All Forum Posts by: Anna Markowski

I have a federally backed FreddieMac loan. These loans as well as FrannieMae loans are already allowing for defferred payments and I believe require the benefits flow down to the tenants. The options they are giving are, both with no penalty, either payments plans or extension of the loan by the months missed, again with no penalty. My tenants all work in retail and have lost significant hrs. I proactively reached out to them, as I knew this would be a major stressor, and said we could setup payment plans if needed and to let me know asap. They were all very appreciative and have all since gotten back to me to let me know that April rent is set and coming but May might be harder with limited hrs and layoffs. They are all being upfront and are committed to working through this as best they can. There is no benefit to me of acting tough through this with them. There are government programs that are and will be available to us as landlords, and the most important thing to maintaining your building is the relationship with your tenants. If they don't pay, you can't even march on with an eviction. So maintain the relationship. Be a human. Give them the options you're are being given. Most likely that will be required, but it's good business to be good to people. 

I totally agree David, but then again, I work at a nonprofit on affordable housing. I have my target number for financial freedom, but I in no way am going to retire at that point. I see it more as having the freedom to do things the way I really want, no constraints. Because of that, I've set my unit/cash flow number a bit higher than what I need so I can invest that money in my own business that will help low/mod income residents buy buildings, provide the management training and assistance in the loan process. There are gov't loans that provide a lot of assistance in purchasing a 1-4 unit building, but at least where I live the nonprofits only tell people to how to use these loan products with true 1 unit single family. I find this very frustrating and a gap that perhaps I can help fill. I also have some fun ideas about super efficient, spaces that I think would be awesome to wrap up in affordable housing. But to your point, I don't need more, more, more, and I don't know if that's how we should be thinking about our lives. I want to be set my family up for a stable future and then I want to continue to use that stability to do good in the world. Realestate can be a race to the bottom just as anything else can be. You have to know yourself well enough to know when it's enough. :) 

I really appreciate the advice. My building is in Humboldt Park. I'm looking to buy my second in Woodlawn, South Shore, maybe Auburn Gresham. Not completely sure, but that's where it looks like the numbers work out to allow us to keep providing quality affordable housing while still setting up what I call my non-profit pension via realestate. :) I'm thinking 1-2 10ish unit buildings in those neighborhoods would greatly accelerate my plans and could be done if things appraise out where I think they should. No way I could afford anything in Humboldt Park right now for my second building while providing low income housing. The market is just too crazy. Where are you invested? 

I'm thinking the refi sounds like it might be the best option, but I also like the idea of having a HELOC for immediate rehab needs that might come up. HELOCs are usually have shorter terms from my understanding, so that would be my only hesitancy on pulling out too much that way. I'll have the building appraised in a couple months once all the work is done and report back on the path I'm taking.

Thanks again!

Interesting... I guess I think of the money I'd be taking out against the cash flow of a new building, not the existing. Does this make sense? Is that not the correct way to think about it? So I basically evaluate all the properties I'm looking at as though they at 100% loan, with 80% of that loan being on the building itself, and 20% of that loan being on the note for the first building. From that stand point I then evaluate what the cash flow would be for that second building, after 100% of those loans are paid, taxes, insurance, utilities, property management and CapEx. I guess I don't see it as the responsibility of the first building to pay for the second, just to create the opportunity to buy the second. And then view that that second building should take care of all the funds required to purchase it, no matter where they come from. So I don't see it as effecting the cash flow on building one. Perhaps this is a silly way of looking at it though. I'm happy to be shown/learn how I'm doing this wrong or thinking about it incorrectly. Thanks!

Thanks so much for your response Larry! What do you mean in terms of cash flow? If I were to rent out the unit I live in, after all expenses, including CapEx I'd be netting $1000 on the low end/month. That's $250 a door. As is, I don't net that, but I live for free, so I net the savings. In major city like Chicago $250/door in cash flow is very good. I can invest in some lower income neighborhoods and get even better, which is my plan, but I'm assuming I will end up with more work for those units as well. I'm pretty happy with $250 a door though as is.

