All Forum Posts by: Dillan Gomez

1. Did you attend the inspection? I ALWAYS recommend a buyer attend the inspection and walk around with the inspector. You get 3 BIG benefits from doing this. One is that you see what the inspector sees. So, you know exactly what they are talking about in the report. Second is that you can ask questions and get more detail to understand the issue and possible solutions. Third, is that inspectors will often give information about how a home functions and helpful tips for maintenance. So, you can get a mini-education as well.

2. Inspection reports always sound ominous and always recommend going above and beyond to address any potential issue. That's why attending the inspection is so useful for a new buyer or at least sending the buyer's agent to attend.

3. Nothing in the report sounds horrible. If you have concerns get a contractor & plumber out to give you quotes.

4. No house is perfect and you want to be prepared to deal with issues. Its part of home ownership.

5. Most of your issues sound water related. That will ALWAYS be the case FOREVER! Water is probably the #1 nemesis of homes. It will always be a battle because its constantly trying to get in from the outside in the form of rain, runoff, condensation, snow, ice, etc. Then we also invite it into our homes through the plumbing and have to manage it there as well. Water is everywhere and will always cause issues requiring maintenance.

6. To me this is really a numbers question. If you can get a handle on the cost to repair these issues and still think its a good deal, I would be inclined to move forward if I was the buyer.

Thank you, Kevin!

I did attend the inspection and it was very helpful!

And both the contractor and agent assured me that this isn't anything too crazy which is good. I'm going to get a quote either way just to see how much repairs would come back as then re-evaluate from there if the numbers still work!

1 Vote

Hi All,

Under contract for my first ever investment property, and the inspection results just came back. I'm concerned with two things which I will paste directly from the report. I'm meeting with my agent today to discuss, but remember, this is my first time purchasing a home/investment so any insight would be appreciated.

My closing date is scheduled for 11/22 - this is coming up fast!

Are these worth repairing? Or should I back out? I only have $2k down non-refundable earnest money. The seller already has given me a good deal on the property due to her being forced to return to NYC for work post-covid (seller is paying $20K out of pocket after overpaying for the property 2 yrs ago, and sellers agent is taking a commission cut to make the deal work). So I won't be able to push the seller for repair concessions.

The main two areas of concern as I see them are:

1. Moisture Issues

2. Plumbing Issues

Below are the details directly from the inspection report:

1. "The house band located at the sink on the right side of the house, to the left of the front entryway, and along the rear wall is discolored and decayed in a manner typical of water damage. The wood was soft when probed. This area and all the house band needs to be invasively inspected by a licensed general contractor to locate and repair the source of the moisture and any decayed wood

The crawl space had evidence of high moisture levels in the form of mold growth and some fungal activity. The areas probed still seemed solid, but be aware that some types of wood destroying fungal damage will only be detectable once the wood has properly dried out. A licensed general contractor or engineer should be consulted to evaluate the wood flooring structures as well as the crawl space ventilation in regards to the moisture and damage concerns. Any areas of damage should be located and repaired as needed to ensure the stability of the home. The home inspector was concerned with moisture issues and any evidence of decay, not the health implications of mold. If you have any further concerns about mold/fungus an industrial hygienist should be consulted.

Grading and drainage is either negative (slopes towards the foundation) or neutral adjacent to the left of the building, and moisture intrusion will remain a possibility. The soil or the hard surfaces should slope away from the building to a distance of at least six feet, to keep moisture away from the footings. In its current state, the grading will bring water towards the foundation which will lead to a wet crawl space, mold and fungal growth, and possible property damage. A grading contractor should be consulted for further evaluation and repair.

From the attic, some of the fascia boards and the ends of some of the roof sheathing were discolored in a manner consistent with water penetration. This often happens when gutters backup or water curls under the roof and gets to the fascia board instead of going into the gutter. This should be evaluated further by a roofing contractor or licensed general contractor to ensure there is no hidden damage and to make repairs as needed."

2. "One or more of the sink drain lines had leaks under them when tested. Leaks can lead to property damage and mold growth if not repaired. A licensed plumbing contractor should be consulted for repair.

The drain line for the bathtub in the master bathroom was leaking into the crawlspace. It seems to be missing the wood flooring at the moment, but did get the insulation wet and there was a puddle of water under the pipe. This needs to be repaired before and further damage occurs. The wet insulation will also need to be replaced. A licensed plumbing contractor should be consulted to locate and repair the leak."

