All Forum Posts by: Alyssa Davis

I've been renting a house for 2.5yrs, and have discussed purchasing the house from with the owner/landlord. The owner is planning to put the house on the market in January if I don't decide to buy. Unfortunately, in this market it won't make for a good flip, but the plan would be to buy it as my primary residence, continue to live in it for a while and fix it (the house needs some renovations/hasn't been upgraded/but of course it's still "liveable"). Eventually either sell it or rent it out once it cashflows (current market rent would barely cover mortgage alone, but eventually would be able to cover maintenance, repairs, management, etc.) I've spoken with a realtor and the property is comped at 390k, however Zillow says it's 400k and redfin says 420k! I agree with the realtor, but I'm up against the owner who trusts Zillow (plus could probably get multiple offers for more just because of the highly competitive/low inventory market we live in).

My question is, how should I make an offer? One thought is to give her two options 1.) 400k and seller pays realtor commission at 2.5% (our agent agreed to do a dual rep for only 2.5% total) OR 2.) we pay 390k AND 2.5% commission. The problem with option 2, is I would rather put the 10k into renovations rather than pay extra for the commission.

Is there an incentive for the seller to go with one option over the other? Should I try to work it out directly with the seller first and then just send the details over to our agent to make it formal or should we write up two different offers?

I'm currently renting a house from an owner in California and the owner wants to sell it ASAP. We've discussed buying the house directly from her (off-market/before she tries to sell it) and she told us to make her an offer. She has made it clear that she will not be using a seller agent to represent her and that she is looking to get "market value" (wants the bidding war common in the CA market) and will NOT consider seller financing.

Currently I am trying to figure out how to make a compelling offer (knowing seller's alternative is to wait for the bidding war to ensue) -considering things like paying all seller closing costs, waving any requests for credits (based on issues that come up in the inspection), but most likely keeping all the contingencies. The house needs quite a bit of cosmetic work/upgrades, but we are aware of these issues (since I've been living there for 2+ years). Long term strategy would be a buy & hold with sweat equity to provide some added value. Also considering foregoing a real estate agent and just working with a real estate attorney to save on closing costs. The money saved would allow me to better fund the rehab.

Would appreciate opinions on forgoing a buyers real estate agent to represent me since I live there, know the market, and already have a relationship with the seller, have access to the property, etc. This would be my first property. Also would love to hear your thoughts on how else we can make the offer more enticing besides throwing more money at it. Unfortunately at this point in my investing career, I have more time than money. 

Currently analyzing a quad-plex deal for my parents. They own a house outright and are thinking about taking a HELOC to finance the 25% downpayment.

My Question: How do I account for the loan payment (PITI) they'd need to pay down the HELOC when thinking about Cap Rate, ROI, and determining if it's a good deal & strategy in general?

Cap Rate 
1. Should the loan payment for the HELOC be considered an expense when calculating NOI?

ROI
1. Should the loan payment for the HELOC be considered an expense and subtracted from cashflow?

2. How should I calculate "invested capital", when really they aren't paying anything out-of-pocket except closing costs? 

3. My assumption would just be to treat the loan payment as an expense that reduces cashflow and then the invested capital is just closing costs, but may be thinking about this incorrectly?

Thanks @Kyle Murphy! Do you know if lenders would be okay with that 120 day delay in me not living in the house? Or would I need to negotiate a longer closing as @Caleb Brown mentioned?

I am currently trying to find a SMF I can house hack in Sacramento, however all the units I've come across so far have "tenants that would like to stay" in BOTH/ALL units. Is there any way around this problem? Is there an easier way to find a SMF with at least one vacant unit I could live in?

Note: This will be my first property and house hacking a multi-family is looking like the best solution for me to get into the RE game, provide cheap/free housing, cashflow (at the very least, after I move out), and meet the FHA/conventional with <20% down requirements.
 

Thank you @DJ Dawson, that's very helpful --I didn't know multi-families required 15% down with a conventional loan. Currently I'm considering the best way to break into real-estate investing in CA 1) purchasing a single-family home with a conventional loan OR 2) trying to find a duplex in Sacramento that I could house hack, but unfortunately I can't afford 15% down on a Sac duplex at this time, so I'd need an FHA, however it seems like all sellers on the MLS are requiring cash or conventional as @Chris Davidson mentioned. 

I'm looking to buy my first property as a buy and hold, with the intention of fixing it up (minor repairs needed) and either house hacking or renting out the entire place. I have a great credit score and have been pre-approved for a conventional loan with as little as 3% down (although I'd plan to put down at least 5%).

The conventional loan seems very advantageous because most sellers don't seem to want to deal with the FHA/prefer conventional or cash & can demand it in a very competitive market (Sacramento CA), the PMI would automatically go away once I'm 20% in (vs having to refinance into a new loan with FHA), etc.

With this in mind, is there any reason I should even consider an FHA. Are their benefits that I can take advantage of (assuming I plan to live there for a >= a year and rent out the other bedrooms/house hack) that I don't get with a conventional loan, or is FHA really only beneficial if you don't have good credit?

For those who have bought directly from the owner, what are some favorable terms you've included when creating an offer? So far I'm looking at junk removal (owner uses some of the rooms and garage as storage), flexibility on selling timeline so owner can do a 1031, potential covering some realtor or closing costs, etc.

This would be my first house (I'm currently renting the house that I'm trying to buy) --looking for those who have had experience creating an attractive deal in a very competitive market (Northern CA where houses can sometimes sell for 20-40k over asking) so I don't have much leverage if she just decides to put it on the MLS.

@Kaylee Walterbach

@Kaylee Walterbach when will this book be available on audible/as an audio book? 

Thank you for the info @Dion McNeeley! To clarify, I currently don't own any property or other assets that could qualify as collateral - In this case, I believe my only option would be to take out a small business (unsecured) line of credit?