11 units in bowling green chance to buy.. Green or red light?

11 units in bowling green chance to buy.. Green or red light?

Member since 2018 · 65 posts · 25 votes

Hey all! I'm looking for some expert advice on this matter. The company I work for has recently acquired 2 quads and a triplex All on the same lot and I'm really thinking about buying it with hard money, use the company I work for to rehab it (maybe) and then refi to pay off a HML. I acquire contracts (like a wholesaler) for them. My issue is 2 fold:

1. I don't precisely know how to analyze a market. I've just had so much analysis paralysis on the matter, that I just call and acquire where they tell me too. I understand some of the basics, but I feel like getting confirmation from an expert will really help calm my over analysis. After this tornado hit recently, I was told that values of homes go down significantly (not sure if that's true). The properties we not affected by the tornado. 

2. I'm not quite sure if I will qualify for this refi because my DTI might be around 41%. That's including the rental income and my current day job. Not sure if that will be appealing to any lender. On top of that, I don't have much reserves. I know Brandon, David, and Scott always harp on the fact you should use OPM only if you have reserves to back you up.

Should I take on this project? Thanks!

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North Richland Hills, TX · Member since 2019 · 156 posts · 80 votes
4y

Hi @Peter Shafik, as I understand, that will be your first investment property, right? If so, I would def recommend not going that big on your first one... 

I always tell people that I'm helping that in my opinion you should start with an SFR, understand the investment, and then move on. As I've realized, small MF is very different from the SFRs, you are paying on a whole lot more than a single-family.

Also, you said that you are not that familiar with the area and REI so you can fall much harder when starting with 11 units and not one, that can be overwhelming.

Again, this is MY opinion. I'm wishing you the best of luck!

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  • North Richland Hills, TX · Member since 2019 · 156 posts · 80 votes
    4y

    Hi @Peter Shafik, as I understand, that will be your first investment property, right? If so, I would def recommend not going that big on your first one... 

    I always tell people that I'm helping that in my opinion you should start with an SFR, understand the investment, and then move on. As I've realized, small MF is very different from the SFRs, you are paying on a whole lot more than a single-family.

    Also, you said that you are not that familiar with the area and REI so you can fall much harder when starting with 11 units and not one, that can be overwhelming.

    Again, this is MY opinion. I'm wishing you the best of luck!

  • Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    100000% GO FOR IT! 

  • Member since 2018 · 65 posts · 25 votes
    4y

    @Shai Flax I think you're right on that honestly. I need to build momentum with my first property here locally and something smaller so I can understand it better. There's wisdom in that. And @Bud Gaffney I appreciate your enthusiasm! I will definitely take the plunge on something locally here in Nashville Soon. 

    A gold nugget for both of you, there's a company I just recently learned about called watersystems.com based in Nashville but work nationally. They install sub meters for water and electricity for FREE and make money between the customer and utility company. I just recently heard about this so do your DD. Anyways. Thanks so much for that guys!

  • North Richland Hills, TX · Member since 2019 · 156 posts · 80 votes
    4y

    @Peter Shafik Thanks! Do you know if they are doing that for a small MF? 2-4 units?

  • Real Estate Agent · Merritt Island, FL · Member since 2017 · 986 posts · 1k+ votes
    4y

    Your DTI won't be relevant unless you make it relevant. HMLs will lend based on the property, not on your DTI. Once done with your renovations and the places are rented, the numbers should help your DTI for Conventional financing. If the numbers are too high (note: 41% isn't necessarily the threshold), then no with a Non-QM lender. You'll pay a higher rate, but that's not relevant - as long as your cashflow is still solid. Good luck!

  • Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    4y

    @Peter Shafik Don't let the DTI issue stop you. It is little more than a distraction from the real prize, which is snapping up a property. You could certainly try getting a full doc A-paper loan where DTI may be considered but don't let any turndowns discourage you. There's a long line of lenders in the private portfolio loan world that ignore DTI, personal tax returns, etc and still offer a competitive rate and terms - think No doc, lite doc, asset based loans. Get your foot in the door with this opportunity and don't look back.

  • Member since 2018 · 65 posts · 25 votes
    4y

    @Shai Flax I'm not sure. I think it's anything Multi. I'd have to call and ask

  • Member since 2018 · 65 posts · 25 votes
    4y

    @Tchaka Owen thats very helpful. Thanks!!

  • Member since 2018 · 65 posts · 25 votes
    4y

    @David Bilandzija OHHH That's good stuff. I'm saving that one. Appreciate the advice!

  • Jonathan DavisPro Member
    Member since 2021 · 4 posts · 1 vote
    4y

    I am not an expert but I would find other investors that do know how to handle this many properties to help. Bring it to them they can show you how for a percentage of the properties. It is probably more than you can handle doesn't mean you can't get a slice of the pie and learn as well. Good Luck!

  • Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Lenders look at more than DTI and before you buy that thing you'll want to make sure you can get a loan to BRRR it. Talk to a couple banks. Otherwise you end up having to sell it and though you might make a profit that way, most of the time if it was a rental investment you haven't created tons of equity so the return on your time and money to own it briefly and sell it makes it not really worth it.

  • Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    4y

    @Peter Shafik Keep us posted Peter and good luck.

  • Member since 2018 · 65 posts · 25 votes
    4y

    @Jonathan Davis I’m definitely putting that and what @Allan Smith said on my Journal of MINS. Thanks guys it helps make the path forward a little more clear. And I got you @David Bilandzija!

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