There are also other minor issues, but nothing that I foresee will cause serious livability issues. Things like GFCI outlets, vent fan issues, etc.

Any quick advice would be tremendously appreciated! Thanks :)

1 Vote

Hey All!

I'm a first-time investor looking at purchasing my first property for a house hack! The idea of an assumable mortgage seems very attractive from a cash flow perspective, but unfeasible from a capital perspective. Typically the homes require a downpayment of over $100K to assume a sub-3% rate. This is why I haven't considered them as a realistic option for a cash-on-cash return. The appeal is pretty much just the low monthly payment.

Are there any ways to bring low money down on assumable mortgage deals to avoid paying a lump sum of $100k+? Has anyone here done an assumable mortgage? If so, how was it? Any pointers?

Any wisdom is greatly appreciated, thanks!

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Quote from @Bryan Maddex:

Quote from @Dillan Gomez:

Following up, will this affect my ability to re-fi or do a HELOC/Cash-out re-fi?

Hey Dillan!

One thing to consider that I did not see mentioned by anyone is your plans on living in the property. An ARM product can be a great way to save now, but if you are not planning on living in the property beyond 1 or 2 years, it may not be ideal.

When you refinance a property as an owner occupied property, you are signing a new 12 month occupancy clause which means you need to live in the home as your primary residence for 12 months after you do the refi.

Rates are on a downward trend and likely will continue to do so for the next 12 months so you may have time to refinance your loan in the next year or two into a fixed rate while you are still living in the property so if you planned on living in the home for 3 years, you could wait 2 years for rates to drop and then refi as owner occupied into a new 30 year fixed rate.

Alternatively, you could get into a fixed rate now at at 5.875% on a 30 year fixed rate if you qualify for the "HomeReady" program (HomeReady is an income limited program that gives buyers a fantastic rate). There is PMI when doing this program, but many times it is discounted as a part of HomeReady. To really know options, we would need to look at your income, area you are purchasing, and credit score. SECU is easier to qualify for with lower scores, but comes with a 1% origination fee. If I charged you a 1% origination fee, you could do a 30 year fixed mortgage with only 3% down at rates as low as 5.5% today! These rates could be better after Sept 18th when the Fed starts to cut rates.

PMI can be dropped once you have made 2 years worth of payments and your home has appreciated to give you 20% equity. Homes have been appreciating in most parts of NC at about 8% for the last 2 years, you could potentially drop your PMI in 2.5 years or so if appreciation continues at the same pace. Doing quick math, lets say you are purchasing a home for $200k. 1% origination fee is $2000. PMI could be in the $80-$100/month range if you have fairly good credit so lets use $90/month. You could pay PMI for 21 months before the PMI cost more than the origination fee so you may not be paying much of a premium on PMI vs the origination fee charged by SECU.

If you get this house up and running, you could be looking to purchase your 2nd home in just over a year with 3 to 5% down (depending on your income and the income limits for HomeReady once you are looking to purchase your 2nd property). 5% is always allowed if you make more than the HomeReady income limit.

Rates should be on the decline for the next few years, 5 years out is way too far to know if we will still have rates as low as they may get, or if they could potentially be higher than they are now. Keep in mind that 2022 we saw rates go from 3% to 8% in about 1.5 years! 5 years is a lot of time for markets to shift and shift again.

I am in NC if you would like to talk more about 30 year fixed rate options and see if you qualify for HomeReady and rates under 6% as of today!

Thanks for bringing this to my attention, Brian! I wasn't aware that you have to live in the home for 12 months after a refi, but now that you mention it, it does make me think through my investment strategy.

Even so, the option to do less than 20% down with no PMI, plus up to $2k (free money) for closing costs with this mortgage product is pretty hard to beat. My income is too high for income-based home-buyer programs.

At the end of the day, I will refi either way (whether I do ARM or fixed now) because I want to capitalize on the best rates when they drop, so it doesn't change much - either way, it seems like I'll have to live in the home for 12 months whether I do an ARM or a conventional loan now. Now it's just about bringing as little money to close as possible and cutting my monthly payments down, which this loan product does well on a level I haven't seen elsewhere!

Think about it, if the numbers work and you were able to bring 0% down to a $350k house and only have to pay around 8k in closing costs with no PMI, wouldn't you do it? That's free money! I still don't see many downsides to this mortgage product!

