All Forum Posts by: Aidan Mulligan

In need of some help everyone, 

Here's the situation I have. I'm trying to get conventional financing for a SFR. The loan officer says everything checks out and is ready to write me the approval except my DTI is artificially high and told me I need to figure out a way to prove that it is lower.

My only debts are my car loan, my student loan, and my rent. I'm splitting a $2,100 rent (May 2018 - June 2019) between three people so $700 is my actual rent.

My DTI with $700 rent is 26% while my DTI with the full $2100 is 54%

Here comes the tricky part. My bank statements showing a $700 withdrawal each month don't include the first month because one roommate (not me) paid the full amount in the leasing office by card and the rest of us venmoed that person. My lender says because of that I can't prove twelve months continuous rent at $700.

Here's where it gets trickier. I would just wait one more month so I can have the twelve except my third roommate has gone back home instead of renewing the lease. The second roommate and myself signed a new lease for $1,800/month in a two bedroom. DTI now sits at 30% which is fine, but I'm afraid he's going to hit me with the "Come back in a year when you can prove a $900/month payment."

Options I've been told. Private lender, Hard money, wait until I can do a deal cash.

Would love some guidance. Thank you (Charlotte, NC)

Let's not get tied up on semantics of the word "plan" @Joe Villeneuve I think the guy knows that his small summary isn't his entire plan. I think he was more asking along the lines, here are the rough back of napkin numbers, is this even worth my time.

1) His financial goal is to Rehab this property that he estimates to need $30,000 in rehab so that he can cash out refinance at 147k and roll that into a new property

2) He has a property in his sights, I assume he wants to put an offer in ASAP, and start rehab ASAP, given his full time position and savings, he probably wants this project complete in less than two months so he can rent and cashflow

3) Offer>Close>Rehab>Rent>Refi>Repeat

4) Second property, I assume he has an idea on how he wants to offer and negotiate>Credit Union to fund Purchase and rehab>I hope he's thought of how to rehab>Will probably reuse his method of renting that he uses on his first rental>Most likely plans to use the credit union to refi>Repeat

5) Has said he plans to offer lower>Find a good meeting ground>$30,000 rehab goal>$1050/Unit Goal>$140,000 Refi Goal

6) The university town is his market

7) Realtor>Credit Union>Credit Union>Prop Management/Self Manage, whichever he currently uses on his first property>Credit Union>Repeat

8) Same as step 5

9) you missed step 9

10) Each part of the process flows into the next

@Yollan Kitsoukou To  Joe's point, these things need to be on the back of your mind but don't be discouraged if you don't have each of these things figured out fully. Start at the first thing in front of you and work your way through as they come along and learn as you go. 

Wow, that one slipped by me, a duplex for 90,000 and rents at 1050/UNIT. For some reason I was thinking 1050 total. Sounds like a good idea now.

With 7,400/Year in taxes, and mortgage (by my calculations based on a $90,000 mortgage) of $392/month, at the low end $50/month in insurance, and not considering other expenses. You're sitting at -$8/month in cash flow.

Factor everything else in and I get you around -$358/month in cash flow.

I think you have the taxes wrong. With your yearly taxes I have this around a $600,000 property. Did you mean $740/year?

Also, how are you paying $616/month in taxes, and still cash flowing $600 a month?

80% ARV or 80% of present 90,000 value? Are they financing the rehab costs as well or just the purchase?

Google your town GIS, they should be able to tell you what the yearly taxes are. 

For PMI I would google any bank and they should have some sort of mortgage calculator that will tell you what your P&I and PMI should be.

Home Insurance is a tricky one that I don't have an answer for. I usually just use $1000/year as a place holder

I'd also try and factor in Maintenance as a monthly expense. I usually use 15% of rent per month.

I have an excel spread sheet that I could send to you if you'd like. Not sure how much help it'd be.

Are these all duplexes?

I would start by looking at the University. If it is the economic center of the town then I would make sure it's not about to close down. It doesn't seem likely but several colleges in Massachusetts just closed their doors in the last five years.

Next I would look at the true conditions of these properties, not just what the pictures show. Find someone in your area that knows construction and walk with them through these properties to get their opinion. You can offer to partner, pay, or just buy a beer for this person depending on how close you are with them.

I would also look at the town data. "Open data network" is a nice site or USA.com. Type in the zip code or town name and they'll show you some metrics on the town over the last few years. Also look on realtor and Zillow with the recently sold filter on. It will show you where people have bought in the last three or four years and for how much they bought the homes.

Find a realtor in the area, or call up a local bank. Tell them you're looking to invest in the area and would like to know more about the town and market. Ask open ended questions to get them talking. When I say local banks I don't mean the Bank of America branch in that town, I'm more talking about the bank that you've never heard of and isn't nationally known. I've found that they like to talk more than the Wells Fargos and BoAs. Just open google maps and type in banks.

Last, nothing tells you more about a town than going to the area that you are trying to buy in and just people watching. Are people out for runs, are there kids at the park, is there a park, are the shops boarded up or are they open. When are they open. If they close at 5PM during the weeks then that's a bad sign. Get lunch at some sandwich place and ask the waiter about the town, only if they aren't busy, don't want to aggravate them.

Google, form 410-T North Carolina, it's not all extensive but it's a good place to start

Let me elaborate further. Technically no money has passed. A contract was signed, the MOA recorded, inspections ongoing, but no deed has been recorded. Do I legally have a right to the property through the MOA?