All Forum Posts by: Andrew Webber

That's the one @Russell Brazil, and thanks for the input. Rentals there are allowed, but everything you bring up is very important. It's an interesting case study and I'll be watching to see what does happen at the 30 years left mark. 

And thanks for your input too @Justin Lanciault

Hey BP Community! Thanks in advance for reading and any comments/opinions.

I see an opportunity for a deal but am pretty confident that it does not make sense. In general, I am looking to buy and hold and rent out property while also looking for a place to live. I live in Northern Virginia where the home prices are very high, but I have been seeing that in Arlington there is one building, 2 stops from the metro, with amazing views of the National Monument and into DC, that is just ridiculously cheap. I look into the building to find out that they are co-ops and that the entire community is on a land lease that has no renewal clause. This is where I know I need to be done looking at the properties and to move on as when the land lease expires, technically you lose all ownership in the building and I would lose any value that the units hold. That being said, for some reason, I can't stop thinking about them and looking for some magical opportunity that others arent seeing. 

They rent for 1% (more or less) of their list price, but I found a set of 4 that are all being sold by the same investor that have sat on the market for 50 days (unheard of in this area). He is trying to coordinate all 4 of the units to close around the same date - so I imagine they are having a hard time finding 4 parties that would all agree/be that flexible. This is where I see some opportunity to make a bundle offer and get all 4 at a discount. If I could write an offer, get them all at a steal, and then earn more than 1% on rent it makes the deal very attractive. The listing agent also has in the listing remarks that the current owner is trying to sell them to do some 1031 exchange, so I imagine there is some eagerness to sell. 

A part of me, and this very likely could be wishful thinking, has a hard time believing that someone, the city government, the state government, the co-op association, etc isnt going to step in and find a solution for this land lease situation. Is this worth the gamble/risk? Is there opportunity here that I'm not seeing that others can help me to see, or can someone throw a bucket of cold water on me and tell me that I could buy these 4 units for $500,000 and lose all my equity when the land lease expires in 2052, OR I could be sensible and put my time and money into something that has a 1% return AND that will have "guaranteed equity" when everything is all said and done?

Thanks everyone! 

Thanks @Jamiel Strickland! Have you don’t some yourself? Good call on the “don’t mind it needing a little work” as these are all houses that I saw as being “in distress”. I went back and forth on the something about myself. Trying to keep it manageable to write over and over again.

Hey BP Community!

So I know that sometimes the most important step when getting started in REI is well... starting. I have a side gig or two like any person who is trying to get together extra money to start their investing career, and one of those is walking dogs. I use this as an opportunity to "Drive for Dollars", just by foot, and decided that it was time to send out a few handwritten notes. I am trying to find the right balance of short message that I can write by hand, specificity so they know its not every house that it is being sent to, and making me sound like an actual person. What do you guys think about this script:

------

I have been looking at homes in {Enter City Name Here}, more specifically the {neighborhood name} area for a few months now, and I was walking through your neighborhood, saw your house at {123 main st}, and was wondering if you had any interest in selling. If you would be open to a conversation please give me a call =)

------

I am actually looking for a place for myself that I could buy if it the numbers lined up well, but work with a Real Estate team if any person I spoke to decided to sell on the open market, and would love to set up some private deals as a wholesaler if any of these people actually gave me a call and didnt want to list on the open market. Does anyone have any thoughts or ideas for me either about that script or my plan in general?

Thanks! 

Hey @Jalissa Hayes!

I think the answer to the question: "can I do both at the same time" depends mostly on the amount of money that you have to invest. REITs can be great and most simply put are more like investing in a stock or an ETF. It's the hands off approach to investing, but in theory would be giving you less return for your money. I would say that REITs have less risk in that the only money you can lose is that which you put into them and that isnt hugely likely to happen, but with less risk comes less reward. 

More traditional forms of real estate investment come with some form of flip or fix and there are often unforseen costs/epenses associated with that. There is also likely more opportunity here but you have to really analyze deals well. This approach is alos going to have you be a lot more involved with your time. Are you more flush with time or money right now, and how confident are you in the group of people you have working for you (your core 4), how eager are you to fix toilets, and what are your ultimate/long term goals?

Some of those last few questions might help us to better answer which strategies make more sense for you. 

