All Forum Posts by: Chad Day

Hey everyone!

I am looking at buying my first "home".  I put that in quotes because the property I am looking at is zoned as a commercial building with a gutted upstairs apartment.

I'd like to purchase the property with a renovation loan, something like FHA 203k or Fannie Mae Homestyle. But will this type of loan work on this property?

I would make this my primary residence for however long the loan requires. I have read that FHA allows you to take out a loan as long as the commercial portion of the building is less than 49% of the square footage. This building should fall under that, but since the upstairs apartment is gutted, would this property still qualify? There is no running water, the plumbing would need to be redone. I would not add much, a simple bedroom, bathroom, kitchen, and hvac.

Another aspect of this deal is that the building is listed as a historic building and thus could qualify for some grants.  There is a Wisconsin grant for historic home owners that gives you back 25% of some renovations costs.  This could save thousands, but might add so much red tape that it may not be worth.  Does anyone here have experience with this?

Thanks for any help! 

I also forgot to mention, this would be my first real estate deal.

I am hoping to find a local lender that will allow me to take out a commercial loan as a first time buyer. I have a 750+ credit score, solid income history, low DTI.

But I don't have experience as a landlord,  I am thinking if I hire a management service, I could get around the lack of experience as a landlord.  

But that just means I'd have $30k short of having one years operating expenses.  

Do commercial loans usually require you to have one year operating expenses in reserve?

An 8 unit apartment building recently came on the market in my town for 250k.  The monthly rent totals $3600.  I figure it would cashflow about $1500 a month.  I ran it through the buy and hold calculator and the numbers are great, but I don't know if a few of my assumptions are off.

This would be a commercial loan. What kind of APR's should I expect? I used 20 years @ 5% with 25% down. Is that about right? This would leave me without much cash in reserves. Does a commercial loan require you to have a years worth of operating expenses in reserve? Do they count future rental income in that number?

I also assumed $300 a month for insurance.  Does that sound right for an 8 unit apartment building?  It is small, all units are 1 bed 1 bath.

Thank you!

When you deny an application do you give a reason?  I feel like if you do not give a reason it could be interpreted as violating the fair house act.  

For instance let's say you deny someone because you believe them to be a messy person or because they smoke pot.  If you say "I'm denying you because your car was filthy" that would offend the applicant. If you don't give a reason it may be interpreted as discriminatory.

I found a place on homesearch.com, which is an auction website.  The website seems shady at best and I don't want to go through them.  I would like to try negotiating directly with the owners, which looks like a bank or maybe some other company

I looked up the tax records and the listed owner is very cryptic:

 MASTR ADJ RATE MORTG TR
US BANK NAT ASSOC 209
7105 CORPORATE DR PTX-B-
PLANO TX 75024-0000

I did my best Googling but I can find who actually owns the place?  Is it US Bank?  is it Master Adj Rate Mortg Tr?

Do I even want to contact the owner?  Could there be a company that is handling this property that isn't HomeSearch.com?

I really want to get in to renting out properties. I live in a small city(35k) in Wisconsin. I've found a few single family properties I'd like to buy and rent out. Here is the best one I've found.

It's a 3 bed 1 bath 2 car detached in a decent neighborhood. The person that use to own it died(in a nursing home). The property is assessed at 70k and they want 35k. The property needs paint and carpet and hopefully no major repairs.

I made a little spreadsheet from the financial analysis article and another on calculating rentals on a napkin. So here are the numbers:

http://i.imgur.com/oGTHRq3.png

I believe my numbers are conservative. I put 20% down to avoid PMI, then calculate 15K which should cover paint, carpet, and some minor repairs.

This gives me about 1.45% of rent to purchase price and repairs. I like this property compared to others do to its low cost. If this turns out to be something I do not like, I feel I could unload it easily.

I've found a few similar to this in my area although most are HUD cases. One is a VA owned property.

Thanks!