All Forum Posts by: Eric Knapp

I consider it a step that is necessary to evaluate the deal. It may not be legal to put apartments in this building due to zoning restrictions. Maybe you can fight that, but it costs money and there are no guarantees you will win. If it is legal, what requirements will there be to receive a certificate of occupancy? Are there costs associated with this that you had not considered?

I, coincidentally, just looked at a commercial building in a nearby city that seemed ideal for conversion to apartments - great location, great building. Off street parking on property - but wait - talked to codes office and found out that available parking, though it seemed adequate by my calculations, was only about 60% of what is required by code for an apartment building - and there is no other available land. That changes the whole equation for the economics - whether I chose fewer apartments, apply for variance etc.

Short answer, I want to know right away.

One of the first things I would do is visit the Code Enforcement Office and check on allowability and any other potential complications (read "expenses", for you).

It is my understanding that to qualify for a conventional mortgage, banks generally have a 28/36 DTI limit, where front-end value of 28% is based on PITI, and back-end value of 36% based on total revolving debt.

First, is that understanding correct?

Second, If I have two mortgages already, one my home, the other a rental, and am seeking a third conventional mortgage for another rental, do both current mortgages get counted in the front-end figure, or is the rental mortgage only count back-end?

Bryan,

I would not call myself an average investor, at this time, but the two properties I now hold required a large effort on my part, with low cash outlay. I started out with almost no cash, but good credit, and good rehab skills, coupled with the fact that I really like rehab work - like a hobby that could be expensive but isn't because I make my money back. Anyway, I have rehabbed two houses, one SFH, one duplex. I used some cash and some HELOC to buy very distressed properties and completely renovate them, then mortgage them after the fact.
Now, I have found that I want to do more properties, and as I have a day-job, I can't do everything myself very quickly, so I have been establishing relationships with contractors, trying them out on small things, hoping to begin to farm out alot of the work in the future, changing my equation to eliminate alot of my time and effort, just doing the things I like most.

That will work on building materials, but unfortunately, for finish materials, the two stores don't stock the same products, so getting an apples to apples comparison is very difficult.

That is correct. I am sorry I did not mention it.

The one thing I've done that I haven't seen mentioned yet, is to take the quote from Lowe's over to home Depot and ask them if they can do better, then back again to Lowe's. They have a real rivalry.

Nathan,
I usually end up somewhere in the middle - between appraisedvalue and replacement value - my company (State Farm) lets me do that. What I do is ask for a fairly high deductible, which lets me get more "catastrophic" coverage with a lower payment. Any smaller repairs I take care of myself.

Scott,
It looks like most good advice has already been offered. I would just ask one thing, and please believe me when i say I don't mean to insult your intelligence - it is experience speaking. You are working upside down, in effect, which can be disorienting. Are you 100% sure that you are turning the nut in the proper direction?