All Forum Posts by: Greg Henderson

Look into Hattiesburg Mississippi. Plenty of deals here. Crime is almost non existent. Three local Colleges and two large hospitals that serve a very large geographical area. Plus Mississippi has the nations lowest average home prices. Taxes are very affordable as well. There are a few rough areas and a couple flood zones I would avoid, but its honestly trivial compared to a large city. You can find 100k 3/1 or 3/2s single family that rent for 1200 a month to college students in 39401 or look into the 39402 oak grove/ sumrall school districts for 500+ a bedroom at 150k+. 

Check out delta if you want to look up taxes: https://www.deltacomputersyste...

My strategy for single family is to make an offer at the number that works for on MLS property. That's it. Call the agents directly and make a verbal offer. They will say no a lot more than yes, but you just need one at a time. I just had a seller accept 92k for a property yesterday. They wouldn't take less than 115k 14 days ago. You CAN find motivated sellers on the MLS. Just keep prodding the agent weekly. The importance of off market "deals" is exaggerated. Mostly I see agents blast the listing to everyone they know as "off-market" like you're getting a deal. The only reason its not on the MLS is because it can't sell FHA. Make your own deals with what you have.

Multifamily is almost exclusively done off the MLS in my market. Short of the junk no one wants to buy.

If you're looking for low cost funding, go to a local bank and see if you can qualify for a commercial loan. I get 75% ARV interest only for 6-12 months. Very low closing cost with no points or prepayment penalty. Interest is +1% over prime rate. They will pay for the property and the rehab in one loan. You will need some cash to front the repairs and take draws as you complete line items. Best option is to always talk to your local banks. If that doesn't work, then you can start to get creative or reach out to high cost national brokers.

@Benjamin J Paoletti

https://www.amazon.com/BAGSTER...

This might be a reasonable alternative for smaller jobs. 

Not even looking at the insurance or taxes, the monthly payment for 825k @ 5.5% is $4684. Your rent will not even cover the principle and interest. Are we missing something? There is zero chance a lender will look at this and say yes. A DSCR loan needs to be @ 1.20+, depending on the lender. Who gave you the ARV and rehab cost? Unless you have a lot of experience, you should certainly not trust those numbers and verify it with multiple agents and contractors. Looks like you're about to walk into a bear trap.

edit: I'd also add that after your interest only, interest rates could be up another 2%. Then you're on the hook to pay $5,769 a month if you can even get it financed. Terms can change quickly. One month they will take 15% down, the next its 25%. What will you do if the appraisal comes in at 925k and the lender wants 25% down? Then you're looking at a gap of $131,250 due at close.

@Robin Simon

Again thank you for all of the help. I've got more questions. These might be more geared to an underwriter. 

Will my rental income, for the house with a conventional loan, need to be on my tax return to be calculated into DTI or will a lease suffice? It was rented out 3 months ago. Any options?

Will a conventional loan use my business current DTI or does it solely look at reported income on returns? I've grown rapidly. So my reported income from last year wouldn't cover my current debt.

For DTI for a conventional loan, Is anything added back into the tax return income like a commercial loan adds back loan interest and property improvements?

If the business property is used in DTI, what metrics are used? Does it use tax returns, NOI, PITI / income or just debt service / income?

If it only looks at returns, does it also factor the commercial debt in any way?

Will the underwriters have to audit my business bank accounts the same as personal accounts to verify funds? 

Quote from @Madeline Malinovsky:

Are the commercial portfolio names in your name? Or a business name? If it's a business, you're just fine and will not hit the agency limit.

They are in a business name. Thank you all for the reply. This is very good news!

I currently have 1 conventional mortgage on a home I no longer live in and it is currently rented. I'm looking to purchase another primary. I've got another 10 properties with commercial portfolio loans on them. Am I still qualified to get a fannie/freddie product for a primary or even an investment? Is the property limit global or does it only count conventional loans opened at one time? Can I close on a conventional loan and then quit claim it to a LLC to remove the # of units in my name restriction or would the loan be called due?

Quote from @Andrew Kilgore:

Thanks for the reply @Greg Henderson! I’m not sure that there is much improvement to be made on this one. However, I am planning to rent this out, as I am living elsewhere at the moment. I wouldn’t necessarily say that this is a poor area, but it’s definitely not a “wealthy” neighborhood either. It’s in a good location next to the high school in the area. 

If you're looking to scale quicker, educate yourself. Listen to BP podcasts and read books that are recommended at the end of the shows. You need to invest more of your own money, use a government program (fannie, freddie, FHA, USDA, VA, etc) to put less down on the property, gain enough experience to wisely use other peoples money, or add enough value to the property you buy to extract more capital than you initially put in (BRRRR). If you're not able to do any of the latter, you will need to save for another down payment. Pick up a side hustle and save like crazy. Keep that in mind when you start looking for your next opportunity. At 23, Its going to be very difficult to fail long term as long as you keep buying cash flowing property. Good luck! 

Can you renovate it or close in a garage to add value? Is the median home price in the area close to 65? If its a poor area, I wouldn't put much money into it. After the value add, you can open a line of credit to use the equity. If no value adds are available, your best option is to live in it and rent a room out. That should cover a substantial portion of your PITI. Then you can bank the savings from not paying rent for your next down payment. If you're living in the house, loan terms are much better than investment property loans.