All Forum Posts by: Chris Talley

@Chris Mason He's got an application underway with Chase right now, but I believe that Wells and BofA turned him down, because he has not had consistent income from his retirement account previously. The other big wrinkle here that I left out to avoid distracting from the main question: pretty much all of his retirement balance was earned in 2020. He had a crypto investment go from hundreds of thousands to over ten million. He's sold a huge portion of that position in his tax-deferred account and now has it sitting in cash in his retirement account. Perhaps lenders have been unwilling to project future income from the retirement account due to the lack of income history and the volatility of the holdings (granted he's now much more diversified)? The answer he's been getting from the big banks has been "No income + new retiree = no loan"

Thanks @John Perrings, that's very helpful!

@Jay Hinrichs We looked into a pledged asset line with fidelity or schwab, but discovered today that there's an IRS cap on retirement account loans of $50,000/year.

I'm starting to think that his only option is to find a small lender that will work with him. Even hard money would be better than paying the $1MM+ in taxes :/

@Sean Ruggiero Thanks for the suggestion, I'll look into that!
@Theresa Harris Unfortunately, his CA home is going to net him a negligible sum compared to the property he's purchasing :( 

A friend of mine recently retired with a very, very substantial amount of money in his retirement accounts but is now having issues getting funding for a personal residence.
He currently lives in CA, and is in the process of moving out-of-state to TN. He's under contract on a property for 1.7MM, an amount which he could easily cover with cash from his retirement account. However, drawing a lump sum of that size from his retirement account is highly inefficient from a tax perspective, especially while he's still a CA resident. He'd obviously prefer to fund the purchase with debt, either with a mortgage or a line of credit secured by cash in his retirement account. But big banks are turning him down simply on the grounds of income requirements, given that he very recently retired. The tax situation means that any reasonable interest rate is still a significant win for him. Any ideas on how to help him find a lender that would handle this type of unusual circumstance? Seems like this should be a very low-risk loan for the lenders, given that he can fully collateralize the loan with cash in his retirement accounts.

@Chris Levarek I just spent the last 5 hours or so watching that youtube channel. Amazing resource, and way better info than we got from our CPA. Thanks for the rec!!

I've noticed that the 2 real estate agents I've worked with tend to manage their sales processes extremely manually. Some examples:

(buyer's agent): Tracking potential properties for a buyer client in a spreadsheet.

(seller's agent): Tracking open house leads on a paper sign-in sheet. They never follow up on these leads, since doing so would require manual data entry that they don't have time to do.

(buyer's & seller's agent): Tracking to-do items either in a spreadsheet or by memory as the deal is in escrow. They'll have a checklist written down somewhere, but occasionally things fall through the cracks if the agent isn't 100% on top of every task in every deal that they're involved with. 

I've heard plenty of horror stories, especially around the third point, where a lack of clear client-agent communication on escrow to-do items leads to problems and delays in closing. E.g. buyer doesn't realize they need homeowner's insurance, delays closing as a result.

So I have a few questions as I explore opportunities to build software with the mission of giving real estate agents better leverage of their time:

1) Do you see any places in your real estate businesses where there is a lack of proper automation?

2) What's the most error-prone part of your business today?

3) Are there tools that the big brokerages have built in-house that the boutique brokerages are lacking?

@Account Closed Yeah, we've noodled over whether this is the right time to buy. However, given the recent dip in the market and the looming IPOs that are set for 2019 and will inject billions into the Bay Area housing market, I see this as an opportunity. A 4% rate from Wells on a jumbo is just icing on the cake.

Similar to you, I'm also looking at a property that partially spills into a flood zone. Did the presence of the flood zone add significant costs and headache for you? My understanding from your previous post was that because of the flood zone, you had to elevate the ADU so that its floor and electrical are above the flood plane. Is this accurate?

I'll be stopping by the city planning dept tomorrow to ask them more questions.

Awesome, thanks for the advice from both of you. This particular property ended up having quite a few additional issues, and we decided not to put in our offer. We're still hoping to buy a property with a rentable ADU. Thanks a lot for the input!

@David Song Thank you so much; this was super helpful! My wife and I are looking at purchasing a home in San Mateo on which we plan to build an ADU. We'll live in the primary and rent out the unit; the economics looks great, especially in San Mateo where there is an abundance of small properties on large lots with lots of under-utilized space. Similar to you, we'd like to do a 640 sq ft unit (the max allowed in SMC) and are looking at homes with this goal keenly in mind.

Are there any hidden traps, things we should be aware of going into this, or things that you wish you had been able to better plan for? Are you able to recommend any contractors or planners/designers? Would you be comfortable talking about the cost of the project?

Thanks again for the information. It was really great to see this thread!

My wife and I are looking to purchase a SFH in San Mateo, CA. We're primarily focusing on properties with rentable ADUs for a small house-hack. We've found a property with an unpermitted ADU, as well as an unpermitted bed+bath addition in the main structure. Does anybody have advice on how to properly adjust our offer price to reflect the risk associated with these unpermitted alterations? There's also some deferred maintenance relating to roof and foundation.

Here's how I'm planning to price the property:

1. Start with comps based on the house without any of the unpermitted additions

2. Deduct for the potential cost to tear down all of the unpermitted work

3. Deduct 1.5x the cost of all deferred maintenance, and offer to add this back if the seller completes this deferred maintenance with a contractor whom we approve before closing.

Thoughts? Are significant unpermitted additions such as these generally dealbreakers for you? Also, if we wanted to pull permits for work that's already done, I assume it would require us to essentially tear everything down and redo the work from scratch. Is this accurate?