All Forum Posts by: Alan A.

Hello Charles.
I flip and have rentals in South Florida.
We flip about 3-4, and purchase 1-2 rentals a year down here.
Let me know if there's anything I can do for you.

Best of luck!

I'll try my best to make it, looking forward to it!

I've started using Google Wallet, and I love it. 

Nick,

One place you might want to check out is Homepath.com

It is a government subsidized program that is excellent for first time buyers.
Because the market is pretty hot right now, you may get outbid if you are going FHA, especially if the deal is good and other investors are looking. A lot of sellers will shy away from FHA in favor of conventional or cash offers because of the additional appraisal and inspection requirements involved.

Homepath, however, offers "First Look" properties, where they give priority to people like yourself who intend to occupy the unit. The first 2 weeks or so that a property is listed can only be bid on by owner-occupants. So long as you are not low-balling, and your offer is reasonable, they are pretty much forced to accept, as the program's very existence is intended to support home-ownership. If an investor paying cash and waiving contingencies wants to outbid you by $23483K, your bid will still win if it is within the First Look period, so long as you sign an owner-occupant disclosure. Of course, you must be qualified and not be outbid by other owner-occupants. They will even contribute a percentage toward your closing costs. I have seen some multifamily available as well. 

Remember: anything 4 units or less is still considered residential, where anything above 4 units is considered commercial, and FHA won't get you far.

Alexis,

I am in precisely the same situation as you. I have 4 rentals paid in full in South Florida, and am considering refinancing one to purchase another. This is how I am approaching the issue personally:

The unit I want to refinance is very similar to yours, worth about 130k and rents for $1375/m.
Most traditional lenders will allow you to pull out 70-75% of the appraised value. For us, this will result in roughly $85k in cash after costs of the refinance (according to loan estimate that I recently acquired for my unit). 

Rather than use that toward a down payment, I plan to use some cash I have saved to purchase a similarly valued unit (around $100k) in cash, that way I will only have one payment, as opposed to two. Also, you can make a stronger offer if you are using cash.
In my area, and given the units that I have been considering, this would result in about $100/m additional cash flow after debt service, and assuming 8% vacancy, conservative estimates for taxes and maintenance. I know it isn't a significant amount by many standards, but it will allow you to increase your portfolio and leverage what you have to build equity. 

Many people here have advised against leveraging your equity, and I respectfully disagree. Even if the market tanks, which I don't profess to have the expertise to predict, I think you should be fine so long as the rental income you collect can help you weather the storm through the recovery period. It would not be wise to leverage in any situation, in my opinion, without adequate reserves for the unexpected, however. I am sure it wouldn't prove very difficult to find investors that were hit hard in 2008, but kept their units rented and are glad they didn't file now in 2016. We are not talking about taking on a huge amount of debt here, it is one unit, and you are capped @ 70% of appraised value. If done responsibly (budget realistically and hold reserves), I see no reason why you can't double your portfolio.

Best of luck.

There's no simple solution here, and what works for others here may not be the best fit for you. With that said, I do a lot of investing in the 90-120k range in Broward/Dade/WPB counties in South Florida, and (personally) find the best return in condos with HOA fees >$300/m.

Unless you come across a diamond in the rough or are willing to take on extensive rehab, you will be priced out of multifamily, and depending on the the areas you are considering, priced out of SFRs as well (assuming you are paying cash). You can still find a solid 7-12% with a cash purchase of a condo. Of course, you should know what you are buying: rental restrictions, HOA financial health, upcoming/outstanding assessments, etc.

If you are willing to buy something distressed and can renovate affordably, you can squeeze out a higher return in our market. I know a lot of people here don't like condos, but from my own experience, all of the distressed REO condos I've purchased in the tri-county area over the past 3 years are performing at 10-14% conservatively. I also believe that however frustrating SoFla HOA bureaucracy can be, that in most instances, it is well worth the peace-of-mind of not having to concern yourself with exterior maintenance and allows for a more hands-off approach if you intend to self-manage. I know there are many experienced investors here that would vehemently steer you away from condos, but they offer a very feasible solution if you intend to purchase with cash and are on a smaller budget.

I'm sure many here would disagree and would tell you to use your cash to secure a loan toward a multifamily, but it really depends on what your goals/expectations are. Cap rates are not fantastic for MLS multifamily in our area on average, although that doesn't mean you cannot find a deal if you know where to look. Many of the multifamily that I have seen with competitive returns around here tend to strictly require cash.

Best of luck.

Thank you @Justin Jocewicz I plan on doing just that this week. Will post the results here. My only concern is that all of my units are condos, and I understand there are additional hurdles involved in terms of qualifying the HOA.

How did you refi go? Did you use it to pick up another unit?

Thank you @Jerry Padilla

Would you mind elaborating on delayed financing? I was under the impression I would need to start paying immediately upon refi, which would not be ideal if it took some time to find and close on the next purchase.

Hello BP,

Thank you all in advance for taking the time to consider my question.

I just rented my third rental, and am preparing to file my second year's tax return of being self-employed. Finally, I will have some options available to me in the realm of traditional financing (without W2, you are required to show 2 years). I know that I would like to start refinancing my units (they are all free-and-clear), and would also like to take advantage of low rates with a conventional mortgage this year.

I am torn between whether I should refinance one of my units first so I can make a strong cash offer on another REO, or go the traditional route first. I am worried that if I do the conventional first I may disqualify myself for refinancing or vice-versa, as on paper I don't show a lot of income (the majority of my income has taken the form of equity). If I refi to purchase another rental, and can show positive cash flow after debt service, am I correct in assuming that this would actually increase what I would qualify for in terms of DTI?

I purchase distressed properties (mostly condos in South Florida; Broward County), rehab them entirely myself, and rent them. I am a broker and find my deals on the MLS where competition is pretty fierce and will probably have to purchase at a premium if offering financing on an REO with a conventional as opposed to cash if I refi out. A conventional would also likely limit the extent of distress the bank would approve to build equity. I am not considering 203k or other distressed-friendly loans, as to my understanding, they dictate that the lender should approve the contractors/subs, and I prefer to do my own rehab.

I have been looking forward to finally being able to qualify for financing since starting down this path 2 years ago, and really want to make this work. I will be interviewing some local banks next week. Should it prove helpful to anyone else in a similar situation, I will update this thread with what I learn. Many, many thanks!

Hello BP,

Thank you all in advance for taking the time to respond to my question.

I have a SFR under contract now (financing) and we are just about to go through bank appraisal. It is advertised as a 4/2.5, but the 4th bedroom was an enclosed garage, and the floors have not been raised. I've contacted the listing agent and requested them to change the MLS info to a 3/2.5 before the appraiser comes in.

Apparently permits have not been pulled for the conversion, but 80% of homes in the area have the same thing (built 1960). My goal is to not have the sale fail to close because of the 4th bedroom. Calling it an "enclosed garage" would technically allow us to get away with the floor not being raised, and other violations that might come up if we were to claim it as a proper bedroom.

I understand that we might also be in a position to negotiate a lower price because a 3 bedroom will obviously appraise for less than a 4.

Any advice from people who have gone through a similar situation would be greatly appreciated!