All Forum Posts by: Brad L.

I haven't done rent-to-own, does a standard contract include a legal description of the parcel? If so, you'd need to take care of creating the separate parcel beforehand so the contract doesn't include the legal description for both as it does now.

It's good that they're being proactive, as a lot of property owners are desperately trying to get their tenants to apply for assistance to no avail. Be thankful they are taking this step on their own to ensure they don't get behind and stick you with unpaid rent.

I'm sure how much they may be approved for varies on a case-by-case basis, but I have tenants who have paid the full rent for multiple months through COVID rental assistance.

Your role is limited, and in my personal experience requires just a bit of information on the balance due and a signature.

You just need to add a contingency to the offer which allows you an out after reviewing lien payoffs/paperwork. Use the full payoff amount when running numbers, don't let them convince you they'll get the payoffs reduced without having actual documentation.

I prevent it by not renting to smokers. It's one of the first questions I ask prospective tenants when they contact me and it's a deal breaker. 9 times out of 10, when winter in Wisconsin hits, the "outside only" smokers end up back in the house or in the garage.

I do have a property with inherited tenants of 25 years who smoke and I'm not looking forward to that vacancy.

Get estoppel certificates from every tenant. Should reference monthly rent, due date, security deposit, lease term, ANY oddball agreements (i.e. cut grass for $50/mo off of rent), deferred maintenance requests, etc.

LTV is based on whichever is lower; purchase price or appraised value. Unfortunately, assuming your loan isn't a portfolio or "in-house" loan at whatever bank or credit union you're using there's no way around it on the front end.

You should start analyzing as many deals as you possibly can, even if you know they're no good. Do at least a couple hundred of these over the next few months so you can really get comfortable with what a good deal is in your area. You should be able to see a newly listed 3-plex for $xxx.xx and know right away whether it's a potential deal or just garbage.

I started out in real estate with no experience, and in the 6.5 years since buying my first duplex I've analyzed thousands of properties and have a total of 35 units and a self-storage facility. I know every street in my city along with rents by neighborhood, and can tell within 2 seconds of a property being listed whether or not it's worth a second look. I'm sure a lot of other people on here can do the same which should show how important it is.

Don't get ahead of yourself and spend this year really educating yourself on what a good deal is in your area and surrounding areas. Even if you're not interested in those surrounding areas it's all about the analytical experience. You should know the approximate monthly utilities cost for a duplex or 3-plex if not separately metered, how your purchase may or may not have an effect on the property tax bill the following year, etc. The often-forgotten details can add up make an ok deal a bad deal very quickly.

Last, there are other low-down payment programs besides FHA. If you go 203k that's another story, but meet with a lender to discuss other options which won't require a refi to get rid of PMI. Also, I don't know about your market but with how fast homes are selling here a FHA offer is not very attractive to sellers because the property condition requirements are so stringent and they don't want to deal with headaches when they have 10 other offers.

Feel free to reach out with any questions, I know if I had someone with experience to talk to when I first started I'd be much further along than I am now.

Apartments.com only because they acquired Cozy. Loved Cozy, do not like Apartments.com

Hi Caprice, any specific reason you're looking to go FHA (aside from 203k as it sounds like you are not completely sold on that aspect)? Just FYI as a first-time homebuyer you could potentially qualify for Fannie Mae HomeReady which can get you in for only 3% down and it's conventional. Property condition requirements are not as stringent as FHA so it's a more attractive offer to a seller but it also doesn't allow for reno like 203k. Shoot me a message if you have any questions.

I've never attempted what you're doing, so take this with a grain of salt:

1. Start with commercial lenders at local community banks/credit unions and definitely have a business plan or at least something for them to review showing you have a plan in place and aren't just flying by the seat of your pants. From my personal experience, these local institutions have so much flexibility and if it's well thought out and makes sense you'll definitely find one that will finance it. I've been able to get some unique financing over the past couple years and know other rental property owners who have financed properties no bigger institution would ever touch. Local guy got a credit union to finance a 17-unit apartment building purchase in which 13 units were vacant for years and 3 of those had fire damage. They allowed him to fix up the units on his own time and dime. So they essentially financed a 17-unit property with only 4 livable units and no immediate plan to bring the remaining 13 units up to habitable standards. Sounds crazy but true.

2. In your initial conversation with these lenders, mention that once you've stabilized the property you'd like to re-appraise and pull cash out. The only thing that would make sense in this situation would be to appraise using the income approach, so if they won't do that they either don't understand what you're doing or they don't understand what they're doing. The problem you'll have is that it will be very difficult for you to estimate ARV on your own close to what the appraiser's value will be on the back-end. Who knows what kind of vacancy rate and cap rate they'll factor in on a property like this.

Summary: This will very likely never be anything more than a commercial loan at a small community bank or credit union, and there's nothing wrong with that. Get in touch with them to explain what you want to do and what they need you to do to make it happen. ARV is anyone's guess, as I'm sure there's not a "standard" vacancy rate or cap rate used for appraising rooming houses since they're not super common. Maybe it is in your market though. Wouldn't hurt to try to call a few appraisers to see if they have any thoughts.