All Forum Posts by: Aksel A.

Mar7ba Bik ya weLd eL bLad Sinan,

Glad to have you here and see a fellow making it. Good luck with this endeavor, definitely go for it and never quit.

If you are serious about building a large portfolio going forward, then you can usually find better deals in the secondary market. Just need to be accordingly more cautious, making sure you have the legal, financial and physical due diligence in check.

Regards,

Aksel

Greetings everyone,

Great and Bad news here:

The Great: I got an offer accepted for a cute MFH in Wakefield, MA. It is a very desirable area and the cashflow perspectives are very interesting.

The Bad: The property is listed as 3 units. However, upon closer examination, it is a 4 unit. A 2 bedroom basement has been built "extra", and all units have been rented for a bit.

The LOI added clause literally says: "Sellers make no representation to the legal number of Units"

I called the city building inspector, and surprisingly, he said that the home was listed as 2 unit, not even 3, let alone 4. Perhaps he could have been wrong or gotten something incorrectly, since the property was officially listed as 3 unit MFH. In addition, he was curt and borderline rude. When I tried to get some guidance, he simply pointed me to the common non-constructive advice: "talk to an attorney".

When I talked to my institutional mortgage banker, the conversation was much more friendly and cordial, but he was strict: we cannot provide a residential loan for a property for the advertised zoning doesn't match the book. If it's 4 unit, it has to be properly zoned as 4 unit. This is especially a concern since I was targeting a FHA 203K loan (about 10K initial repairs/fixes)

He said I would have to take the right measures to rezone it as 4 unit. But how can I do that when I don't own the property?

To that he answered: your best bet is to talk this through with the seller and try to come up with an arrangement so that he does it.

This deal is in trouble and the legal due diligence is coping with a hard red flag:

- On the one hand, my business instinct tells me to walk away because something smells shady and can have very bad consequences down the road.

- On the other hand, this is a very good deal for the following reasons

     - Very good area

     - Good cashflow, even if we were to ignore the basement and only consider 3 unit.

    - This would be my first property, and location does matter, much more than a pure investment property

I would not be satisfied giving this up without a fight.

The question becomes: what can I do? I'm thinking of the following:

- Try to talk to the seller directly to ask him to properly rezone the property, even if it were to be at my own cost

- Take the required prerogatives to rezone the property myself (assuming I am even allowed to do it)

- Present my case to a non-institutional lender to get some flexibility in terms of lending. Afterwards, close on the deal and take a risk in case the city were to decide that one (or 2?) or the units were to be closed.

I am sure there are some checklist items we can conduct for a case like this. If you have any other thoughts or recommendations, I would appreciate to hear them.

Thanks all

Resurrecting this thread for a similar situation here. Some info about the deal:

Background

5 Unit MFH in a suburban area

Goal is to occupy one of the 5 Units as a 1st time home buyer.

Property overall in good condition, no liens, no hidden surprises

Numbers

Listed price 300K

Good condition, 5K repairs

Average rent: 800 per studio

Insurance: $2200

Tax: $4000

Cashflow

The following numbers were done using Residential financing 20% down at 4.5% interest on 30:

Monthly cashflow as owner occupying and non property mgmt: $300

Monthly cashflow as pure investment with 10% property mgmt: $1200

Latest Update

Good side: House is almost under contract.

Bad side: All of my 3 residential conventional lenders backed out at the last moment after learning this was a 5 unit property.

In summary, we have a great deal, but no financing.

Any recommendation on how to approach commercial lenders on this case? Much appreciated.

Seems like we have separate trends of thoughts, either to be open and truthful, or be strategically concealing, depending on a few factors such as tenants stature, portfolio size, etc.

Out of curiosity, does this thread solely address investors living separately from their investment property with inherited tenants?

What about the case where the owner himself occupies one of the units in the same MFH where the inherited tenants live? In such case, would there be an advantage in hiding oneself from being exposed as being the owner?

The answer may be biased depending on the size of the MFH. For example, if a 2 unit, I can well envision being transparent and live in harmony with the tenant. But how about a 5 unit, 10+ unit, etc.

