All Forum Posts by: Evan Manship

This question is probably suited for lenders/HUD consultants but anyone with experience please weigh in.

I am looking into a 203k loan for a multi-family property. There is a 8-unit building that is currently for sale in my desired neighborhood. Each unit is 500 sqft. I am curious to see if anyone knows the FHA regulations behind taking an 8-unit building at 500 sqft and converting it into a 4-unit building with 1000 sqft.

Technically I would still abiding by FHA's guidelines of a 1-4 unit property so long that the HUD consultant made the conversion to 4 units a requirement for the loan product.

Is this at all possible? If nothing else, it makes for an interesting discussion.

@Jonathan E. 

Property taxes in Cook County are atrocious cashflow killers. From what I have normally seen, property taxes in Chicago are often 2-3 times higher than that of Indianapolis' suburbs in say Carmel, Zionsville, Greenwood, etc.

This could come back to bite you if you aren't carfeul.

BP,

I posted on here about a month ago to stir discussion about possibly going after my brokerage license in Indiana. I have since purchased the materials and passed fairly easily with the materials we have covered so far. At this pace, I will be licensed and ready to rumble by the start of 2015.

For those of you whom are licensed in Indiana, please share your thoughts on what to look for in the exam, parts to pay special attention to, forget, etc. Insight from others who are licensed in other states particularly around the Midwest would be appreciated as well.

@Cody Steck 

I too am a beginning real estate investor with only a few properties. I am lucky enough to work in commercial real estate so I have already met a good amount of mentors whom could provide insight through the process. Even if someone doesn't want to invest with you, learn from them, pick their mind, and don't make the same mistakes they did. It's amazing what a cup of coffee or a few beers will accomplish.

My mentor recommended that a successful partnership has three things: Time, Talent, and Treasury which echoes your points verbatim. Without someone with talent, someone with time to act, and someone with the funds to back the project - each one will fail. He also recommended that I pursue my broker's license on the side. Being a broker gives you access to a wide array of tools, provides more networking opportunities, and many see you as an "expert" in the field just by being licensed.

I am on pace to be licensed in January.

Nice work. That's exactly what I am attempting to do in finding a worthwhile multi-family home and utilize FHA for rehab. Important to grab up as many units as possible -- especially if you can borrow someone else's money.

You will be very surprised whom all does FHA 203k financing. It is a surprisingly popular product that a lot of lenders are familiar with. Using a "streamline" FHA 203k loan the amount used for rehab extends only until $35k, but a traditional FHA 203k can go as high as $200k+ in rehab amounts.

Unfortunately, your contractor does have to be bonded and licensed to perform 203k work. Be sure to speak with a contractor whom has worked with these products before and knows what to expect -- they will be your best friend for the next few months.

Good luck

@Rodney Kuhl 

Couldn't agree more. It seems that your appraiser has some lingering interest in what the number came out as. Any transaction that wasn't truly arms length should be adjusted if not entirely omitted. Things like short sales, REOs, and distress sales are not truly indicative of value. Also, cash sales often receive a discount and should be adjusted accordingly.

Just some thoughts. You should give your appraiser a call and discuss.

@Rodney Kuhl 

Definitely check out which approaches your appraiser considered in his report. I completely agree with what @Matthew Schroeder 

said. Most good appraisers will reconsider alternative data if they are not familiar with the area and have not gone to personally inspect both your property as well as their comps.

I'm not sure if an income approach would work for this property or not, but most appraisers would be interested in seeing it to see how closely it matches with the sales comps. Also, entertain the idea of a GIM (gross income multiplier) to present to your appraiser as well. This value (annual gross income divided by sales price) when compared to comparable sales could be evidence as well.

Many of the people you will encounter on this site are control freaks, myself being one. Being able to go out and touch and improve my investment is paramount to me. There are also associated tax benefits with real estate that allow wealth to build upon itself in a fountain effect.

However, REI is less liquid so as long as you can live without cash on hand, you are in the right spot.

The 3000 block of Ruckle is nice. Just about each home on this block has been rehabbed, flipped, etc.

However, one street over, Mapleton Fall Creek could be dicey. I own property just south of there in Fall Creek Place and I suggest it highly.