All Forum Posts by: Steven Griffith

Hi @Dylon May

I'm over in Chapel Hill - nice to meet another NC investor!

There been some great information shared on this post. Can you clarify - is there a reason you're looking at seller financing, or that's just what they've offered? Since your a newer investor, and unless you have a specific reason why you want to go the Seller financing route, I'd strongly encourage you to go the 'traditional' route through a bank for financing. That will also be a good learning experience for you. Ask your bank/loan officer questions. There are some crazy low rates available right now, and again unless you're in a unique, and unusual, situation where Seller financing makes sense (i.e you have 10 other mortgages, banks have turned you down, you can't make the down payment on a bank loan, etc), I don't think you want to mess with it for your first deal. Just my 2 cents. If you do decide to go the traditional bank route, let me know and I can share a few banks with high -to-mid 2's on 30yr fixed loans.

Last comment/question - is all your communication with the owner going through the PM? Is the PM a realtor, representing the seller or is this going to be a for sale by owner deal? If the PM is the seller's realtor, then you should get a realtor. You pay nothing - all realtor fees are in the sales price. They can walk you through the ins and outs of your first purchase. If this is a FSBO deal, again I'd encourage a realtor since this is your first home purchase. If you're set on doing it yourself, then BP has all the forms you'll need. Everybody else has already shared how they do comps. A quick way to see if their number is ridiculous is to go to Zillow, zoom in, and look at what Sold, recenty near the house. You could also call up a realtor and say 'hey, I'm trying to buy a house on my own. If i give you $1000.00, can you run some comps for me, and help me get the right forms?'

While I'm usually an advocate of doing things yourself, I'd encourage your first deal to be with pros, just to learn the rules.

Thanks for the insight, everyone.  I am leaning towards accepting them, truthfully.

@Elise Hazzard Answering your questions: 1) Yes, and they've met all of the criteria, except for me being unable to verify employment.  2) I have 1 other person who has begun an application but hasn't actually finished the application.  I pulled the listing down when they applied and passed everything, so i would need to repost.  It was only posted for 2 days before I had 3 inquiries, so I'm confident I could probably find other tenants.  3) Yes, this property does have a mortgage. Fortunately I'm renting out the basement apartment separately and that covers the P&I.

I actually posted this place for rent with no pictures on craigslist, because it was mid-Reno and I wanted to gauge interest.  These folks happened to be in town looking for housing and asked to come see it, even though it was under construction.  As did 2 other families.  One family passed.  A second started the application but hasn't completed it.  And then there's this couple.  if I did decide to reject their application, I'd post a full listing with pictures, etc.  I'm reasonably confident I could get another tenant in a few weeks, if needed.  Based on the answers to your questions, would you accept or reject their application?

@Karl B. that's a great idea - I think I'll do that.

@Mike Cumbie thanks for the input.  That's exactly what I was leaning towards.  I had a tenant on a separate house in the past where they were moving to a new job.  When I did the employment check, the company confirmed they intended to give the candidate an offer, contingent on a clean background check.  This company (public school district) won't even confirm that, so I wasn't sure if that was normal, or not.  Again, the vagueness of their response is what's throwing me.

Anyway - thanks everyone for the input!  I really appreciate your insights.

Kudos to you for finding an off-market duplex!  Hopefully you can come to a deal.

Just as an FYI, there are some limitations that come with renting out the basement apartment as opposed to a true duplex. if the home is a true SFH, then chance are you won't be able to separate out the utilities bill. There probably won't be separate meters for basement vs main home. Internet, for example - you'll only be able to run 1 cable, so only have 1 service provider. Now you can structure all of this into the rent - either as a flat rate, or as a percentage each month. In this, I prefer a flat rate because there's no balking at paying utility bills.

So, for my house - I charge a flat rate utility fee (structured into the rent) for both the basement apartment and the main house upstairs, as well as provide internet.  I built those costs into the rent, so my home is priced above market average, but it is "all-inclusive".  I've also included a clause that if electric goes over $200, then the tenant is responsible for overage.  Looking at the past 4 months electric bills from the previous owner, that's how I came to the $200. 

I just wanted to be transparent - renting out a basement apartment is a great way to get the dual income you can find with a duplex, particularly in a market like ours where duplexes (and multifamily in general) are hard to come by.  But there are some unique challenges that you have to be willing to work around, as it is not as straight forward as renting out a duplex.

