.
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Unknown Speaker
There's a pretty cool program that, that I wanted to just hit on for a little bit and then we'll talk about some strategies for the start of the year. I want to keep this call. My goal here is to be talk about this program for a minute. My goal here is to keep it fairly Simple. Simple yet, I don't know, simple yet strategic yet profound. Whatever. I think you can take this call to whatever level you're at in the, in real estate investing or buying a house or all of that stuff. I think that all of the things we'll talk about today you can take to the next level no matter where you're at. So keep that in mind as we're talking. But this is a new program. I like this program because it's 100 financing and I'll explain how it works. There's a lot of stuff here. I didn't really have a flyer because it's new enough. We really don't have. Nobody has a lot of that stuff yet. I mean, we've started talking about it. I think we've done one of these in our company, but again, fairly new. I haven't heard anybody really talk about it except for internally. So Simply Solar, what this is, this is an FHA program and a borrower can actually earn their down payment, right? So what's going to happen is you're going to, you're going to go, you're going to get a course and you're, it's a six to eight hour course, it's not a small thing, but you take it online and you basically earn three and a half of three and a half percent of a down payment or the home sales price up to 13,000. So this gives you kind of a ballpark. This is about that, that takes care of pretty close to a $400,000 purchase, right? There's your down payment. So this isn't a down payment assistance program or anything like that. You're, you're going to get a 1099 at the end of the year for the down payment that you earned watching this video. It's going to educate you on fha, it's going to educate you on solar and wind technologies, all of those kinds of things, just a bunch of things that it does. And, and at the end of the day, once you're done with this, you have 90 days to buy a home and you can use that 3.5%. The cool thing is this starts to talk about the benefits a little bit. But the cool thing is that down payment or that three and a half percent, you don't just have to use it for a down payment. You can, you can use it to pay your closing costs. If you have the down payment, you can use it to pay down debt if you have the closing costs and the seller is paying the down payment. You just need some Help qualifying, right? You can go on a cruise after you buy the house if that's what you want to do. Like this is not necessarily. You just have to buy a house within 90 days and at closing they'll give you the three and a half percent to use at your discretion. I like this because most of the down payment programs that you have out there, Utah housing is one of the ones we have in Utah. You know, you always have usda, that's a smaller demographic to qualify for because it's a little bit tougher. You have to make enough, but not too much. And a lot of those down payment assistance programs out there, whether they're state assisted grants or whatnot, depending on where you're at, they all have their income limits and different things. This is just a normal FHA loan. So first and foremost you just have to, it has to be fha. So if you're a seasoned real estate investor, the main thing for an FHA loan is you can't have it within 100 miles of the house that you're vacating. If you're going to house hack off out of it and start renting your house, you have to have 25%. Well, I shouldn't say you don't have to. You just can't be within, can't be then 100 miles of your house, right, that you're living in. Now, if you want to use the income from a house, hack house, hop, whatever, and be able to count the rents, then you have to have 25% equity in the house that you just left. Those are the two FHA things. So 25% equity 100 miles away. There are some exceptions to the rule. And if there's things out there, you know, we've, we've made FHA loans for people that have health issues or, you know, maybe adult parents that you're taking care of. Just similar things like that, right? There's, there's different things like that. But if you're a first time homebuyer, this is great. This is just your first home. But you don't have to be a first time home buyer to use this program. So fha, it gives you your down payment. And the cool thing is this. So you get your 13,000. Let's just say, like I said, it gives you these four things. Down payment, closing costs, debt payoff, savings, replenishment, whatever it is. You can just put that in the coffers because, and you can also team this with down payment assistance programs too. So if you have 100% financing program out there in your state or whatever and you can get this tax credit, then maybe that 3.5% goes for something else. So what I was saying earlier is a lot of times with these down payment assistance like Utah housing, they have a 1% origination of a half a percent warehouse fee. So 1.5% in fees right out of the gate. This, this skips all of that. You don't have those fees. You just, you're basically getting paid for the down payment. So you're not having to pay your down payment back. And it just, it helps your ratios in, in those kinds of ways too. So just a different thing, different way to think about it and you get, we'll talk about the tax credit, but you get a tax credit because you're put on, on solar and all that stuff. So long story short, this kind of gives a basic scenario and keep in mind, I think this is in, I'm going to come back to this page right here. But this is in, these are the states California, Arizona, Nevada, Utah, Texas, Idaho, Colorado and Florida. So those are the states this is in for now. And you can see the where, where it's coming to soon. Right in those, Illinois, Pennsylvania, New Jersey, Oklahoma, Kansas, Missouri, North Carolina, South Carolina and New Mexico. Okay, so this gives, this gives kind of a little bit of a breakdown and you can kind of see the, see there. So you got a home purchase on this. In this scenario you've got just an FHA loan and the simply solar and, and they're adding, I think one of the things that to think about is they don't let you go more than 20% of the home's value for solar. So if you're buying in this case a $500,000 home, a, you've got to be in an area where that loan limit doesn't mess you up. Right? You can't. In Iron County, I think the loan limits like 484 or something like that. So, so this one probably wouldn't work. Well, I guess with your down payment and a little bit of work it would. But 10% of they're saying right now after talking, these guys are doing the education, they're saying that about 10% of the home value is usually what your solar system costs on average. This one's a little bit cheaper. For 5 on 300 it was like 25,000 for the solar system. And there's a lot of those solar systems for you sales guys out there that do solar. You know, you would know way more than me on that. And they'll take care of you on that. Once you kind of get started in the education process, they'll talk about the type of system and the batteries and all of that kind of stuff that goes along with it. So in this case.