@Zac Boelkow one possibility might be to use a renovation loan on the short sale. Bascially you get quotes for the cost of the work to make it livable, have an appraisal done to show what the value will be once the repairs are done, and then as long as you qualify for the new loan amount you should be able to move ahead with the repairs and have them be financed into your monthly mortgage. 

Example numbers: Short sale price is $100,000K. The property, with a new roof, functioning bathrooms, happy HVAC, remodeled kitchen, etc, would have an ARV of $150,000. You can in theory borrow $50,000K to make those repairs and have a home. I've helped clients who wants to use the renovation loans before, but not on a short sale. I am not 100% sure how the shortsale piece ties into it, but give a few loan officers near you a call and see if its possible.

I don't agree that its impossible to use financing on a short sale. Depends on how tough of a condition the property is in. You can use an FHA, Conventional, or VA loan on a property as long as it is in livable condition. That definition changes a little bit with each type of loan.

@Mike Sola it's my understanding that the renovation loans work slightly different than it seems you think they do. Typically an appraisal is done before the loan is approved/finalized and that appraisal includes the value of what the property would be worth after the fact. So they would say "right now the house is worth X but after proposed repairs the property would be worth 110K." Based off of that they will give you a loan for the amount that the repairs cost to get it to that point = ARV-home purchase price. So in this case if you bought it for 50K and the ARV is 110K then you can get a renovation loan for the difference of 60K. If you use your numbers in your example then you would have 70K in loan value, but the 5% down, or the down payment expectation, is based off of the total loan amount, not just the purchase price of the property. So it would be 5% of 70K instead of 5% of 50K.

Those are just slgiht changes to the way you were thinking about it but they are good to know. With a 75% or 80% loan to value ratio you would be able to pull out $110,000*80%=$88,000 - ($70,000-5%down payment)  = $21,500. Typically the more serious renovation loans have a higher interest rate so it would likely be a good idea to refinance =).

Those numbers seem like a dream scenario so just make sure you do the numbers a few times and get a few opinions for the ARV, the cost of repairs, etc before committing.

Hey @Zac Boelkow! Short sales can often come as a really awesome deal. The only hangup is that they are anything but short (in terms of closing timeline). The steps are not too much more involved than a regular home purchase you just never know how long it is going to take. On our team we have seen short sales that close in 2 months and some that close in 12. I cant remember the actual record for our agents but the longes might have been longer than that. If you can find out which bank you would be working with you can get a good idea for how long the short sale will take. Each institution is TYPICALLY consistent about the amount of time on each short sale, so if you find a Real Estate Agent who specializes in short sales they will be able to give you the best feel for which banks are good and which are bad (in terms of speediness). 

As for replacing the roof and AC prior to closing, I would say ABSOLUTELY DO NOT. Just to give a hypothetical example, say you spend $20,000-$50,000 replacing those systems (I have no idea the size or complexity of the house you would be doing this on) you would be investing that money into something that someone else owns. Say that last minute you have a family emergency which takes up a large amount of your available capital and then you can no longer afford to purchase the property. You have now lost that entire investment. Even on a "standard" sale there are hiccups along the road 25% of the time and any of those situations could cause you to lose that investment. On a short sale I would say the risk of it falling through are likely even higher.

Any specific reason you want those done before you move in? Would any of those risks be worth losing the entire investment of those repairs?

@David de Luna I would tell you that you dont have to have a formal home inspector come in and check out the property but it is often a good idea to have someone that you TRUST, who is also knowledgeable about the topic to get in there and give it the thorough look over. If this contractor is someone you trust and that is knowledgeable about construction/home conditions (I would hope that he/she is as they are a contractor) then you should be fine. The biggest question is how much do you trust them? It would also be good to get more than one opinion as there are malicious people in the world who might be interested in taking advantage of others. 

Many investors I have worked with in real estate will forgo the formal home inspection but will have their contractor give a final look on properties after they are under contract (or before in some situations) and have some kind of clause that allows them to cancel based off of what their contractor says. So it's basically like a home inspection contingency but called something different. Hope that helps!

@Andre' Arceneaux - from what I've heard all their other services are top notch =) It's a bummer but all I can do is speak from experience, haha.