All Forum Posts by: Dan Taylor

I'm with Aly L and Terri Pour-Rastegar all the way on this one.

We started with traditional collection methods but some of our residents didn't understand the "Rent due without demand" portion of the lease. They always paid, but we were asking for it.

Needless to say, that didn't last long. Now, all our tenants are required to authorize an ACH withdrawl/debit on the first of the month from their checking account for the term of the lease before signing the lease. This has proven to be most effective for us. In the event an overdraft occurs, they not only have to worry about late fees but overdraft fees as well - a pretty effective deterrent IMO.

If you don't choose that method, I'd agree with those who've recommended text message reminders, including verbiage outlining late fees. Text messages have a very high "read rate", almost guaranteeing they'll see it, as opposed to an email they may not see for a week or that sits in junk email folder.

Good luck. If you have any questions on how we do it please feel free to connect.

I'm pretty well versed with the 203k loan and the intricacies of how tedious the process can be. However, I couldn't help but asking:

"Has anyone ever used the 203k loan to add a unit(s) to an existing structure?"

According to the 203k program, it is allowable (up to 4 units) as long as the property, as with any FHA & 203k, is Owner occupied and (at least) a portion of the existing foundation is used.

We currently have an opportunity to add a unit to a duplex that has been completely gutted. The location is key for us and all zoning requirements have been met. Now, it's just a matter of finding the additional funding above and beyond the original renovation estimates. The 203k loan would work well without having to seek hard money or private money.

FHA says it's possible, as long as the LENDER is ok with it. I've been in contact with 3 203k lenders in my state who have all agreed to originate the loan - but only if/when they find a 3rd party/investor to sell the loan to. Been waiting a few weeks now and still no return calls.

So again, although it is technically possible, is it realistic? I have yet to find ONE instance where a 203k was used for adding additional units.

Thoughts?!

P.S. Before you ask, YES, I'd be moving into one of the units, and YES, we've run the numbers and even with the addition the ARV is below market value and comps. We got the house dirt cheap.

Also, if you've ever added a unit, with or without the 203k loan, i"m interested to hear how it went and if you think it was worth the hassle.

FYI - A quick search turned up these results , along with a ton more. This is probably one of the most asked questions on this forum.

http://www.biggerpockets.com/renewsblog/2013/07/18/real-estate-license-investor/

http://www.biggerpockets.com/forums/311/topics/84587-re-license

http://www.biggerpockets.com/forums/21/topics/90967-real-estate-license-limitations

http://www.biggerpockets.com/forums/48/topics/87908-should-i-get-my-license

http://www.biggerpockets.com/forums/12/topics/78331-getting-a-real-estate-license

http://www.biggerpockets.com/forums/21/topics/76598-is-a-re-license-necessary

Your Realtor is misinformed. FHA does not recognize one contractor any more than the other. In fact, they specifically state on their site that they do not endorse ANY contractors and recommend you do your own due diligence in choosing a qualified GC.

Matt Devincenzo is absolutely correct. Any and all requirements aside from FHA guidelines would come from the lender. In addition, local governments will have no more an influence than they would if it weren't a 203k project. I don't see why your new contractor wouldn't work. However, here's some questions you may want to ask him before going that route:

1. Will he provide an in depth and detailed work write up/bid/estimate that clearly distinguishes between material cost and labor involved for each project in the SOW (scope of work/Project spec). This is essential for most 203k lenders, and I know a few contractors that won't do it.

2. Is he wiling to cover the cost of renovations until the first draw is released? 203k Requires the work begin and stage 1 be completed before ANY money gets distributed (you're allowed up to 5 total draws). So, in essence, if the project is 100k, you're looking at 20k per draw, which means you'd need to complete 20k worth of work before the bank would release that money to reimburse the contractor. Some GC's may not be able to carry that cost until the bank releases payment.

3. Finally, is he ok with waiting til the end to get 10% of the payment. FHA holds 10% of each draw until the end to ensure the contractor finished the job.

Lot of hoops to jump through but if you find the right GC, I think 203k's can be a great route.

Good Luck!

You'll get answers for and against. The big time investors will tell you to build a team of agents to find the properties for you, so you can focus on building your business. Furthermore, I've met plenty of people that take that approach and are very successful.

I, however, can't imagine investing without access to the MLS. Sure you can get basically the same listings by searching realtor.com, trulia, or the other sites. But those sites won't tell you which properties are pending, won't provide private remarks from sellers, and, most importantly, won't give you any true MARKET DATA other then the listings themselves.

The MLS has a massive database of information from price reductions, listing history, days on market, etc etc. Seriously, you can get lost in the reports for hours. If you want an all-encompassing description of property values in your area, there is no substitute. Yes, it may cost a thousand bucks to maintain MLS access each year, but you should easily be able to make 1 or 2 retail sales to cover the costs.

As for the course itself, for a couple hundred bucks you will certainly get an overview of the entire process but, just remember, these classes are for RETAIL agents, and they often touch only briefly on RE investing. (My instructor was full of "investing generalizations" which, half the time, were dead wrong or misinformed. [You know, the "you'll be fixing leaky toilets at 3am" type]) Instead, you'll be inundated with RE terminology, selling requirements for cemetery plots, trailer parks, listing procedures, etc.