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Jason Griffin
Hey, Jason, so touch on, just clarify.
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Brody Fossett
For people that don't know what you're talking about when you say that's the.
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Jason Griffin
Limit, you're talking about Iron county, like being. Okay, just so people that don't know what that means kind of know what. Know what you mean by that.
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Unknown Speaker
People that don't know what that means, know what that means.
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Brody Fossett
Yeah.
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Unknown Speaker
Okay, perfect. So with fha, like I said, there's a couple of guidelines here. Normally on, on other loans, the first time home buyer especially there are, there are some overlays, what we call them. FHA has loan limits in every county. So in Iron county, the, the loan limit is 484,000. In Utah county, the loan limit is, it's higher and some of those higher, like where Park City is or in California, you know, all you got to do is Google the county that you're in and just google FHA loan limits in whatever county and it'll tell you what it is. Now, the loan limit is not the purchase price, it's the loan limit. Right. So for example, in this scenari, if I'm buying an Iron county and I'm buying a $500,000 house and the loan limit is 484, then I have to come up with 16,000 down to do an FHA loan. And so you can, if you have a bigger down payment, if you wanted to do this simply solar and you had a little bit more, you bought a little bit of a higher house, you got the 13,000. Let's just say you had 13,000 to put with it. You can do that. You can put a bigger down payment down and, and do it that way as well. So there's some flexibility there. But keep in mind, the loan limit means the max that you're borrowing for fha. Does that make sense? That good, Brody? Yeah, that's great.
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Jason Griffin
And you, you could still, right, like, like that's just to qualify for three and a half percent down. If you went over that limit a little bit, you could still use an FHA loan. You would just be paying a little bit more, more than that. Three and a half percent down. Is that accurate?
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Unknown Speaker
That's accurate. And so like there's, there's two or three different ways to do that, right? Like you can, if you have the cash again, three and a half percent down up to 13,000. So if you have, you're going to get 13,000 and then you, you're going to have to come up with the difference. But let's just say you want to go, you don't have the difference. So go Utah housing, which is 100% financing program. Get the first through them and get the 13,000 through here and then borrow what the, you know, the remaining difference that you need through Utah Housing too. I mean there's different ways to team that up with these down payment assistance loans to get where you need to be. So that we're going to talk about the basics here. But again, you can do some different things if you find it, right?
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Jason Griffin
The other thing. Sorry, I keep chiming in. The other thing is kind of interesting too. I know this isn't like an FHA loan training necessarily, but if you're doing one just so like, I mean basic, obviously the idea of doing FHA loan and the reason why you want to if you can is the terms in general are just going to be a lot better, right? So not only like what you need to put down, but typically like you're incentivized because of the type of program that it is, right. So anytime you can do that, you want to try and do that. But in most scenarios, but one thing is up to like multiple units, right? You can, you can do say you're like house hacking and there's, there's other units. The. Correct me if I'm wrong, Jason, but like the, the, the limit changes. It also goes up in. I don't know if that's every county. I know, I know it is in.
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Brody Fossett
In Maui for sure.
