All Forum Posts by: Aaron Brown

Hi Alfredo,

I absolutely love this "house hacking" strategy with a multi-family property! I say go for it if you can live in one and let the tenants pay for the mortgage!

you might find this blog, and podcast to go along with it interesting regarding multifamily investing! One of my favorite podcasts on here!  http://www.biggerpockets.com/renewsblog/2014/03/14...

I used a 203k(owner occupant-rehab) loan on a fourplex back in May of 2014. if you don't need to do any rehab on the property, then just go with the standard FHA loan.

Some advice on the logisticsof the 203k: You have to use one general contractor, and cannot use individual subcontractors. The GC can use subcontractors but it all has to go through the GC. before you close on the loan, there is a huge stack of paperwork that you have to go through and the GC has to be selected and finalized and you must turn in the borrowers agreement, signed bid and scope of work, and the GC has lots of paperwork as well.The GC you select must be licensed bonded and insured, provide several references.

A little about my experience-The extra paperwork that the borrower and the GC must fill out for the 203k approval is pretty extensive. I contacted four GC's- up front,  1 declined to bid, 1 didn't meet  licensing and insurance Requirements.  The other 2 bid on the projects.  I selected the lowest bid. After about a month and two closing date extensions,after pushing this contractor and working with 4 different people in the company, I still was not able to get all of the required paperwork turned in. It came down to one last piece of info we needed and they finally decided to back out a couple days before closing. Another extension. I then had to go back to the last GC who was the highest bid. I was able to negotiate a little lower price on some projects, which was good,  but he was still 2-3 times higher than 1st GC On some major projects. 

I ended up using the cheaper contractor for some work later, but this I had to pay out of pocket and couldn't wrap into the loan. I also did lots of work myself, but anything on the signed scope of work using the 203k, must be done by the GC you hire.  payment-the bank pays the GC half up front and half on completion when you and the inspector has signed off on the finished work.

I used a 203k(owner occupant-rehab) loan on a fourplex back in May of 2014. You have to use one general contractor, and cannot use individual subcontractors. The GC can use subcontractors but it all has to go through the GC. before you close on the loan, there is a huge stack of paperwork that you have to go through and the GC has to be selected and finalized and you must turn in the borrowers agreement, signed bid and scope of work, and the GC has lots of paperwork as well.The GC you select must be licensed bonded and insured, provide several references. 

A little about my experience-The extra paperwork that the borrower and the GC must fill out for the 203k approval is pretty extensive. I contacted four GC's- up front,  1 declined to bid, 1 didn't meet  licensing and insurance Requirements.  The other 2 bid on the projects.  I selected the lowest bid. After about a month and two closing date extensions,after pushing this contractor and working with 4 different people in the company, I still was not able to get all of the required paperwork turned in. It came down to one last piece of info we needed and they finally decided to back out a couple days before closing. Another extension. I then had to go back to the last GC who was the highest bid. I was able to negotiate a little lower price on some projects, which was good,  but he was still 2-3 times higher than 1st GC On some major projects.  I ended up using the cheaper contractor for some work later, but this I had to pay out of pocket and couldn't wrap into the loan. I also did lots of work myself, but anything on the signed scope of work using the 203k, must be done by the GC you hire.  payment-the bank pays the GC half up front and half on completion when you and the inspector has signed off on the finished work.

My loan application and paperwork approval almost blew up on me due to timelines and paperwork expiring because of all the delays. Luckily even with all the extensions we were able to close on the property Thanks mostly to my very knowledgeable mortgage lender and help from my agent! I highly recommend using a very experienced mortgage lender who has done several 203k loans And can push all parties to get required paperwork submitted. 

In the end, it was a TON of work but definitely worth it!  Good luck on your deal! let me know if you have any questions I may be able to help with.

@Nicholas Kral  @Mike D'Arrigo

I'm curious, why would you guys avoid multifamily? ... and when you say Kansas City, does that include the outer areas Blue Springs, Lees Summit, and independence? The only reason I ask is because I just have started investing, I live in Independence, and I've chosen Multifamilies as my main target and goal! My first deal was a 4plex in Independence and after much hard work and rehab (I used a 203k loan), it is now cash flowing brilliantly, even with me living in one unit! Lol. after reading much on BiggerPockets about multi-family vs SFR, I see the benefits of both...

Mike, if you could share your reports and links to your podcasts on Kansas City and and Indy, I would greatly appreciate it.

Hi Connie,  can you send to me as well please?! You have my email address already I believe! Thanks so much!

Winston-

I've read several really great tenant/landlording posts here on BP, and my thoughts were "as long as they pay in full & on time, then I'm happy." But I can forsee a deep cleaning and possible update needed when they move out. Thanks for the comment.

Thanks for the quick reply Colleen. I hadn't thought about snow removal and lawncare.

I don't know specifically why the units are vacant or for how long, but the monthly rent numbers are current rent for unit 3 &4, and past rent is for unit 1 &2. Was not owner occupied.

Also, I forgot to mention that this has been on the market for 3+ months... which I thought would warrant a bigger reduction in original asking price($65000) but they won't budge from $62k.

Hello BP Community! This is my first post and first deal so I'm excited but also needing some advice!

This single-family home built around 1900 has been converted into a multi-family with four units. I am planning on this being my personal residence for 1-2 years(either unit 1 or 2) and was able to get a local bank to finance with only 5% down since it's a personal residence. Here's the details:

Purchase Price: $62,000

Closing costs: approx $3,000

Monthly Rent ($725, unit 3&4 currently rented)

Unit 1- 600 (2br) -newer cabinets and carpet

Unit 2- 450 (1br) -newer cabinets and carpet

Unit 3- 350 (studio)

Unit 4- 375 (1br)

Monthly Expenses- ($488, not including management or maintenance)

Insurance- 83

tax-138

water- 47 (total house-city won't provide separate meters)

trash-18

gas-50 (owner pays gas for unit 3 and 4, 1 water heater for both units)

electricity- unknown

sewer-26 unknown (estimate based on local rates - 26)

Maintenance ???

Management???

Advertising, Landscaping, other???

Questions- How much should I include for monthly maintenance budget? I plan to manage it myself as I will be onsite, but should I plan for prop. management up front?

Interesting side notes-

1) the two current tenants are longterm 4+ years, but are also not clean and tidy at all.

2) there are several very nice houses in this neighborhood, but the one next door is condemned (in tax default), and a house a couple blocks over has been destroyed completely by fire.

3) Comps of SF and MF homes are all over the place in the area and it's pretty much impossible to get comps on this type of unit even going back 2 years.

Any suggestions on how I should factor the current tenants, neighborhood, comps or empty unit potential??? Anything I'm missing?

I've just about ran the numbers and scenarios to death and at this point need some outside advice!