All Forum Posts by: Daniel Soovajian

Appreciate the response Jason - makes sense now re: the prepaid insurance.

Now I'm trying to get a sense of where I might be getting overcharged on the closing costs...I listed out quotes provided by two companies - quotes for one company vs. the other are separated by "vs":

Lender Related charges

- Appraisal fee - $475 vs $450

- Credit report fee - $21 vs. $60

- Flood certification - $8 vs $14

- MERS - $12 vs $14

- Processing fee - $400 vs. $450

- Tax service fee - $94

- Underwriting fee - $695 vs. $950

- Government recording fee - $180 vs. $115

- State tax / stamps - $923 vs $680

TOTAL: ~$2800 for either lender

Title charges

- Title expenses (e.g. closing fee, title insurance, etc.) - $1580 vs. $1450

I think I might be getting tripped up on what I'm counting as a "closing cost". When you say a lender should be able to come in at less than $2000 if no closing costs are involved, are you talking only about the lender related expenses (and therefore you're not including prepaid expenses and title charges)? 

Hello,

When plugging in #s into the "purchase closing cost" section of the BP rental calculator, you can click the "cost breakdown" link on it to plug in specific components (e.g. points, taxes, hazard insurance, etc.).

The loan quotes I've received all include 12 months of prepaid hazard insurance. But if I'm including a year of insurance as an up front closing cost, when I get to the expenses section of the BP calculator and I'm plugging in another $75 estimate for monthly ongoing insurance costs, aren't I effectively double counting my insurance costs for the first year? 

One other question: the BP calculator says that I should estimate $1500 - $2500 for closing costs, but I've received 4 quotes from different lenders and for a loan with 0 points, their closing costs all come in between $3800 - $4500 (plus an additional ~$2300 for prepaid expenses). Are the quotes I'm receiving just not that competitive or am I missing something here? I received these quotes from a mix of small to larger sized lenders in TN.

Thank you!

Very helpful - thank you @Craig Curelop and @Chris Mason

It looks like the lenders are baking taxes and insurance into the closing costs - as "prepaid items / reserves" - which amount to around $2000.

The actual "closing costs" themselves amount to $5500 for a loan with 1 point - which includes title fees, state tax, processing, underwriting, appraisal fees, etc.

Sounds like it can't hurt to do a bit more shopping but I definitely feel better that these costs are more in line with what's to be expected.

Hello!

I have a question about closing costs...I've reached out to 4 lenders and secured pre-approvals with each to compare their rates, fees, etc.

For a 25% down payment with 1 point on a $200,000 investment property, they're estimating closing costs between $7000 and $8000 (which includes prepaids, insurance, etc.). 

However, I notice in the BP rental calculator tool that it recommends I estimate closing costs to be between $1500 and $2500. 

Out of curiosity, I did a quick google search for "average closing costs paid by buyer" and am seeing that it's customary for closing costs to amount to 2-5% of the purchase price...so between $4000 and $10,000 for that $200,000 property. 

Should I just go with what the mortgage bankers quoted me or am I missing something? I just want to make sure I'm using the right assumptions when running my calculations.

Thank you!

Hello!

I'm looking to get pre-approved for a conventional mortgage and wanted to start by comparing lenders based on the interest rates, points, fees, etc. they're offering. A few questions came to mind as I started to kick off this process and I'm hoping to lean on the expertise of the BP community for guidance on them: 

1) Do I need to go through the underwriting process and get pre-approved with each lender in order to see what rates, fees, etc. I would actually be charged on my loan? It seems like this would be the best way to compare lenders but I'm concerned about all the hard credit checks that would result from doing this kind of comparison shopping. Or could I call each lender and without going through the pre-approval process with each of them, have them give me a ballpark estimate for what those rates, fees, etc. would be - so that I could rule out some lenders and just move forward with getting pre-approved with a few of them?

2) I've read that you can minimize the hit to your credit score by getting all the pre-approvals done within a short period of time so that they are counted together. Depending on where I'm reading, I've seen folks suggest that I should have all the hard credit checks done within a 14/30/45 day window to take advantage of that. Can anyone confirm what the actual window is?

3) Once I have the pre-approvals in hand, I understand they're usually only good for a limited period of time (e.g. 60 days), but that I can supply updated information to the lender and they'll extend the shelf-life for my pre-approval for another few months. Are additional hard credit checks taking place to conduct this extension?

Thank you - all this feedback has been super helpful! 

Since this will be my first out of state investment where I'm not at all familiar with the legal landscape, it feels like spending a few hundred on a legal consultation to review some docs up front (e.g. PSA, lease) makes sense.

Hello BP community!

As an out of state investor, if I'm working with a licensed realtor to purchase a property and then hiring a property manager to manage that property after closing, is there any need to hire an attorney? If so, what gap(s) would the attorney fill that the realtor and property manager couldn't cover?

Thank you!

Really appreciate everyone sharing the helpful feedback - thank you!

A few folks have suggested turnkey to start out with, but I have two concerns with that approach:

1) Lower returns - if I'm willing to accept less than 10% ROI with turnkey, why not just invest in REITs for truly passive income?

2) Don't see turnkey as an effective way to learn about investing - right now, I see my lack of experience as the most critical gap I need to close in order to successfully expand my investment portfolio long term. Because turnkey seems so hands off, I feel like I'd handicap this learning process, not to mention the trial and error I'll likely need to go through before establishing my "go to" out of state team (e.g. realtor, PM, etc.) in a given market. 

If I'm willing to accept some headache and/or losses early on to get that hands on education, does my approach still make sense? Or is there something about turnkey I'm missing? 

Hello! 

My wife and I are ready to start our real estate investment journey and are looking for some feedback on what market to start in. First, a bit of context: we recently moved to Vancouver, WA have found it very challenging to find rental properties that could satisfy the 1% rule - especially since neither of us have the expertise, time, or interest to try and rehab a property for our first investment. After doing some research on BP and reading David Greene's book on out of state investing, we're feeling confident we can make out of state investing work. 

Someone posted an article on BP a while back that gave (what I thought at least) was a really comprehensive analysis of growing markets (https://wallethub.com/edu/fastest-growing-cities/7...). I did some quick searches for many of these markets on realtor.com to get a ballpark idea of what properties were selling for and what rents were being charged for comparable properties. Based on that research, I narrowed the list of potential markets down to these three:

1) Columbus, OH - I really like the stability provided by major employers in the area combined with its modest growth prospects

2) Chattanooga, TN - my wife and I lived there for about 1.5 years so I'm somewhat familiar with the area and felt like it was heading in the right direction; additional research I've done seems to support that as well 

3) Indianapolis, IN - I've done the least research on this market so far, but it seems similar to Columbus in that there is likely to be continued modest growth there 

Our strategy is to pursue buy and hold rental properties, primarily for cash flow but with some potential for appreciation, and are interested in B/B+ multifamily properties (4 units or less) that can produce a 12% ROI with at least $100 of cash flow per door per month.

We have $35,000 cash and plan to put down 20% on a conventional mortgage, so right now our target price ranges is $175,000 or less. Once we pick the market to pursue we'll focus on building our our key local team (e.g. realtor, property manager, lender, and contractor).

Looking forward to hearing what the BP community has to say about these markets given our investment strategy. Thank you in advance!