All Forum Posts by: Andrew Valeri

@Logan French Congrats, starting off is an exciting time! 

If your plan is to buy - then yes get pre approved. Otherwise if a deal comes your way it could pass you by if you are not "ready" which is likely how a seller would see you if not pre-approved. 

I am not well versed on how the physician loans work - not sure if only certain lenders carry them. Not every bank that carries them may also lend on Multifamily properties. The loan product you find may dictate what your house search/business plan may look like. 

You will want to talk to lenders about how refinancing would work down the road with this type of loan if the goal would ultimately be a BRRRR. Conventional loans when discharged (principle is paid in full) has the remaining interest wiped away. This is not the case with some loans. Some have a pre-payment penalty (paying off the principle early will require the remaining interest balance to be paid to discharge the loan.)

You may find out after talking to 25 lenders that one of the possible plans you had may not be an option and instead you have to pivot to plan b.

My recommendation would be to get crystal clear with what your goal is.

Before coming up with your team - decided what you want/can do and reverse-engineer the solution by knowing where you want to get. The team you assemble may be different depending on your goal.

What is your first deal? A house hack or BRRRR? May depend on how your loan is structured

Next is location? It's different from buying a single family when you can make anywhere within a certain radius work. This is where your business will be. Location is a factor in your pricing and therefore the purchase price will need to make sense because it is tied to profit.

A property manager may be able to point you in the right direction of what areas yield what for rent and where to stay away from. However if you are going to live there or in the area I would recommend getting to know the area yourself. Know where you like and where you don't. If you or your wife don't feel comfortable in an area  - a tenant like yourself or your wife will be driven away. 

I'm in Attleboro, about 35 minutes south of Boston. I work in RI and Wife works outside of Boston so we picked something along the T line. Figured if we were a couple that was splitting between Providence and Boston there were likely other couples that would look for an in between point. 

Maybe you take a similar approach and look for a housing "solution" that works for those in the medical field.

Feel free to reach out. I'd love to hear about how your lender search goes!

Good Luck,

Andy

@Lauren Cromie

Hey @Brendan Finney,

Congrats on deciding to take the step into RE world. 

If you're good with numbers - just having MLS listings sent to you by an agent makes its easy to run the numbers.

1. The mortgage calculators on MLS pulls in the taxes for the property you are viewing. It calculates the mortgage with the different PMI/different rates/different % put as down payment so you can understand what range you would be looking at for monthly payments depending on what the circumstance is. It depends based on your specific market/factors (i.e you're in a flood zone, are pets allowed in building, what level of ins you want, etc.) to determine the cost of insurance. I found when I was first looking to buy - realtors would show me numbers of how much insurance cost and other misc cost would be and they were all significantly lower than the actual cost. Personally I like to forecast Expenses high and income conservatively.

I found playing with the numbers myself and understanding what ranges were possible made me much more confident come time to offer and move forward after having offers accepted.

2.  Realistically, your first step is to talk to multiple lenders - let them know you are a new investor. Ask what products they offer. If you don't hear what you are looking for don't be discouraged. Let them know what you are looking to do and ask "How can I make this happen?" If they say its not possible - It's not possible at their bank. Ask if they know of any other banks from their experience that lend on. I made a list of 10 banks/credit unions in my area when I was looking to buy (during Covid when many banks lowered rates and stopped doing creative financing solutions.) None of those banks did what I wanted but one bank suggested 2 different banks that could possibly help. One of those banks found a solution similar to what i was looking for.

Being highly leveraged you will likely want to have a high reserve balance in place. Be sure to include high CapX/reserve/maintenance cost in your calculations. 

3. That will have to be something you will have to find out from your conversations with lenders. Some sellers are not interest in FHA because its a longer closing process (usually) and they may not want to fix the small items that FHA loans will require to pass inspection.

You may find that your current plan is "not practical" and you need to shift your priorities to align with what is possible or more likely to get you to your true goal.

