All Forum Posts by: Andy Tomaswick

Hi All,

I recently started talking to a lender (a nationwide bank with a strong presence locally) about possible funding options for flips in my area.  He described what he called a Fannie Mae Homestyles loan.

From my understanding, this loan has the estimated repair cost rolled in with the property cost on the closing date, with the repair costs held in escrow until the contractor can prove he has completed however much of the work (25%, 50%...whatever).  In addition, it has a 4.7% rate and can have a term of 15 or 30 years, which would dramatically reduce the financing costs on any potential deal.  It does require a 25% down payment, but I have the capital to finance that for most homes in my area worthy of flipping.

That being said, this sounds almost too good to be true.  I've heard of hard money lenders charging upwards of 16% with 2-3 points on a flip financing deal, where the full amount is due back in 6 months.  This Homestyles financing path blows that out of the water, giving no points, 1/4 the interest rate, and essentially an unlimited payback time.  Also, apparently there is no minimum hold time on the mortgage as well.  Does anyone have any experience with these loans?  Is there a down side to them?

Thanks in advance for the feedback!

@Kevin Prentice

I just re-read it and there is definitely no clause like that in there.  The part of the contract that threw me off was this:

"Owner hereby employs  XYZ PROPERTY MANAGEMENT (name changed for propriety's sake), as his exclusive agent for the rental and management of Property.  Initial term is 12 months, and will then renew annually unless owner terminates within 30 days of the end of the contract. XYZ PROPERTY MANAGEMENT can end this contract with 30 days notice.  If property shall be listed for sale while under contract Owner will use XYZ Real Estate (affiliated real estate agency named also changed) as their exclusive listing agent (italics mine).  If the property is sold while under contract Owner shall provide Agent 30 days notice and Contract with terminate."

To be honest, this is posted in hind sight.  I already sold the property using the real estate agent required in the contract after the PM failed to rent it for over 3 months.  We got a full price offer the first day it was listed, so she at least did her part of the job well (or I listed to low...who knows).

The disconcerting thing is that this was one of the larger PMs in the area (not where I currently live) - they claimed to have over 400 managed houses.  I wonder how many other investors have a contract like that and don't realize it?

In any case, I will never make that mistake again now that I know that's not standard for PM contract.  Thanks again for the feedback!

One thing I should point out @Account Closedthough you probably know this is that Kettering students have really weird schedules.  They're on something like a 3-4 month work / school rotation.  It wouldn't be uncommon to have to move tenants in an out multiple times a year.

I'm assuming this is included in your expense numbers, but Kettering students aren't your typical student rentals, and you probably want to make sure you buyer knows that as well.

That's an excellent idea @Steve RozenbergI've never heard of NARPM before now.  I'll be sure to check them out.  Thanks for the tip!

Sounds like a good plan @Blake F.and I've read somewhere that it wouldn't be a bad idea to walk through with them on some homes you aren't planning on buying as well (maybe ones that are in worse or better shape).  Do you think that's good practice?

Thanks for feedback Emily - it's good to know that's no uncommon.  At least from my perspective, I would expect a PM to tell me up front if they think the price I set is too high for the location.  What the one I was having trouble with did was agree to the price, then lowered it after a month, and then suggested we lower it after another month, at which point it didn't make economic sense for us.  Do you normally tell your clients up front you think the price is to high?  Or do you just go with the price they suggest to start out?

Hi All,

I had a bad experience with my first PM company, where they were unable to rent a property at a price I had been previously renting it at for over 3 months.  When I attempted to get rid of them, I realized that in the contract we had agreed to use them as our property manager for a year, and that we would have to use their real estate agent if we wanted to sell the property.  Newbie mistake in this case.

I wanted to get a better feel for PM contracts in general - is it normal to have the tie up for a year?  I think I would want to vet that the PM actually knows what they are doing (especially in terms of getting renters into the property) before I sign a long-term contract with one.  

Anybody have any suggestions on how to structure a future contract so I don't end up in that trap again?  I appreciate the advice!

Thanks for the advice Manolo, I'll be sure to take it into account.

Thanks for the feedback Vanessa.  I'll look into home advisor as well.

Interesting idea Nathan - do you have a contractor look at the same listing as you on something like the MLS or are you talking more like having them go to a showing with you?