All Forum Posts by: Tatiana Gershanovich

I can't say anything about commercial real estate, but in residential you can get away with 2.5% in very hot areas, but not less than that. The agents just won't show your property to their buyers.

If you want to save on commission when you are selling, you are better off saving on listing agent commission (of course it's not for everybody).

If your private lender chooses to have their attorney to prepare the documents, then they will pay for it and might ask you to reimburse them.

So far, none of our private lenders wanted to go to an attorney to draw the documents. Couple of them elected to run the documents prepared by us by their attorney first time they made a loan. They never asked to be reimbursed, but we would do it no problem if they asked.

Couple of sellers who was providing us with seller financing had their attorneys draw the documents, but they never asked us to pay for it.

All other fees like lender's title insurance, Deed of Trust recording and reconveyance fees are paid by us.

@Angelea Weihs what is the minimum you would like to generate a month? In B+ neighborhoods of Tacoma it's very hard to find something that will generate even 10% ROI with financing after taking into account management, vacancies and maintenance.

Reading what Chris wrote above, it also looks like this money should be in semi liquid form, in case the expenses increase later on. So, rental property might not be the best option, especially out of state where the cash flow might be higher, but it's harder to sell it when needed.

@Brie Schmidt - There is an exception to it if the property was rezoned after the structure has already been in place. For example, if area gets rezoned, all buildings that existed on the properties prior to rezoning and don't conform to new zoning will be grandfathered in. In this case, the building will remain legal, but non-conforming. You can get financing in this case if you provide a letter from the jurisdiction the property belongs to that confirms the grandfathered status of the building.

I'm so far to see a HML who will lend without a downpayment. So, even thought your purchase price + rehab fit 70% LTV, your HML will want you to bring 10-20% down of acquisition price, at least. Also, some HML don't roll their points into the loan, so you will have to pay points out of pocket as well. If they do roll points into the loan, that 70% LTV will include that points, so your actual loan will be less.

Also, HML might not agree with your ARV and base their loan on the ARV they are comfortable with.

And also, they will base their loan decision on your experience. If you have never done any flips before, be prepared to HML wanting more downpayment or cross collatarisation, especially when we are talking about a complicated rehab such as fire damage.

Your out of pocket expenses will probably be higher, since you will be paying 2 closing costs (when buying and when refinancing, taxes, utilities, insurance, hard money interest while the bank prepares all docs that might take 30+ days, origination points for the refinance loan, etc.).

In terms of when you can refinance, it will all depend on the lender you find. The more time passes the more refinancing options you will have. Some lenders can refinance before 6 months passes, some can refinance only after you own the property for 6+ months, some will require a year of ownership.

In any case, you will be able to refinance only 70-75% of your appraised value. You don't need to have tenants in place if your DTI ratio including these new payments is within their guidelines. Keep in mind that a lot of lenders will want to see a 6 months payment reserve in your accounts (cash, stocks, and so on ) that can cover 6 months of payments on all your investment properties.

There are several things you need to make sure you do for your private lender:

1. Make sure you don't overleverage 

2. Provide your private lender with a secured promissory note

3. Provide him/her with Deed of Trust / Mortgage recorded on public record

4. Provide him/her with title insurance

5. Name him/her on hazard insurance as a mortgagee

6. Make sure all money go through escrow

In some states I heard title company can prepare Note/Deed of Trust for private lenders. If not, ask an attorney to prepare paperwork for you. 

Since in Washington state title companies don't prepare paperwork, for our private lenders we usually prepare all paperwork ourselves, so, they only need to read through it, verify the terms and sign the acknowledgement. As simpler you make the process for your private lender, the more they would want to invest with you again and again.

You can reach out to me if you need more details or have questions.

Omar,

Congratulations on the buy!

I would strongly encourage you to do a flip and buy a SFH as a buy and hold (in the area where you have a cashflow and appreciation. Tacoma is a good area for it).

There are a lot of downsides with holding a condo. As @Ben Meisel mentioned above, rental cap is one of them (some condominiums allow only certain percentage of all units to be rented out). If that cap is reached, you can't rent out your unit. And that can be reached at any time, for example, when you are between tenants, and you are stuck with a condo you can't rent out. Absence of rental cap is also a problem. When you decide to sell, your buyer will have limited choice of lenders if there are more units rented than the lenders like (I think a lot of lenders require ore than 50% of the units in the building to be owners occupied), so might be harder to sell. Another issue is an assessment. When some costly items in the building need repair, the owners of all condos have to chip in (most of the time there are not enough money from home owners dues in the reserve and the money are very mismanaged). Also, the maid up rules of what you and your tenants can and can't do in the unit (for example, what color of curtains are allowed). You can't choose your neighbors and bad neighbors in the condominium can affect your rental income much worse than bad neighbors of SFR.

If your calculations are correct and the condo can be sold for 220K and you can get away with putting only 6-8K into repairs, I would say flip it. You don't need to use a listing agent at 3% to get on the MLS if you are ok to sell yourself (you can send me a message and I can tell you more about it), your closing costs will be around 2.7% including title/escrow/excise taxes. If you bought it with bank financing you, probably, will stand to make about 35K+ if your ARV and repair numbers are right and you can do repairs and sell within 3 months.

If you, indeed, decide to hold, I can recommend you a great property manager who charges only 8% management fees.

Hey everybody! It's time to resume our weekly workshop! Join @Dima Suslikov and I on the topics of Flips and Development.

We are happy to answer any questions related to these topics - or any other Real Estate subject. We keep it flexible.

Topics that we can tackle :

• Land Analysis
• New Construction Acquisition & Process
• Flipping
• Using both Flips & Development as part of your Capital + IRA Growth Strategy
• Budgeting
• Management Tools
• Contracts + Permits
• Or anything else!

We will continue with group food orders - it's been working out awesome! If you want to participate in the group food order, be sure to follow the link below to the event page and have your order in by 5:15PM on Wednesday (December 21st).

For more details on the event :

• https://www.meetup.com/Real-Estate-Wholesale-Flip-...

If you haven't joined our MeetUp group yet, here is the link :

• https://www.meetup.com/Real-Estate-Wholesale-Flip-...

Looking forward to seeing you guys!

Tatiana Gershanovich
Sound Housing + Dwell Foundry

You will spend some time waiting for permits, so it will be nice to have a tenant there in the meantime. You can do it 2 ways, either apply for relocation license before renting the property out and at lease signing ask the tenant to sign a paper that states that he is aware that relocation license was applied for and, therefore, he doesn't qualify for tenant relocation assistance as well as he is aware that the house will be demolished and he will need to leave.

The other way is to rent the property right away, but make sure that in your lease agreement you state exact lease termination date. The lease can't say anything related to something like before the expiration of the lease tenant or you have to give some kind of notice (ask me how I know that :D We are sitting and waiting for relocation permit just because of this sentence) or that the term of the lease can be extended.