Is there a reason you have to be in Boston or a direct suburb of Boston? Could you push out a bit further from Boston to a price point that will allow you to be more competitive.

Determine the difference between a want vs a need. Sometime it is hard to evaluate on your own and this is where a mentor can help. It is a sliding scale - you have to sacrifice in the "would be nice categories" for what is needed. 

4. What repairs are needed? There are much more cost to owning out side of just the purchase price and monthly payments. There is no right or wrong answer here. You must understand your own tolerance for risk. If the goal for real estate ownership for you is to get financially free and live a life by design then being super stressed and scraping by - living in fear of the next repair that is needed and how to make mortgage payments isn't a solid plan. I bought in Attleboro, MA a Triplex for $485k and my closing cost was about $12k. I wanted to be able to have 18 months of PITI payments in the bank ~$40k after my down payment because that made me comfortable. I also knew there would be a light rehab needed once vacating one unit.

Feel free to message me bout any questions you have!

One of my friends recently bought a 3 bed 1.5 bath. He was looking originally for rent to break even with PITI.

After showing him the higher costs of reserves/capX than he anticipated he aimed to shoot higher.

I strongly suggest doing what I suggested to him - know the area that you are in. Know it well. What neighborhoods are better and worse than where your house is. Be realistic of where your house is. 

Now go to Zillow Rentals or whatever is the hot rental listing site in your area. Pull in the area you are in addition to some of the nicer and the lower scale locations around you. Keep track of what stuff is listing for and how quickly it is removed. 

How nice is your unit/rooms/amenities compared to what else is being listed at same price point.?

Price yourself in accordance with what the market dictates. 

So - Understand how these variables effect pricing in your market:

1. Location

2. Finishes

If you are house hacking a one unit by the room with strangers find out what you value most.

If it is money then be all over your comps and push to top of market.

If apprehensive about living with strangers then be slightly below market so you can have pick of the litter.

Go too far below market and you will likely attract the wrong tenants and have too many people to screen. 

Good Luck!

Hey Michael,

"NEED" an agent? 

No

Work with listing agent directly if you're not an agent?

I wouldn't reccomend this. They only truly represent the seller, not you.

However from my experience buying a 3 unit for my first deal - working with an experienced investor/agent who himself had 30+ doors in his portfolio was helpful. 

I bought my triplex $75k under asking. I showed him the listing as it had been Back on Market 3 times with a days on market 100+ days.  I understood we were likely looking at a motivated seller. 
My agent asked the right questions to seller agent by finding out the right pain points and then did an effective job catering to the sellers ego that I  likely wouldn't have been able to do since I was the "bad guy" coming in so far under asking. I gave them what they truly wanted which was to close and taking on their tenant issues. 

Closing got pushed back 2 months because of an issue with the title.

I could have possibly navigated the closing process alone but I wouldn't have felt confident once we reached the snag with the title. I was happy to have an experienced agent to keep me level headed to keep me focused on bigger picture. If I backed out or didn't negotiate correctly with title issue and seller backed out at that point it would have been a huge mistake.

I work a full time job - and wouldn't have been available to deal with these headaches.

In my eyes you don't not hire a professional just because you think you can do the job if everything goes right. It's good to have someone with experience who knows what they are looking at to diagnose a problem/fix it before you know its there and before more damage is done.

Overall, I would suggest yes to an agent who is also an investor at least on your first deal. My agent is now one of main my mentors.

@Douglas Snook The seller said there were no security deposits and no last months rent. Also said there were no leases as the original tenants weren’t the same people that are living there today.

I had 1st floor fill out applications and I have all their information and signed a lease with them. 

I’m now working with an eviction attorney to get the other two tenants out on the second floor. Tenant C just moved out yesterday.

@Nathan GesnerThe 3 tennants live together in apartment 2 and are all related so not super surprising that they all mailed their forms together.

Once Tenant C tells me her new lease is signed then my plan is to tell Tenant A and B that I will take legal action to remove anyone still in the apartment after 6/1.