I don't know that townhomes are the most common SFH with basements. My primary home, (SFH, stand alone house) has a basement. I chose the townhouse because it met my criteria, the numbers looked phenomenal, it was in a location I wanted (near the UNC Med school, dental school, hospital, and downtown CH), and because the community came with a few amenities that I think folks would find attractive. And it sits on the free city busline. If you're lucky, you may be able to find a SFH with an unfinished basement, buy it and finish the basement yourself, then rent it out. In myeit limited experience, unfinished basement homes generally sell for less than finished basement homes.alb

@Abraham Moreno-Riano

You may also try searching for SFHs with finished basements and/or basement apartments. I had the same problem as you. But recently, I came across (and purchased, renovated, and rented) a SFH which had a rented basement apartment. It was advertised as a SFH, but the description and owner both shared the basement was rented. It would not have shown up under amultifamily swarch. Turns out, the whole townhouse community rents out their basements. It might be another option for you. Good luck! Let me know if you want to chat more! Oh, and my home was in Chapel Hill

Hey y'all, I would appreciate some input.

I have a unit that a couple has applied for. Their credit is high 600s, background check is clean, and the only outstanding debt on their credit report is a mortgage, which has been paid consistently on time. They're moving to my area from GA, and I've been told she has a teaching job at the local high school. With their current combined income (GA income), they qualify. What she has told me that her salary will be at her new job alone makes them qualify.

Here's my problem: They're moving to NC from GA, where they were previously both teachers, and I don't want to approve them based on GA income when they are moving to NC. She has told me that she has a verbal offer, and will receive a written offer after they complete the background check. I reached out to the district to do an Employment check and was told "...(applicant) is not currently employed with the district". When I tried to clarify (the word 'currently'...) and asked if they were being considered for a position and/or if they had received a verbal offer, and informed them that they had applied for housing contingent on this job, I was then told 'I cannot release that information at this time'. This is the contact person the tenant provided at the district, and whom I verified actually worked at the district. I let the tenant know this response.

After hearing this, they conferred and called me back. They said their house is under contract with a back up offer in place, set to close on August 21st. They sent me the contract verifying this, and Zillow lists the house as pending. They asked if they can pay the sec deposit and 1st months rent now and move in on August 5th as planned, and if they can't provide an offer letter or proof of employment by Aug 21, then when their house closes they'll pay 6mo rent upfront.

What do y'all think? Anyone with more experience in PM and rentals have any advice? I have a few rentals, but have never had this situation arise before where the employer will not verify employment. Or, more specifically, where the employer is being vague.

@Chris Hall Thanks!  I'm pretty excited about it.  I've been looking for a while, so it's nice to finally get a deal, close on it, and then have it succeed as I had hoped/projected.

I also work an unrelated 9-5 job, and I completely empathize with the difficulty of finding good BRRRR deals and Renos. Again, for this one, it just worked out right place right time - we'll see if I can replicate it. I actually had a second unit in the same townhouse community come up for sale recently around the same price ($245,000 instead of $241,000). I reached out (rinse and repeat?!) but unfortunately it was under contract within 2-3 days of hitting the market. Someone else got a really good deal.

Where in the triangle are you looking?  I focused on Chapel Hill, but was eyeing a few areas around Raleigh.  I'm curious if you've got a favorite area you prefer to invest in.

Hi @Chris Hall,

Great questions!  I appreciate it and am happy to share. I also realize based on your questions that I responded to one of the original questions incorrectly - my mistake!  When I read "total cash invested" I was just thinking Reno, not Reno + Down payment (I just wrote the final check to my contractor and was in that mindset).  Thank you for catching that!  Here goes:

1) You're right - I'm sitting just (barely) over the 1% rule.  The total cost of renovations was estimated just over 15,000.  At the end, we ended up being all in on renovations at $19860, due to some unexpected finds during Reno.  So, that's where I pulled the $20,000 from - rounding.  So, 260,000 all in, rounded.