Greetings Contractors,

I need a friendly reasonable GC with good rehab estimation skills to be present with me and my agent during a 1st time home purchase visit.

The location is Ayer, MA.

The time is this upcoming Saturday morning 25th @ 10AM.

I need a GC with good cost estimation skills for the required work.

Pest/Termite inspection skills is a plus.

Please send me a PM to engage further.

Regards,

Aksel

Thanks for the tips guys,

One thing I didn't mention is that the house has been on market for quite a decent amount of time, several months. That's a bit strange since the house is already on a 33% discount (according to Zillow's estimated price at least). Why? My guess is that the house needs some repair and is isolated enough from the city not to attract interest. But it looks fairly solid on paper and certainly not in shambles. We'll confirm this next Saturday, hopefully no structural wack-job in the beams or something.

Anyways, I don't yet see a good reason why an extra 30-day period would be too much asking to warrant refusing non-cash offers. I'll keep trying to get down that path (regular FHA/203K financing).

If that doesn't fly, then I think the option left I have is to negotiate seller financing, but I wouldn't expect that much positive response from it.

@Wayne Brooks I have complete pre-approval applications (W2s, statements, etc) so I would expect it to speed things up. As long the repairs are not severe, Village mortgage mortgage assured me that they close faster in 30 days (well, verbal agreement, but nothing on paper). We'll test the seller's flexibility accordingly.

@Matthew Conroy checkout the Fitchburg commuter rail line. There seem to be a few gems between Littleton and Fitchburg. Fitchburg itself seems to have decent offerings, with 4 unit properties under 150K. Just careful with the shady areas given the non-negligible welfare population over there. Gotta do the homework.

@Ann Bellamy thanks for the tip, definitely not willing to take legal risks here.

@Account Closed I may risk a non-refundable amount of 1K or 2K (symbolic 1%) but 20K (10%) is way too risky for me at this point. I like this deal but we can't neglect reward/risk ratio.

Thanks @John Jacobs , sounds like you are referring to https://www.biggerpockets.com/forums/49/topics/412...

Will check it out for the time being...

Greetings everyone,

This topic has probably been discussed elsewhere, so please feel free to redirect me accordingly and paste links as desired.

My case is simple to summarize:

- I want my 1st home purchase to be a cashflowing MFH. I found a good 4 unit family deal at about 25 miles from Boston for 200K.

- I plan to occupy one of the units and rent the 3 others

- The seller is said to accept cash-only transactions

- I am pre-approved for almost 4 times the property list price by multiple institutions for FHA and Conventional loans, such as QuickenLoans, Fairway Mortgages, Freedom Mortgages, Village Mortgages, etc

- Just in case, I also have one private money lending connection at a rate of 12%

Here is my dilemma.

Because of the cash-only transaction, it is my understanding that I cannot resort to any of the lending institutions above, and rely on some sort of direct funding.

However, it appears that Dodd-Frank law prevents private money lending for funding my very 1st house purchase for owner occupied type investments.

Here are my questions:

- Is the above true? Should I completely rule out PML and HML from the picture for my case?

- Does it make a difference if I put the house into my LLC instead of my name to get around the problem (while still living in the property as owner occupied)?

- It appears that the Trump administrations is changing (or just changed?) something specific to DF. Are we in some sort of status-quo where DF may not apply to me here?

- Bonus: Is there any alternative for me, such as asking the seller to be open to seller financing (provided DF doesn't forbid it too), or else?

Trying hard to kick-start my business with a strategic cashflow friendly move, I welcome your advices or suggestions, and like I said, any existing resources will help me a long way.

Thanks

Update: We're going with Webster First, looks like a great Credit Union of choice for Boston-based business owners.

Thanks @Rich N. @Pauline Misiak @Aaron Smith  great advises here, as usual.

The real address mailbox seemed to be the way to go, as it is required by the IRS to get an EIN, no PO box (at least in MA).

Main part of the process was the going back 'n forth with the key actors and the various options at hand. The entire filing to approval only took a few hours.

Next step: choosing the right bank/union for the biz account in this area. Fun times