All Forum Posts by: Benjamin Aaker

Completely agree with @Caleb Brown. You won't get a better deal until rates go down further. Better to concentrate on decreasing expenses and saving for now. 

Hi Alex and welcome to the forums. Happy investing!

If you plan to live there in the winters, you might have a hard time doing long term rental outside of that and finding a new tenant every summer. It'll be hard to cash flow if you are living there that much, though cash flow isn't everything. You should reconsider looking for a property zoned for short term stays. These aren't only in the flood-prone areas.

Spend some time considering how the repairs will get you a return on investment. In other words, how much will rent increase by spending money on repairs? 
If this property won't cash flow as a long term rental, you might want to sell and 1031 exchange into a more profitable property.
When considering refinancing, also factor in the closing costs of the new mortgage to determine if it actually helps you. The headache of refinancing may be more than it's worth.

Since you will be renting it out you should get a conventional loan. What would you do with your current residence if you planned on living in the new one to get an FHA loan?

Hi Lenny,

Probably I would wait until you have a steady income source to make it easier to get a mortgage. Also, you should focus on getting your degree before purchasing. Use this time to study at the university and continue to study real estate. Keep evaluating deals so you are ready when a good one comes along.

Quote from @Michael Palmer:

Quote from @Benjamin Aaker:

Assuming you mean 75% loan to value, looks like you'll need to close with $97,285 after closing costs and points. As Ko Kashiwagi says, we need to know more, such as rate, amortization, term. It would also be nice to know what you plan to do with the property once it is built.

 Benjamin,  here is a complete breakdown of my loan costs.  The property will be sold upon completion.

Rate:  12.05%

Term:  13 months interest only

ARV: $648,000

Loan Amount:  $433,000

Processing Fees:  $15,361.64 (3 pts plus processing fees)

Escrow Charges:  $3,130.90

Insurance/taxes:  $1,722.82

Construction Holdback:  $498,361

Cash to Close:  $84,762.36

In the OP, you said that the loan amount was $346k. Taking the higher of the two, that's 52k in debt service for 12 months. If you can get it built/sold in 12 months and are accurate with your ARV the underwriting looks decent. Loan terms seem reasonable. Just be careful your expenses and time to complete don't go over.

No experience in Brooklyn but there are a lot of programs out there for rental assistance. Sometimes the tenant just doesn't know about them or their situation limits their ability to apply. If you are willing to do the work, the landlord can often be the first point of contact with housing assistance. I've inherited non-paying tenants before and assistance has paid their back rent almost every time, but it takes a long time and you will need patience and cash to wait them out.

2.6k a month on a 300k purchase price might put you underwater after all the expenses are paid. Probably not since you are paying cash and will have no mortgage, but then your return goes way down. It could work that way, but will seriously stunt your ability to continue purchasing properties (if that is your plan). It all depends on your situation, but you might want to keep looking.

This will be a question for your bank. They will likely have interest when you want to transfer ownership of the property to the new LLC. That could trigger your due on sale clause and force you to get a new loan. The lender may then require your co-signers to be owners of the LLC, but not necessarily.

Shouldn't be any extra taxes involved. The tax burden will pass through the LLC to the owners.

Keep in mind that your mortgage terms and insurance premiums will probably be less favorable in an LLC. So talk to your bank and insurer before continuing.