All Forum Posts by: Christian Carson

I've been going back and forth with banks for the last few weeks trying to find one who will underwrite me. Here's the plan: I want to buy a fourplex for about $140k and give myself a place to live. It's a steal of a deal and I want to get into it. I am not too concerned about the down payment as cash is not an issue, but I want to finance this place and I would like to know my optimal route for doing so.

Here's the thing: I am one year out of school and have about 11 months of income history. I am a self-employed attorney but I get paid bi-weekly by my main client for full-time contract work. My income is high, I don't have much debt (low student loans and no credit card debt), and my credit score is 791. Everyone tells me I need three years of tax returns.

My mother said she would be willing to cosign with me. She's got a very high credit score and good continuous income history and would probably qualify for anything.

Here were my thoughts on how to do this:

1. Kiddie condo loan - I was initially hoping that I could get an FHA non-occupant co-borrower loan ("Kiddie Condo" loan) but two banks have called me back and said "we don't do this." Is there a bank that does?

2. Conventional mortgage with cosigner -- If a bank isn't going to write me an FHA loan, I don't see why they would do a private mortgage, either.

3. Buy with cash now and refinance later -- I can get ahold of the cash in the form of a bridge loan from my mother, but she doesn't really want to write me a long term mortgage (she wants that cash to invest in other things). If I refinanced, is it easier to qualify with a co-signer? Do I have to wait 12 months to do it?

4. Have mother buy the building with an investment loan -- If the interest rate is going to be 6% or higher, I don't really see why she wouldn't just write me a mortgage, though maybe I'm just being picky about this. In any case, this building still returns 13% cash-on-cash with a 25% down loan at 6%, which isn't the best but still pays the bills.

Can anyone suggest what they think is the most prudent course of action? I am not about to wait three years to own my own building just because the bank needs tax returns. I think I can do some great things to add value to this building so I don't want to lose this opportunity just because I can't get the bank to play nice.

Hello all,

I'm looking to buy a 4-plex using an FHA loan and occupying one of the units myself. The problem is that the building is fully leased and it looks like I might not be able to get an open unit until April. Question is, what's the hard and fast rule on this? Will they ultimately deny me for the loan? If I decided to do cash-for-keys, how long would I have to do this?

I also have an income issue, since I just graduated from school in 2011. The loan officer told me "no problem, your history as a full-time student counts as a substitute for income history!" before sending me a preapproval letter. I find this to be quite odd. Have any of you heard of this happening?

Thanks for the informative replies, everyone! I did find some extra properties that I'd missed before on the commercial MLS. I'm going to start calling the selling agents and have them put me on their list for pocket listings.

Steve,

I don't have personal access to the MLS, only Zillow. I do have several agents who are (supposedly) checking up for deals that come by, but pretty much any time I hear from them is when I contact them about a property. I understand most agents' lack of motivation to help me because I'm young and because I do far more research on properties than others which makes me pickier.

I've been thinking of getting a RE license since my second business will eventually require it. Is there an easier way to get direct access, or am I totally at the mercy of agents?

Uwe S., lol! I have been really interested in Lakewood. I have seen good deals but they don't last long at all. Is there another resource besides LoopNet that is worth checking on?

Hi all,

I have been trying to get into an underperforming apartment building for a good 6 months and am having a heck of a time finding one that isn't grossly overpriced in my area.

My specific neighborhood has probably 100+ 6-15 unit apartment buildings that are always fully rented at premium rents and are NEVER for sale--I imagine because they're such good cash cows! The handful of places listed on LoopNet, across the entire metro area, are either (a) in the ghetto or (b) contain misleading NOI estimates (most commonly I've seen sellers omit the maintenance budget entirely from their calculation).

I'm frustrated enough with dealing with agents that I'm considering going on a letter-writing campaign to try and draw out the little old ladies who want to dump their headache apartment buildings. Has anyone had any luck taking this route with apartment buildings? Any other tips?

@Karen M. True enough; any decision requires you to do a calculation of cost versus benefit. I carry general liability insurance for all my businesses that might experience loss in excess of investment.

With respect to the law of building codes, permitting and contractors, I have to be frank--in Ohio, it is nothing more than a hidden tax, a protective tariff, and a way for the municipality to veto any development or renovation that its architectural review board subjectively considers "undesirable." It has very little to do with ensuring that contractors are properly qualified to do the work. There are no educational requirements for contractors unless they engage in electrical, plumbing, and a handful of other very specialized trades. In this respect, these laws are more like registrations than actual trade licenses (and are referred to as such in the city code).

Of course, your mileage may vary as these laws change drastically from jurisdiction to jurisdiction. One should always be 110% informed before pulling the trigger on anything like this. I will be doing it because my Amish contractors don't want to deal with the city themselves for licensure.

Here's another idea for you that I have been toying with--become a licensed contractor yourself.

My city requires a $10,000 bond (which might cost you $200/yr depending on credit), and a $125 app fee. You only need to have a state cert if you are doing plumbing, electrical or architecture. I plan to do this so I can get my team of Amish subs to work in the city.

I should also add that there are plenty of other neighborhoods and suburbs that are fantastic places to live, but don't have strong rental markets and their rent-to-value ratios are not favorable. Neighborhoods that come to mind are Shaker Heights, Beachwood, Mayfield Heights, Mayfield Village, Chagrin Falls, South Euclid, Solon, Pepper Pike, Rocky River, Avon Lake, Bay Village, Bratenahl, Westlake. These are places where flipping a foreclosure is a better idea than renting. I'm sure I'm missing others but as I'm an east-sider, I never cross the Cuyahoga River and I don't know anything about the west-side neighborhoods. :)

You can make a fortune in this city if you know what neighborhoods are vibrant communities and which ones give this city its undeserved bad reputation.

City neighborhoods: Invest in Ohio City ($1000+ for a 2/1), Tremont ($800/2), downtown ($1500+/2), Little Italy ($900) (but you'll have to marry the owner's daughter to get title to any property there!). There are some depressed but stable speculative neighborhoods out there like North Collinwood and Detroit Shoreway where houses can still be had for $20k in rentable condition but they need to be watched if they go vacant. Houses in those areas will rent for about $600.

Suburbs: Cleveland Heights (east of Little Italy/west of Coventry Rd fetches $1200+ for a half-duplex; most other places fetch $900), Lakewood ($650-800), University Heights ($750-900), Willoughby (not sure about rental values here).

Those areas are all that I would consider. If you buy property in these areas, you will pretty much be guaranteed a steady stream of good-quality renters and very few crime problems. Be wary of buying on the outskirts of these neighborhoods. Some simple improvements like adding gated offstreet parking can significantly increase rental values in the areas within the city.

Section 8 is also an option here. The Cuyahoga Metro Housing Authority pays $783 for a 2bd voucher and the waiting list is long. This is a tool to be used in the depressed areas--local property owners in the nicer areas might not think of you highly if they find out you are accepting Section 8 in their neighborhood. Take that with a grain of salt.