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Jason Griffin
Like the, your minimum is like right around a million bucks is the, is the county limit for fha. But if it's you, I think you can go up to like a triplex, maybe even a fourplex, I don't know. But it's like one point, like 55 at that point. So you get an extra like $550,000 of your limit. Now there's different qualifications with that which. Sorry, I didn't mean to derail everything but just something to keep in mind, like if you're looking for a place and you want to house hack it and you want to get something, you know, bigger, nicer and you want to put solar on it and you want to be able to get into it where you can take advantage of. I mean, I guess it's only, you know, it's going to max out at that, that 13,000 or whatever. But yeah, just some different thoughts.
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Unknown Speaker
Well, no, that's perfect. And yes, when you jump on the website to look HUD's website or when you Google that, it's going to give you a single family loan limit and then it'll say two to four units and it'll break down in every county what they are. And they do graduate up depending on how many units are there, up to a fourple. And FHA is going to be a little bit more understanding with the down payment on that kind of stuff too. You're still going to be at three and a half percent down. So yeah, so all of those things that Brody said come into play and all of the benefits of a, of an FHA loan, I guess it's hard because I see all of this stuff on a day, day to day, right, when I'm trying to help people find the right kind of product and we're talking about 100% financing or some sort of down payment assistance and, and all of that kind of stuff. And you're, and so you're like, well, you can go Utah housing in this case, but you know, you can only make 100. And if you're a family of two, you can only make, I can't remember what it is now, but 120,000 or 90,000 or whatever, whatever those things are. And you have to have a credit score of 660 to use Utah Housing First Home program. And you have to be a first time homebuyer. And you know, there are all of these stipulations in those down payment assistance. And the cool thing about this one is all they're doing is saying, hey, take our course, get the 13,000 or the down payment and then just go FHA. You don't have income limits. You can make as much money as you want. You can, you can have a FICO score of 580, 620. You know, some of those things that those down payment assistance programs don't do. And there's probably an option here to manually underwrite, meaning if, if the, if you run it through the FHA system and the, the automated underwriting system says no and you can find enough compensating factors, you've got a good job history, your ratios are really good, your credit score is just low, but you've got some reserves or something like that, like compensating factors, an underwriter can take that no and turn it into a yes through a manual underwrite. So there's just a ton of stuff that you can do with this which is really kind of exciting. And the, the third part I'll talk about a little bit later. My idea here was partnering with somebody on this. So, so again, just kind of look through this. I can send you some of the stuff after if you want to see it. There's the earned income credit. You're the bigger differences that you're going to see right here in this program. The electric bill. I mean, in this case they're saying wherever this is, it's 300 bucks a month. Maybe if you have a four plex, it is 300 bucks a month and you're the landlord paying people' power bills. But, but here it is right here. Right now you start to have the ability to charge a more premium rent because some of the utilities are taken care of. Cash. Do it. Signing 175 here, you can see that they have applied the 13,000 to the 175 and 4,500 is left over. Just like what Brody was saying earlier. You can, you can supplement that 13,000 to get where you need to be. The monthly payments vary just a little bit. They're really pretty close. This bonus, you get a 30% tax credit with this solar thing. So you can take that depending on how you're paid. If you're W2, they're seeing that maybe a little, a little bit more. If you're self employed, you can take that 30% the year that you buy the house or you can spread it over five years. So it's something that you really kind of need to get with your CPA on and strategize. But a 30%, you know, 30% tax, tax refund is, is definitely going to help you recoup some of that cost of that solar. And so I think that the biggest thing that I'm seeing right now is like if this is something that you're going to do and only have for a couple years, it probably doesn't make sense. It's going to take a minute for you to recoup. You can see in here the 30,000. So you, you buy a, in this case, a $40,000 solar storage unit, a $40,000 solar system. You get 13,000 towards your down payment. You're going to get a 30% tax benefit. It's going to be another 12,000. You're basically saving, what is that, 3,600 bucks a year. So, you know, 13,000 plus 12 is 25. You know, the first year you're going to be at 28. Call it 28,000 to offset that 40. And you're also it's going to add some value to your house as well. And that's where it depends on the area. I mean, sometimes you don't, most of the time you don't get dollar for dollar value for solar. And that's probably the downside to this program. If you add a forty thousand dollar solar system onto your house in Utah, you're