All Forum Posts by: Kwambe H.

In March 2018, my partner (@Mauricio Botero) and I purchased our second property located in W. Germantown, Philadelphia. As we make our way through the BRRRR process, we now have to deal with a situation involving a rather sizable difference between our purchase and refinance appraisal valuations. At purchase, the property's appraised value was set at 210k. However, during the refi the property's appraised value was set at 140k. I know there are many factors that are taken into consideration when performing an appraisal, however a drop in value that size seems a bit drastic - especially post rehab. Is this common? Are there ways to ensure something like this doesn't happen in the future?

Hey @Nick Edwards! Welcome to BP. I'm a beginner investor out of the Fredericksburg area. This is a great community with a ton of great people. Good luck!

Congrats @Scott Schuetz! 25 homes is 3-5 year goal. Here's to the next 25!

I noticed an interesting article come across venturebeat today about a new startup that supposedly will make buying/selling homes easier. Being an IT guy and budding investor/entrepreneur, this article piqued my interest. Here's an excerpt that I thought was interesting:

"The startup will “work with sellers directly to purchase home[s],” “work with local partners to rehab, maintain, and improve our portfolio of properties,” and “partner with local brokers and Realtors to market, list on [the multiple listing service], and resell to retail buyers and investors,” according to the site online now at opendoor.com."

Although I'm still learning the ropes when it comes to wholesaling, it would seem to me that this could serve as direct competition to wholesalers. There isn't much info out on the business, so I'm not sure if the business functions within the wholesaler role only, or if just offers an environment for the seller/wholesaler/buyer to interact amongst one another. I was just curious if anyone knew/heard anything about this startup, or had any thoughts on what something like this could mean for the industry if it were to become successful.

Here's the link to the VentureBeat article.

To the mod gods: I posted the link for the sole purpose of discussion. It was not my intention to promote anything outside of said discussion.

Thoughts?

@Andy Robison As I understand it, to view comps outside of sites like zillow or realtor.com, I need to have access to the MLS. If this is in fact true, I don't have access to MLS at the moment. I plan to talk to the real estate agent I want to use for my business this weekend, so perhaps he can assist with pulling these.

The VHDA has a streamline refi available, however its for owner occupied units (according to their website). I will call them tomorrow to see what options I have.

According to rentometer, we are about $50 above the median rent for our local area and about $70 below the 80th percentile. Sounds like theres some room for improvement there as well. Im hoping to get rid of property management all together but I still have a bunch to learn. Not to mention my wife and I both work so times can be tight occasionally. Its definitely on the todo list.

Thanks for the feedback!

Thanks @Rocky V. I plan to call them tomorrow!

Thanks for your response @John E. . The more I learn about the various ways to make money within REI, the more comfortable I am coming to terms with holding the property. Thanks again!

Is walking away and going through a short sale the same? I assumed it was, but if not then I may have come off wrong. To clarify, I plan to either hold the rental until I can refinance the current loan or work with my lender and get a short sale. I dont plan to ever stop paying the mortgage unless its through the approved short sale process my lender has established.

The principle is helping. When we were looking for homes back then, getting a 30 yr fixed mortgage was the only requirement I had at the time. No ARMs...no interest only...fixed.

I just looked over my amortization schedule again and I should reach what Zillow has the home listed at 1 Sept 2025 (just in time for my 43rd bday :-)). That doesn't take into account market fluctuations as you mentioned so im hoping (at the very least) the market and I can meet somewhere in the middle.

Ive tried looking into HARP but that’s only for freddie and fannie backed loans. I plan to call my lender and see what type of refi i may be able to get. Most of the ones I looked into had an owner occupied stipulation, but we shall see! Thanks for the great feedback @J. Martin !!

Thanks for the feedback! I think a short sale is definitely still on the table at this point. There is a ton of money going into this house that I just won't ever see again. I still have a lot of info I need to grab to see if it makes sense (like exactly what my tax liability would be) but I have not ruled it out. With regards to my personal feelings about the deal, I too believe all debts should be paid, and have felt that way most of my life. Especially when doing so is within my means. That feeling is at constant battle with my developing entrepreneurial mindset which is leaning towards cutting the loses, learning from my mistake, and applying what I've learned to the next one. I'm not sure which side will prevail, but I know what I'm losing monetarily I'm gaining in personal growth.

Hello BP! Several years ago, a 22 year old me (and my wife) with a baby on the way decided to purchase our first property (with little to no money OR real estate experience). We purchased this home mid 2006. Fast forward to two years ago...We moved into a SFH due to the arrival of my second child. The townhome is upside down in a major way and we are losing some serious cash on it monthly (especially now since our first and only tenants just vacated the rental). My question is do we hold onto the property and wait for the market to pick up or should we fold on the home and try and get out of it?

Here is some background info on the Loan:

• Loan Type: VHDA - Rural Development
• purchase price: $286,008.00
• balance left: $251,121.00
• loan rate: 5.75%
• Zestimate: $162,329.00
• underwater: $88,792.00
• mortgage: $1,850.00
• taxes (2013): $1,278.00
• SQFT: 1700

And some background info on Rent:

• rent: $1,395.00
• Property Manager: 10% of rent per month
• Take home Rent: $1,255.50
• monthly loss (tenant): -$455.00
• yearly loss (tenant): -$5,460.00
• monthly loss (no tenant): $1,395.00
• yearly loss (no tenant): $16,680.00

Option 1 - Hold

Im tempted to keep the home because the homes in that location tend to rent very well and the home is still in very good condition. Another reason to hold is the tax situation. The benefits would still be there but I would assume most of that is being eaten away by my negative cash flow. With the Mortgage Forgiveness Debt Relief Act off the shelf id be liable for the forgiven debt if I were to successfully conduct a short sale.

My wife and I both work, so with some new lifestyle modifications, we have been able to afford to keep making payments (even with no tenants). If I keep the home, I would do my best to try and pay down on the loan primarily through wholesaling/flipping so that I could attempt to refi and drop the mortgage payment.

Option 2 - Fold

Ive thought about walking away because I believe the money we would free up could help drop some debt we have elsewhere (small amount of CC debt and student loans) or with saving up for our future REI adventures we have been planning.

One of the major issues I have with this option is I'm not 100% sure how this would affect the building of our REI business in the future. The home is in my name only so my wife wouldn't be affected by a short sale. However, I was looking to partner with my father this summer on some deals. If we moved forward with a short sale, how would that affect those proceedings?

Part of me sees the negative cash flow and thinks this property has to go. But the other part can see the value in having this unit (with the right financing). I just wanted to put this out and hear from others who may have run across this situation previously. Thanks for any advice you offer up.

Thanks,

Jermaine