Tenant C has told me she will be all moved in before 6/1.

Tenant C has told me multiple times how hard it is to find a place “right now” but it is not impossible almost inferring that A and B have not been putting in much effort to find a new place to live.

@Jonathan Bombaci
I had previously considered cash for keys as an option but with all 3 of them looking to live in separate places and one of the tenants having told me “the money isn’t the issue, we have plenty of money to move and get a new apartment.” I didn’t seem to be a “solution” to their problem

@Jonathan Bombaci all the tenants are planning on going their separate ways. Tenant B says he’s trying to find an apartment with his brother because he says it will be easier to qualify that way. 

My attorney had told me to deliver the notice myself to ensure it was hand delivered with a signature as opposed to having a constable do it. 

I was waiting to make sure Tenant C actually signs her lease for new apartment as expected today and then apply more pressure on the other two as we are now at 8 weeks since I had the 30 day notice signed.

Thanks Scott,

Did you start the eviction process in your situation or did they just take the cash for keys offer before it got any further?

I closed on a 3 family March 1, 2021. In purchase and sale 1st floor tenant was to be given written notice of rent increase. 2nd floor to be given written notice to quit. Seller instead just gave verbal notice. (3rd floor was vacant and unit I was moving into after renovations.) Both 1st and 2nd floor were tenants at will.

1st floor was aware of rent increase. 2nd floor states they were not aware. I delivered 30 day notice to quit mid March since it was not in writing.

2nd floor had not paid rent since December 2020.

I contact both tenants once I was on record as owner to let them know I would be coming by to collect rent.

1st floor paid (there had been no previous issues with rent being paid)

2nd floor ignored my request. I made three attempts over text that all went unanswered. A few days later I delivered notice to quit. 

May 1st was day they had to be out by.

2nd floor has 3 adults living there: 

Tenant A (Mom ~50 yrs old)Tenant B (Tenant A’s Brother ~50 yrs old), Tenant C (Tenant A’s daughter.) Tenant C also has 3 children.

Around April 15th Tenant C (who I had no contact info for previously) texted me saying she’s been working diligently to get a place to live and she wanted to be upfront that she might need more time.

I told her to let me know what the update is after going back and forth looking to be helpful with different resources to check out for finding and apartment.

April 29th I text the Tenants since I have not heard anything further about them need more time so I assume they will be moving out before May 1 and told them where to leave the keys etc.

Tenants B and C both promptly answered back (I have no contact info for Tenant A) saying they needed more time.

Tenant C said she was still working on the same place however she needed more time and that it was a promising lead. She has been up front and has given actual explanations to the questions I have asked throughout the process.

Tenant B has not been cooperative. I have made it a point to let him know he must be responsive with me if I’m going to help him. I’ve told him to give me updates proactive as he gets them however small they are but he has not. He rarely answers any questions I ask. Questions about if he has been at showings applied anywhere this week etc. When he does reply it’s something like “nothing yet sorry to be a bother.”

Tenant C has assured me she is signing a lease 5/24 and will be all moved out by latest 6/1. 

I believe the tenants will not be protected by MA moratorium since I served them a 30 day notice to quit just terminating their tenancy at will and not a 14 day notice for not paying rent.

Additionally when I served Tenant B the notice to quit he asked me if we could work something out for payment and told him it wasn’t about the money and it was part of the purchasing of the house that their month to month lease would be terminated.

May 10th I got certified mail from Tenants A,B and C that they had applied for protection under the eviction moratorium for non payment. On the papers I was served they all stated they had done their best to pay everything they could possible and had communicated to me that they couldn’t pay all their rent owed because of a hardship. (None of which had happened upon 3 requests for payment.)

I plan to tell them that I will be taking legal action to remove them if they are not all gone by June 1. I feel as if I’ve been more than patient.

Has anyone been in a similar position to this during COVID times or heard about similar situation?

Any suggestions?