probably not going to increase the value of your home by 40,000, but you might increase it by 20. So if you've increased your home value by 20, you've got 13,000 to go to it from the down payment. You've got 12,000 that you've made in tax incentives and then you're saving 303,000 bucks a year in power bills. You know, pretty soon you've recouped that 40,000 and then some and then from then on it's going to be that way. And the solar, kind of the last thing here, the solar is financed into the loan. So you don't have a lease, you don't have, it's just done and paid for. And, and I think that's one of the, the bigger things that help with the value of your home too is it comes with a solar system that's paid for. So a lot of times if there's a, what's it called? A, like a lean, an equivalent lien from solar, I can't remember what the, the name of it technically is, but they'll, they'll put a lien on the house because there's a solar system that's not paid off when the seller has to pay it off or they can come and get it or you have to assume that all of those things which, which make it a little bit more cumbersome and that's, that's a tough part of refinancing sometimes as well. But after all of this is done, you have the solar and you own the solar. So anyways, the last thing here to think about, and this has been fairly popular for me this year, is partnering. So this is a great program to partner with. So you're going to, if you're a real estate investor, you can find, this is where I've kind of seen it the most, is they'll find a little brother or sister or niece or nephew or something like that. That's, that's going to college or looking to buy their first house. They'll partner with them for all the lowdown payment stuff that they need and, and can get in the low interest rate through fha and, and then they buy A house and maybe it's a duplex together, maybe it's a fourplex, maybe it's a single family and they create an ADU in the basement. And, and then in a year, the, that person can stay, they can, you can partner, you can sell, you can buy the equity out, just whatever your exit strategy is, but it's a great thing for that. And then nobody has to come up with a down payment if you play your card right and find things in the right kind of price range. So let me ask, answer a couple of these questions. Two requirements for FHA moving 100 miles away or more and have 25 equity in the home that you're moving out of. You only need 25% equity in the home if you're going to count the rents from that to qualify for your next. So if you're doing a house hop and you want to count the rents from that home, you need to have 25% equity and otherwise they hit you for the full payment. So that's the. And then Brody for the. Yeah. Doesn't mean buyers will have to qualify for the higher purchase amount. So, yes, it will increase your payment a little bit. So again, but you're gonna, it's gonna offset with the down payment too, right? So 13,000, you're gonna, you're gonna go down 13,000, but you're gonna go up. In this case, you would go up 27, right? The difference between 13 and, and 40. So that would increase your payment roughly about 100, 180 bucks, maybe, maybe a little bit more, maybe 200. So yeah, your debt ratios have to work, but you don't have to put a down payment on the solar, the additional solar. So you just have to make sure DTI works. But again, you're not necessarily qualifying for the solar independently. It's just going on into your loan. So you're going to borrow. In this case, you're going to borrow 500, you're going to go down 13 to 487 and you're going to go back up 40 to. I probably did that way harder. 5, 5, 40 minus 13 is 527. That's going to be your loan amount in a scenario like this. But the seller's. Again, the seller is going to be on there, it's going to be yours, it's going to be paid for. You don't have to go back to that kind of stuff. So I don't know all about the batteries, I don't know about all the systems. I don't know. I know, there's definitely some tweaks there. But anyways, just I think this is pretty cool. I think in some areas, Arizona, some of these other places, I still think southern Utah is going to be, be good Northern Utah, whatever. All that kind of stuff is going to be something that is going to be like big and yes sir, there are only certain lenders doing it right now. We, we. I saw the loan store I used to work with when I broke but our, our company RWM right now has brought this in house and we've underwrote and underwrote and underwritten and funded a solar loan. So. So pretty new. I have, I haven't heard of anybody down here doing it yet. It's a Freddie Mac program. So this isn't one of those fly by night things. This is an fha. They like these loans because they perform better because the solar, solar helps offset things. They get some education. They're, you know. Yes, the payment is up a little bit, but it's probably, I don't know what a payment on a $40,000 solar system would be now, but it's got to be cheaper than, than what it would be financed into your mortgage at that low rate. But I think that this is, this is definitely generating a little bit of excitement and whenever you can get your down payment taken care of with, with the exception of just having to count it as income, that's kind of a pretty cool thing.
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Brody Fossett
Thanks so much for tuning in today. We'll catch you on the next episode. Don't forget to leave us a review if you're getting value from this and we'll see you next time.