All Forum Posts by: Greg Clatterbuck

This is a little different question than usually posed on BP.  I am a real estate investor with multiple properties.  My inlaws are in financial distress, primarily due to many years of poor financial decisions.  They currently own their home outright- the background of which was another bad financial decision.  Their home is worth an estimated $50,000 and in good repair (mobile home with well and septic on their own lot).  A mobile home would not qualify for a traditional reverse mortgage.  I am exploring ways in which to assist them.  The obvious answer is buy the home outright and have them pay rent.  This uses my cash for other projects I have upcoming as well as I doubt the inlaws would accept this type of assistance.  Another option is a "reverse mortgage" funded by me.  They are currently on a payment plan for income taxes which is questionable if the payments will be made in full throughout the plan.  The property taxes are paid and not in question.  If I entered into a legally documented reverse mortgage, is the property subject to forfeiture based on income taxes?  Any suggestions?

Thanks.  Will do

I am looking for a CPA specializing in Real Estate. I am located in central/northern Virginia. I prefer to be able to meet in person, however, would be willing to work remotely with the right individual/firm.  I tried contacting one of the more popular firms specializing in RE, who is popular on BP and has written several books, but alas, they have not returned any phone calls or emails.  Not interested in working with someone who can't return a simple phone call or email.  Thanks in advance for any recommendations.

@Alex Olson Great thoughts.  One of the reasons for wanting the 3 bedroom is there is minimal additional construction cost, but will generate $200-300/month additional rent.  It is a growing area about 20 min from a larger city with overflow into this community.  I think with redesign, I can get 7 units with 1400 ft2 and 3 bedrooms.  

I have several options for construction of a Phase II project with townhouse style units.  The existing (Phase I) consists of 7 townhouse units, 2bd, 2.5 bath.  The property has 7 additional pad sites with water and sewer connections existing.  I want the new construction to be 3 bd for increased rent value.  The difficulty is fitting 3 bedrooms into the available space.  I am marketing the property as Luxury and therefore don't want tiny bedrooms in order to add the third, but can make it work.  Another option is a wider unit, but would reduce the number of units to 6 vs 7.  The larger units would also have an attached garage. I anticipate the garage to add $50-75 monthly rent and increase marketability.  

Constructing the additional unit will mathematically generate more income in the long run, but I am concerned the smaller bedrooms could be a negative when marketing as luxury.  No other complexes in the area are marketed as luxury.  

Great.  Thanks for the info.

Daniel,

Thanks for the response.  I am looking at the Fannie Mae Multifamily Small Loan Program.  Are you familiar how strict the sponsor requirements are, specifically borrow must have net worth exceeding loan amount.  Currently, I am getting my information from CREFCOA (Commercial Real Estate Finance Company).  Any positives or negatives?  

I am looking for advice on financing construction and converting to long term financing.  The property is a recent purchase and currently cash flows.  Part of appeal for purchasing is that fact there are existing pad sites with water and sewer hookup in place.  As it sits, there are 7 townhouse style units with below market rent.  Rent was scheduled to increase April 1 until the pandemic, and has been delayed by several months.  The projected gross rental is $92,400 annually.  The current debt service including taxes/insurance is $60,600.  The current valuation is approximately $900k with $600k loan balance.  The cost of constructing an additional 7 units is between $1.3-1.4M and would generate a projected $118,000 annual rent for a total of $210,000.  The valuation would be approximately $2.5M.  The goal is to convert the debt to 30-35 year fixed using a federal loan program as this is a long term hold property.  An additional 4 units could be added as well in the future, but is not in the immediate plans.  What is the best way to achieve construction funding and how difficult is it to obtain Fannie Mae or Freddi Mac long term funding?  I have done several single families, but this is my first multi-family.

@Clayton Mobley, @Dave Foster, @Bill B.

Thank you all for the feedback.  I had a direction I wanted to go, but wanted to hear other opinions.  I will work the deal to sell to the tenant and 1031 into the new multi-family and keep cash on hand that I was going to originally purchase with.  With the uncertainty of the market, I think would prefer to keep some cash on hand.   

@Bill B.undefined

Thanks Bill. 

If I sold, I would do a 1031 into a property I’m about to go under contract on and would use that money instead of cash I already have.  I still wouldn’t owe any taxes. I would only sell to do a 1031.  I would use the cash on hand, that would go to the purchase, on something else. I feel like in this situation it isn’t as clear cut (sell or hold) and can be argued either way.