And I haven't seen anywhere with rates under 6% without a points buy-down. SECU has the best rates I've seen with no points buy-downs. I'm sure after the Sept and subsequent rate cuts we will see a few lenders get down to the high 5% with no buy-downs, but even still, it's hard to beat up to 0% down (no PMI mind you), with low rates and 2k towards closing costs, regardless of the loan type since I'm going to refi in 5 years anyway (whether I do conventional or ARM).

Thanks for your thought-provoking comments, Brian! :) A lot of this is thinking out loud for me!

1 Vote

Quote from @Mike Scaccia:

Dillian,

First off congrats on your journey into real estate, and no better way to get started than a house hack. Little back story on me, i am a local lender in Chicago, been the biz almost a decade. Investor and house hacker myself.

The deal you're being offered from what i can tell seems like a steal.. 0% down no PMI? Who is this through and what market are you in if you don't mind me asking!? Is this not a conventional loan? What is the type of financing and is there any points of fee's associated with the rate being offered? From my perspective, if you can get a 5/1 ARM at a lower rate, by all means take it. Most expect rates to come down over the next 24 months, and since a 5/1 ARM is fixed for the first 5 years, you'll have plenty of time to get out of that ARM prior to it adjusting.

Right now, i'd say leverage is your friend, rates expected to come down, which will only drive demand therefore increasing home prices.. CASH IS KING. Hang onto your money if the payment makes sense without a large chunk down, or any for that matter. So long as you plan to hold the asset for the next 5-7 years, the historical appreciation/principal paydown should be enough to cover costs of sale, should you need to exit. Putting less money into the property upfront would give you a greater return on your money because you're into for basically nothing out of pocket upfront!

If you have any other questions feel free to shoot me a PM/DM!

Thanks,

Hey Mike!

Thanks for providing your expertise! You express a lot of the sentiments I have as well.

Yes, it is an incredible deal. Look at State Employee's Credit Union (North Carolina) and check out their mortgage products. All of them are very good and none of them have PMI. And no, the rate I quoted does not include any buy-down points - that's the actual rate! The catch is you have to be a State of NC employee or relative of one to have access to the Credit Union which eliminates most of the USA and even most NC residents. I'm planning on buying in the Raleigh-Durham-Chapel Hill Region of NC.

I'm thinking of putting down maybe 5% just to have at least a bit of equity right away...we will see though!

0 Votes

Following up, will this affect my ability to re-fi or do a HELOC/Cash-out re-fi?

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Hey All!

I'm planning to purchase my first SFH and do a house hack at the end of this year to get into the REI game! A local lender has a first-time homebuyer program that offers 0% down with no PMI and $2k towards closing costs with a very competitive rate (6.025% as of 8/19/24). The only thing is that it's an ARM which I hadn't initially considered for my first property. The really attractive part of the loan is the idea of not having to put down cash as a downpayment (even though I do have cash available since I was initially anticipating going with a Conventional 30-year loan).

Is it fine to assume the risk of interest rates going up for the sake of putting 0% down? I'm thinking of cash-on-cash ROI here in the long term (I'm in a medium-appreciation environment which helps). The assumption is that I would re-fi to a conventional loan when (if) rates drop in the next 5 years. What things would you consider in my situation? I won't be cashflowing either way (whether I put 0 or 20% down) because of the market conditions, so that's not really what I'm going for (although it would be nice). This lender has NO PMI for any of their mortgage products so PMI for under 80% LTV isn't something I have to think about thankfully.

I'm conflicted because saving a lot of my cash that I had anticipated using for a downpayment could be great to use for my next property in a year (or later). If the interest rate environment is horrible in 5 years, I could also just sell the home if worse comes to worse since the anticipated appreciation will give me some decent equity by that point even though I would start at 0%.

Any advice would be very much appreciated. Has anyone done something similar in the past? Remember, this will be my first-ever home purchase. Thanks!

2 Votes

All Forum Posts by: Dillan Gomez

Dillan Gomez has started 3 posts and replied 7 times.

Post: Advice needed on results of my property inspection

Post: Advice needed on results of my property inspection

Post: Assumable Mortgages: Any ways to do creative financing?

Post: First-Time Investor: House Hacking with a 5/1 ARM?

Post: First-Time Investor: House Hacking with a 5/1 ARM?

Post: First-Time Investor: House Hacking with a 5/1 ARM?

Post: First-Time Investor: House Hacking with a 5/1 ARM?