All Forum Posts by: Edward Casano

Hi Nick,

If the math checks out... Are you paying all cash or financing the deal? Either way, have you researched renovation loans like the Fannie Mae HomeStyle loan? Would the owner accept an offer with this financing? That sounds like a better option for you to make this deal happen with less out of pocket. I haven't purchased my first deal yet, though based on my extensive research on renovation costs I'd say @Alok Sood's estimates are fairly accurate.

Good luck and please keep us posted!

@Jacob Plocinski

How much $ do you expect the renovations to cost? There is an FHA 203K Streamline for under 35k in renovations, and a Full FHA 203K for renovations over 35k. For alternative mortgage products to FHA 203K, if you have a larger down payment, check out the FannieMae HomeStyle Loan. I'm in the process of receiving commitments for both a 203k and HomeStyle loan from WellsFargo. I like the guy I'm working with there. PM me if you want his contact information. I'm located in NYC, so I'm not sure he is able to provide a mortgage for your area, yet I'm sure he can point you in the right direction. I know Guaranteed Rate offers rehab loans too, and I worked with a guy there from PA -- it didn't matter that I was in NYC. As long as you get along with the lender, they are responsive, plan to help you throughout the process, and know everything applicable to your area, you should be fine. Whatever you do, I would recommend getting pre-approvals (they call them "commitments" for the rehab loans for some reason) and rates from several different lenders.

Good luck

Eddie

Hi Max.

Welcome here! I'm fairly new myself. Lot's of great information on BP.

I haven't taken a 203k myself, but I've been doing a lot of research on this loan option recently.

With an FHA 203K you must have a licensed contractor complete all of the renovations. Even if you are a licensed contractor yourself, FHA requires a 3rd party. The contractor should also be familiar with the paperwork involved with an FHA/rehab loan and have the funds available to complete the project (since they won't be released the funds up front). I've heard of folks working with their contractors and using sweat equity to help with the renovations, and FHA should be OK with that, as long as the contractor oversees and takes responsibility over the project.

If you want to do some work yourself, are capable of putting down a larger down payment (15% - 20%), and this is a one-unit property, consider the FannieMae HomeStyle Loan.

https://www.fanniemae.com/content/guide/selling/b5...

"Under Fannie Mae’s “Do It Yourself” repair option, which is available for one-unit properties only, the borrower may complete repairs that the lender reviews and approves in advance. Do It Yourself repairs may not represent more than 10% of the “as completed” value of the property; the lender must inspect the completion of all repair items that cost more than $5,000."

In any case, I stumbled upon a really cool post today by Ryan Murphy, which provides pros and cons for both the FHA 203K and FannieMae HomeStyle Loan options. Take a look at this thread:

https://www.biggerpockets.com/forums/311/topics/14...

Also, give a search on BP for "203K" and you'll a ton of posts with folks' experiences.

Good luck!

Ed

@Ryan Murphy - Awesome post! Thank you for that. Gave me a lot of confidence about this loan option.

Yes. How much do you expect the renovation to cost? If less than 35k you'll want to look at the FHA 203k Streamline. If more than 35k, you'll want to look at Full 203k or FannieMae Rehab Loan. If you have a bigger down payment you may want to use the FannieMae loan to avoid PMI. In any case, search "203k" on the Bigger Pockets forums and you'll find a ton of great posts and information.

Here are a few links:

https://www.biggerpockets.com/mortgage/home/gettin...

https://www.biggerpockets.com/mortgage/fha-loans/f...

https://www.biggerpockets.com/blogs/4380/39975-why...

http://perryfarella.com/2014/09/top-20-questions-b...

Good luck!

Ed

Thanks @Christine Wong for the recommendation! I spoke with Green Apple this morning and unfortunately they were too backed up to make an appointment I have to view the property on Thursday. Also while they can provide a very detailed inspection report they aren't contractors and can't provide estimates for repair costs (or at least they said they wouldn't feel comfortable doing so). If I put in an offer on a house and call for an inspection, I will strongly consider them -- I was impressed by our phone conversation. However, I'm still in need of a contractor who can tour the property with me and give me ballparks on repair costs.

Hi there,

I'm looking at a property in Bushwick Brooklyn that needs work and before I put in a bid I want to bring in a general contractor to inspect the property and provide estimates on some of the work that needs to be done. If you guys can recommend contractors in Brooklyn who also do home inspections please send me their contact information.

Thanks!

Thanks @John Hickey for the response. This question has been a mystery to the lenders and agents I've worked with, which is strange! I'm just trying understand if the purchase of a property leads to a property tax reassessment and how much taxes on a property can increase YOY -- does the 6% rule apply when transferring ownership? I want to be able to make this determination when assessing a property's ROI. I've seen a lot of  multifamily properties with taxes ~$2250 and in some cases less and it would be great if they stayed that way. ;) 

@Lelith Walker - How did you calculate the tax before you purchased the property?

Hi All,

I recently began my search for a multi-family property to buy and hold in NYC and have been getting caught up in the tax calculations. I worked with a couple different lenders and they didn't completely understand the rates either (not a good sign!). So, I'm hoping the Bigger Pockets community can help with this question.

The NYC Department of Finance Website says you calculate your tax rate by:

Market Value (MV) x Class Assessment Ratio (6% for Class 1 Property) = Assessed Value (AV). So, if your MV is 1,000,000 then your AV (or "Taxable Value" if there are no exemptions) would be $60,000. A taxable value of $60,000 x Class 1 Tax Rate of 19.554% = $11,732.4 in taxes anually...

However, an import step is to apply the state law rules which limit how much the AV can increase from one year to the next. In the case of a Class 1 property, this is 6%. The lower amount between the two calculations your AV.

So if the current AV on a property is $15,525 (you can look up the current tax bills on properties through NYC Finance) then I'm thinking more simple calculation would be Current AV on Tax Bill ($15,525) + 6% ($931.5) = $16,456.5 x Tax Rate for Class 1 (19.554%) = $3,217.9 annual tax bill. I've increased the value by 6% (the limit it can increase) to be safe and since most properties I'm looking at haven't been assessed in some time.

Does this math check out or am I overlooking some critical points?

Thanks,

Ed