Hi, I'm looking on some advice for my next step. In October of 2016 I bought a 4-5 unit building for $655K in Chicago (5% down). This is legally a 4 unit building, we have restored it to 4 units, but it has a mega unit that I've been rehabbing (fixing up and combining a large artist studio into another apartment). Now that I'm about done with the rehab I'm looking for my next purchase, my plan had been to Refi or do a HELOC, but I keep getting hit with email appraisals for my current home that have the value between $950K-$1.2mil. So my question is, would it be smarter for me to sell? I've put a lot of work into the building and into our unit, but I don't want that to cloud my judgement.
 

Pertinent info:

- Rent from 3 of the units covers all but $350 of the mortgage, taxes & insurance.

- Meaning, I live in the 2000sqft mega unit for $350/month. Very soon this will be for free (my rents aren't at their max - I'm keeping them at 80% of AMI to qualify as affordable housing and get other benefits that way - think free energy efficiency & solar, etc.). 

- Mega unit could bring in at least $2000/month - I would have to pay at least $1500/month for a home for my family for a unit half the size.

- At point of sale there was a large single family home that sold for $700K just across the street. Now there is one in the middle of the street that just sold for $850K. 

-Two-flats are selling for $500K-$600K right now that 3-4 years ago sold for $150K-$200K. So I guess I'm believing the hype, but should I?

- I haven't talked to a banker yet, but I'm seeing refis for 3.3%, and I have very good credit and two very solid W2 full time jobs in our household. 

- Was planning to invest next in 3-4 unit buildings that run $150K-$300K- cashflowing at $800-$1000/month/building. I've done all the math, and there are a good number of these in the low/mod income areas I like to work in. (I work in affordable housing professionally)

- I'd like to reach FI in the next 7-10 years via realestate investing.

So if values are right... Should I walk away from this building with a pile of cash to invest in more buildings, or should I refi or HELOC to buy more buildings that way?

Side question, what do you think about these online appraisals? Are any of them worth their salt?

Thanks so much! 

-Anna

p.s.- Thank you both so much for you responses. We really appreciate the help!

Interesting... My lender ended up saying that the mental health concern wasn't sufficient to get clearance from his underwriter for FHA. That said, I've found that everyone in the business knows very different facts/sides of the equation.

To answer your question on if it is rented out, it is fully except for the unit we live in.  We've had the current building for 10 months now, and have three units rented out, and we live in one that is fully finished. The space is a bit confusing, as it actually has five units, even though it's a legal four.  We are/were working to combine two of the units into one big 2000sqft unit for ourselves to live in. In the meantime, there are 4 fully finished updated units. We could just leave the space we were going to combine unfinished and unrented until it's ready to combine into the mega unit to rent out. That said, the rent from just the three units rented out covers all M,I,T less $350/month. So right now we live for $350 +expenses/month. If we rented our unit out, not at the mega unit, just as it is now, it would fetch around $1000-$1100/month. Once finished into the mega unit it could fetch around $1800-2K. 

Our mortgage broker said that actually if we moved out of our place, rented a new apartment, and just rented the final fourth unit we currently live in out at the end of the year, then in the new year we could qualify for the FHA loan. This seems a bit crazy, and not like a solution to our immediate issue... But it is interesting.

What do you think? Should we chat further directly? 

Oh, also, important to note, we both have full time W2 jobs.

I recently purchased my first building, a 4 unit that I live in, in Chicago with a Fannie loan at 5% down. A part of the building is going through a renovation and that triggered some old mental health issues with a member of my family. We've tested everything, and the building is okay, but the health issues persist so we need to move to a space that doesn't have the construction concerns. I would like to keep the current building and rent it out fully and then move into a new building (2-4) that is finished and house hack there. Since we just bought I don't have a ton of money for a new down payment. I could use some advice on loan options. Can I get an FHA loan in this situation? What are the parameters? Can I get another Fannie 5% down loan? I've only owned the current building for 9 months. I'm thinking this would mean that the debt would be a negative debt still since the rental income hasn't gone through the maturation period, so this would put my DTI pretty high. My current lender says the maturation period isn't the issue and that the income from the current building will never count as income.... Is that right? Anyway, looking for some advice.

Thanks,

Anna

Thanks so much guys! Appreciate your feedback and encouragement!