What's your RE investing objectives? Buy and hold, flips, wholesale? This may determine how beneficial the MLS can be for you. Do a quick search and you'll see how having your license can cause some ambiguity when wholesaling and how to properly disclose that info to prevent any issues.

I know this topic is rather old but I just wanted to add that a near 20% discount is possible. In fact, I save at LEAST 17% EVERY TIME I do a materials run to either Lowes or HD.

Here's how:
Before any big capital improvements, I'll draft a materials list and price it all out.
For instance, my most recent project (soundproofing between units) called for about $2K in drywall, insulation, paint & primer. I went online and purchased $2k in LOWES Gift Cards at a discount website like PlasticJungle, or GiftCardGranny(a great broker site). Sometimes you get lucky and find two "one thousand dollar gift cards", however, its unlikely. I was stuck with about 4 $500 gift cards at a 10% discount. Combine that with the " 10% mover coupon" mentioned above and you've got yourself a solid savings of 18-20%.

I know it may seem like a hassle for big time investors but for the modest DIY rehabber/investor the savings can really add up quick. Even if you don't do the work yourself, but have no qualms picking up the materials for your contractor, this can save you money with them too. Most contractors I know charge MORE than they pay for the material because they have to arrange pickup and delivery.
Since I started investing I've saved close to $6000 in material cost, and by years end should be above $10k.

I recommend this approach mainly for projects that fall BELOW the $2500 minimum bid requirements for the contractor desk. Even still, I've actually opted NOT to go with the contractor Bid/Price a few times as they could only offer 13-15% (based on the specific materials as some items can be discounted more than others).

Just thought I'd share how I do it.

A friend of mine has a duplex and an owner-occupied single family (3 total units) on the same parcel/lot/deed all under a standard FHA mortgage so it should be possible. I wouldn't look to the lender for a definitive answer though. In my experience, most loan officers are only interested in qualifying you financially, rather than being experts on the type of loans they offer. Finding a true lending expert is hard and rare, especially with big box banks. They are out there though.

Case in point: I had 3 banks assure me they could close an FHA loan on my owner-occupied 4-unit. I chose one, qualified without a problem, appraised without a problem, even got my commitment letter! and a week before closing - "Sorry, FHA won't lend on this property". Needless to say, I wasn't just out of a loan, I was out $700+ on an appraisal and a LOT of wasted time.

I ended of going with a "no closing cost" conventional loan requiring 20% down at 4.5% instead of the FHA at 3.5% with 3.5% down. It was a tough pill to swallow believe me but in the end it worked out. If you do have to go conventional at 20%, look at the bright side - you won't be flushing hundreds of dollars away on PMI every month. I'm saving over $150 a month, thus increasing cashflow. (And it helps me sleep at night :) AND you should avoid many of the painstaking FHA hoops (handrails, attic access, chipping/flaking paint, etc. They can bog down a deal on any house, I can only imagine on THREE)

For those of you wondering and more to the point of the forum TOPIC:
Financing a Fourplex Multifamily Property using FHA - A Few Twists

Here's my twist: You cannot get FHA financing on a 4 unit deeded with a separate PARCEL of land unless it is contiguous (adjacent or attached to the original parcel.) The prior owner purchased an additional vacant lot to satisfy zoning parking requirements. The lot is one full parcel away from my 4-unit, less than 50 feet, but not contiguous. The irony: I own the lot in between them :)

Good luck!

My first question without hesitation would be:
"Why are you filing for bankruptcy?"

Bankruptcy, while viewed negatively by most, can actually be the best option for her. For instance, a friend of mine was married to a man who owned a very successful business and he used their house as collateral for over $75k in loans for business equipment. Through the divorce a few years later, the deed was signed over to her in lieu of back child support. Some 13 years later, the creditors who loaned on the equipment came calling and she was saddled with the debt. Unable to afford the payments, Bankruptcy was her only option. Having reviewed her credit report with her, she, in 26 years of credit history, had NEVER missed a payment and had ALWAYS paid more than the minimum on her balances. Unfortunately, she just married a prick.

Point is, investigate. If she can provide a legitimately good reason for the bankruptcy and has documentation to supplement her reasoning she may be worth considering. Odds are she's financially incapable of managing her affairs, but that isn't ALWAYS the case. Good Luck!

Photo's!

Matt Devincenzo, Totally understand where you're coming from with improper Tyvek installation. I'm confident whoever does the job will do it according to manufacturers instruction. It's a small 3 page pamphlet and I'll be going over it with whoever gets the job to ensure such. I've had issues with this on past projects with prior contractors.

As for the closed cell insulation, I'm think I'm actually using open cell spray foam on the interior of the house to really tighten up the envelope from drafts and such. Even though theoretically the closed cell would protect the wallboard and interior from water, it has no protecting effect on the building structure itself (sheathing and framing) from the outside elements, because its inside the sheathing.

Rob K The range is based on 4 of the bids from verified painters, All of whom have seen the property and are aware of it's age. However, getting the assurance that everything is done within the bid to EPA standards is definately something I'll add to my list.