All Forum Posts by: Jahan Habib

@Darius Moody The interest is 0.375% It was due to result of buy down of a 15 year mortgage. I used a community development mortgage and aggressively reduced the mortgage rate by paying points upfront. 

The best part is that I am expecting a nice refund when I file my 2015 taxes. So the overall cost is mitigated by the tax savings.

@Sunny Suh

Thanks Sunny! Your Cap Rate Calculations are correct, however there are few factors that I wanted to highlight:

- 15 Year Mortgage: Building equity/retiring debt quicker.

- Owner Occupied: With the exception of Landscaping/Snow Removal, the monies that I am setting aside are reserves for vacancies/repairs. 

- Plan to upgrade the units: I'll be starting with my unit first :) Stainless Steel Appliances, Hardwood flooring, re-doing the bathroom. Eventually the other two units will also receive the same upgrades.

I think the cap rate and positive cash flow will increase after I am done. Of course, if I end up moving after few years, my unit will rented as well.

@Sunny Suh Thanks! Yes, there were many sacrifices along the way, however I have some excellent financing in place and I am an owner occupant:

Rents: $1,100 (Unit 1), $1,300 (Unit 2), $0 (Owner occupied Unit)

Mortgage: $1,683.00 (15 Year Fixed at 0.375%)

Taxes: $451.75

Insurance: $137.50

Water/Sewer: $75.00

Total: $2,347.25

Since I am living there, I'm spending the following out of pocket:

Vacancy (10%): $240.00

Snow removal/landscaping: $100.00

Property Management: $0.00 (I am on-site/stable tenants in place)

Maintenance Allowance: $400.00

The rents for the two units are undervalued and after my bathroom/kitchen updates, they will definitely increase by $100/unit per month (conservatively speaking). I'll spend the next few months getting the systems setup/repairs completed before starting on the next deal.

A quick update on the progress.

Just closed on the first deal. Some relevant details:

• Purchase price: 294,900
• Rents: $2,400/month
• This is a 3 unit multifamily deal with significant growth potential. I am expecting to break even on this deal, however will be cash flow positive by 2016 due to the rehab work/property enhancements that I have in mind.

I’ll be targeting deal #2 in the October, 2015 time frame.

@Scott VanHee I appreciate the response. Actually Scott I was referring to a 10-15% down payment rather than 0% down payment in my first message. Therefore, there is 'skin in the game' for the lender. The only difference is that I would have sufficient reserves in the bank with the 15% down payment.

I think that the bigger risk for the lender is the increasing values in the Boston metro area -- bubble 2.0, anyone?

In any case, this point is moot, as I have found a lender who is willing to work with me and understands my perspective. Now the hard part is finding that special second deal :)

Actually the risk is higher if the borrower does not have funds for maintenance, cash reserves etc. because they have spent their dollars on the down payment/transaction costs. However I understand your point and recognize that it will be an uphill battle.

@Flavio Zanetti I appreciate your response and I recognize the challenge in finding financing that will require a lower down payment. I think it’s worth a shot to try to find a lender who understands my perspective: I’d rather spend the dollars on making cosmetic updates, having cash on hand as reserves etc.

I am in the process of closing the first deal using conventional financing. In the meantime, I have been looking at other properties for deal #2. I have identified a few good possibilities, however cash will be tight as I plan on making improvements in Deal #1. I know that there have been a number of threads on 0% money down mortgages for investment properties, which is not possible at all at this time. Therefore, I wanted to see if there are 10-15% down mortgage products out there for investors?

Besides searching on BP, I have asked a few portfolio lenders in MA, who are requesting more investing experience before they will discuss possibilities. So I was hoping to see if there is anyone who has had any luck/experience with lenders in Southern New England (CT/MA/RI)? I’d like any pointers on a lower down payment mortgage product, as I’d like to set aside some cash for vacancies, repairs, and 6 months of cash reserves.

Any advice would be most appreciated.

Unfortunately this deal feel through due to intractable issues that came up during the inspection.

I am working on another deal that might not be a slam dunk like this one -- however it holds its own promise.

@Mike Hurney

Property Management

Sounds like doing property management is a good idea. Besides the fact that I'll be living there, I like the landlord education that I will be receiving, all while saving a few $$s.

Home Inspection:

I had a very thorough inspection and the inspector identified a few issues. I am negotiating with the seller to get some credits. We'll see how it ends up.

Thanks for the review and I am glad that you like the deal!

Jahan