All Forum Posts by: David Rogers

Hello Biggerpockets,

I'm in the process of closing on a duplex in Cleveland and am starting to think I picked the wrong lender. I have been asking for details on money down, closing costs, interest rate, etc. and have been met mostly with "it depends." I'm trying to purchase with a 203k FHA loan so I can put 3.5-5% down. The house I'm buying has peeling paint so I'm going to add siding. The lender wanted a bid ASAP so she could start on the loan documents and then said we could redisclose and put the actual contractor's real price once I decided on the contractor. I had Home Depot come out and give a high bid while I scheduled the other contractors to give an estimate.

When I received the loan documents, the interest rate was .5% higher than my preapproval letter. When asked about the increase, she said it was because of the renovation loan and because it was a two-family property. Is there any truth to this? Additionally, I knew the loan would carry PMI, but the lender never told me a percentage nor did she mention an up front premium that would be wrapped into the loan. I understand there are many variables in real estate, but are these details I could have been told upfront? Can anybody suggest a good FHA lender in the Cleveland area? Thanks for your help.

I'm about ready to put in offers on a few properties I have been looking at near Cleveland. I'm looking for a lawyer and accountant that have worked with investors. One property will have an inherited tenant so I'd especially like to have somebody walk me through their lease. Any recommendations would be great.

Thanks again, guys. 

@Kyle J. I tried to post an image of the assessor's numbers, which were just above $5000 for an assessed value of $130k. I'm actually living in Chicago but moving to the Cleveland area. One of the zip codes I'm looking in is 44118. Overall it sounds like I just need to lower other expenses or increase rent to cover the larger percentage of property tax. That, or enjoy the wealth of "charm" that my taxes are paying for.

Here's an example with zillow's numbers and the county assessor. The prices I mentioned earlier were for the foreclosure prices. The appraised values would be higher. Can I petition to have these lowered if I pay a foreclosure price for the property?

http://www.zillow.com/homedetails/3961-Silsby-Rd-U...

Thanks for the quick replies. 

I'm looking at Fannie Mae Homepath properties in this area, so if I can get a very cheap deal I'll take it. Otherwise I'll be looking at some other zip codes. Two are listed at $40,000 with ARV of $90-110,000 depending on sq footage, and a third is listed at $89,000 with ARV of $120,000.

@justinr I agree, which is why I was curious to see what other investors thought. I just found a list of property tax rates in 100 cities, and the place I mentioned is top 3 most expensive. 

Hello BP!

I'm running the numbers on my first potential investment and am at an impasse regarding property taxes. With current rental rates and property taxes it seems impossible for me to cash flow unless I have a $100 mortgage. Max monthly rent I can charge for a 3/2 in this area is $1250. Property taxes are $500/month, which eats up almost half the income right off the bat. If I buy a 4/3 and charge $1600 I'm cash flowing $100/month. Even though this cash flows it seems like a $5000-6000 property tax hit every year just isn't worth it.

Have high taxes made you guys look elsewhere or is there a way for me to approach the numbers differently to make it work? Should the property tax write-off affect how I look at the numbers or is it just time to find a cheaper property? Is there a rule like the 1% rule, 50% rule that investors use for property taxes? I've attached the numbers for one potential property using BP's rental property tool. Thanks!!

Hello biggerpockets!

I'm considering making an offer on a property but it has a few liens on it. I'm wondering what I would be responsible for paying and how I could use the liens to my advantage at the bargaining table. They are the following (abbreviated):

1) Taxes and assessments for 2015 - $10,000

2) Open-end mortgage - $65,000

3) Mortgage - $75,000

4) Collateral assignment of leases and rents - $91,000

5) Open-end mortgage - $91,000

Is this something I should still bid on? If so, do any of these liens give me the clout to look for a lower offering price? 

Thanks!

Hello BiggerPockets!

I am a high school teacher on the South Side of Chicago and students have brought my attention to two gang/drug houses on streets adjacent to our school building. 6 of our students have been robbed in the past couple of weeks by individuals affiliated with these houses and they are afraid to speak up for fear of being labeled a snitch and possible retribution by the gang members who robbed them. My students say the people who robbed them live in or frequent the gang houses mentioned above.

I've found the landlords through the county assessor's website and am wondering what my next steps are. My plan is to write a letter to the landlords and ask if they've viewed the property recently to see what's been going on. If not, watching their house from 8-10pm on any given night will give them a good idea of gang activity that could be grounds for eviction. If this doesn't work, I'm ready to mail the alderman to put community pressure on the landlords to get rid of the gang members. Does anybody have suggestions for how I can proceed quickly but diplomatically to persuade the landlords to monitor the property more closely or evict?

Additionally, I would like to improve the block by somehow purchasing properties near the school, rehabbing them, and filling them with reputable family-oriented tenants that would serve as a deterrent to any possible gang activity in the future. I cannot do this myself, however. I'm looking for ways to partner with investors who have extra $$ and a good heart who would be willing to put one of these properties in their portfolio for the greater good, or, by setting up some sort of nonprofit partnership with the school through which it would be worth the investor's time and money to hold one of these properties in order to improve the neighborhood. Again, I have no expertise in these matters and am looking for suggestions for community partnerships that can and will benefit my school as well as the investors.

Please respond with any advice. Also, if you are in Chicago, specifically the south side, and would be interested in working together on this idea, send me a PM and I would love to talk.

Hello BP,

I'm looking to buy a duplex near an up and coming area that has received millions in investment and is slated to receive more in the next few years. With the development of the are have come brand new townhomes and luxury condos priced 2.5-3X the average rent of the area. I'm looking at a duplex right now that is across the street from the new townhomes and I'm curious how this influx of higher priced luxury housing has affected other neighborhoods in the past. Does it tend to increase the value of surrounding inferior properties (my potential duplex) or make those inferior properties obsolete by virtue of their inferior quality. Does anybody have suggestions or long-term statistics for this sort of thing? 

Thanks Triston. That's super helpful. I feel comfortable running cash flow numbers for rents so now I'll practice with ARV. Did you pick the upgrades to match what's renting in your area or are those standard additions in terms of granite countertops etc?