All Forum Posts by: Adam DuCharme

How do you price out an individual room vs the entire house? My initial guess would be look at 1 bed 1 bath rentals in the area but is that the best way to estimate?

My mortgage was sold to another institution last year and it seems like they handle escrow differently. My previous bank would pay the taxes and insurance when due and collect those balances equally throughout the year. So my escrow account could technically be negative for some of the year if, for example, taxes are collected halfway through the year but everything would be settled by the end of the year. My new bank requires that requires that I have a positive balance of 2 months escrow payments in my account at all times, meaning my account is a few thousand dollars "behind" on this balance. To fix this, the bank has added a shortage payment to my monthly mortgage until that positive margin is achieved. However, increasing insurance rates means that this shortage is also increasing so my monthly payment is increasing exponentially to accommodate the increase in both my insurance rate and my shortage (my mortgage has increased over $400 monthly in the past 1.5 years because of these factors).

TL;DR - Is it normal for a bank to require a positive escrow balance at all times like my current bank does? Or do most banks only charge escrow based on payments for that year like my first bank did?

Quote from @Celia Lumbroso:

Hi @Adam DuCharme great question and more than happy to discuss this further in-depth. 

A few things to additionally consider costs upfront is the appraisal cost and insurance costs. Alternatively, you can have these paid on the HUD at closing but that means you will get less funds/cash out at closing.

A lender I previously worked for would collect a deposit upfront from the client to cover the appraisal cost and some still utilize this action. 

 Thanks for the info Spencer!

Quote from @Erik Estrada:

Quote from @Adam DuCharme:

I'm getting ready for my first flip project. Is there a rule of thumb of what costs require cash up front vs what can be covered via loans? From what I"ve gathered on a few posts, I believe the hard money loan downpayment, closing costs, and holding costs likely require cash whereas the hard money loan, renovation costs, and selling costs are essentially covered via loan/after selling. Am I off base here? I want to make sure I'm budgeting correctly.

 Hi Adam, 

Most hard money lenders will finance 65-90% of the purchase price and 100% of the renovations in an escrow account. Interest payments could be deferred until payoff but it varies from lender to lender. 

Costs include downpayment, closing costs, and monthly interest payments. If the construction is financed be expected to complete some renovations and request draws for reimbursement. 

 Thank you Erik!

Quote from @Ko Kashiwagi:

Hi dam,

Yes, typically the downpayment, closing costs and holding costs are covered by the investor out of pocket. Some lenders will finance the holding cost, but this is rare. There are also instances that loan interests are paid at the end of the project (withdrawn during sale/refinance) which is referred to as accrued/deferred interest.

Best of luck!

 Thank you Ko

I'm getting ready for my first flip project. Is there a rule of thumb of what costs require cash up front vs what can be covered via loans? From what I"ve gathered on a few posts, I believe the hard money loan downpayment, closing costs, and holding costs likely require cash whereas the hard money loan, renovation costs, and selling costs are essentially covered via loan/after selling. Am I off base here? I want to make sure I'm budgeting correctly.

Is there a time where buying a home warranty on a rental house would make sense? Could this cover capital expenditures? I was running some deal analysis the other day and noticed that I've had home warranty quotes come back on my house that would be cheaper than my projected annual cap ex, but I feel like I'm missing some details there. Any insight/previous experience would be appreciated.

My team is looking to start wholesaling in the Atlanta. Does the 70% rule still apply? We've been focused in Phoenix for the past year but a lot of the deals we've seen are 80% or more before taking away renovations and my fees.