2) Thanks for clarifying this - out of pocket cash, including the down payment and reno cost, was right at $69,730 ($49,870 down payment and buyer-paid closing costs). We closed in June, and managed to get the Reno done in July. Tenant is moving in next week, and the first mortgage payment isn't due until August 1 so there isn't a mortgage due until after the tenant moves in. I used a mix of HELOC funds and personal funds for this, although I could have used only the HELOC. The goal is to now get the HELOC paid off.

3) Yes, it is a 10 year interest only HELOC which converts to a 20yr amortized repayment schedule after the 10 year draw period.

To your point, I was initially only thinking of using the HELOC as a funds source for BRRRR'ing. I don't have a lot of construction experience, though, and this made me hesitant (i.e slow) to take on big projects as I didn't have a great way to estimate costs. When I could schedule a contractor to walk a property with me, that property was usually already under contract, gone, or the Reno costs were way too high. I see that you're in Knightdale - you definitely understand, then, that the Triangle market is hot, even with COVID so when good deals hit the market, they seem to go FAST. I was fortunate that this wasn't an MLS property and was able to get in ASAP after it hit the market. In fact, the only reason that this works using my HELOC funds is because of the unadvertised Basement Apartment which provides a big boost in income. If you take look in Carrboro, and even in Chapel hill, there's a shortage of 1BR/1BA apartments so their rents are disproportionately high. Heck, you can find 2BR/1BA houses renting for 1100 in Carrboro, and yet a 1BR/1BA basement regularly rents between 900-1100. Now as I said, I kept the previous tenant to maintain the income stream at 800/mo and will renovate, update, and raise the rent in a year or two.

Hope that helps to clear things up!

Investment Info:

Townhouse buy & hold investment in Chapel Hill.

Purchase price: $241,000
Cash invested: $20,000

I've been looking in the NC Triangle Area (Raleigh, Durham, Chapel Hill), in Charlottesville VA, and in San Antonio, TX for my next deal.
This townhouse is advertised as a SFH in Chapel Hill, NC. In reading the description and talking with the Owner, I found that it had a basement apartment which had been rented out for the past several years, currently to a Med Student at UNC.

4BR/3.5Ba end unit townhouse, in need of updates, on bus line to Med School & UNC. 3/2.5 upstairs, 1/1 down.

What made you interested in investing in this type of deal?

I've been looking for my next investment for a while, and specifically looking for properties that have significant cash flow potential. Every time I ran the numbers on a Duplex in the Triangle area, I had a hard time finding a deal that made sense when I financed the property. I don't have a lot of construction background/experience, so I was leery of major renovations (cost). This deal though needed minor cosmetic updates and had potential for significant cash flow.

How did you find this deal and how did you negotiate it?

I had been searching in my 3 areas for the past several months looking for my next deal. For this deal, I was checking Zillow.com and FSBO.com every morning for the past few weeks, before this house hit he market. I saw this deal at 8:00am, contacted the Owner and scheduled a showing at 9:30 (social distanced of course...looking at you, COVID), used the BP calculator to check the numbers, and made a verbal offer after the showing. Upon acceptance I sent her a contract that afternoon.

How did you finance this deal?

Back in April I had previously taken out a HELOC on my Rental property (yes, HELOCs on rentals can be done!) with the intent to use that to fund my next deal. So, I used my HELOC to fund the down payment, closing costs, and renovations.

I financed the rest of it with a 30yr fixed conventional loan at 3.625% interest rate.

How did you add value to the deal?

In the basement apartment:
I did nothing. I upped the rent to bring it closer to market value & the tenant still wanted to stay so I'll renovate that whenever she leaves.

On the upstairs unit:
Renovated the kitchen
Took out wall separating kitchen from the dining room
Put in breakfast bar
Removed two half walls to open up the floorplan
Refinished existing hardwood floors
Reglazed the bathtubs
New vanities in bathrooms
Ceiling fan/light in bedrooms
Recessed lighting in LR
Repainted

What was the outcome?

Outcome was fantastic. Upstairs just rented out for $1900/mo (had 2 families apply), and the basement was brought up to $800/mo.

P&I is around $879, HOA is $259, and property tax is around $300/mo. HELOC repayment (10yr draw 20yr repayment) is $233/mo.

So, $1671 each month. Rent is $2700, so over $1000 in the green, before accounting for CapEx, Vacancy, and Maintenance. HOA covers all ext maintenance including roof and with new appliances, HVAC, and a 2018 water heater, CapEx is low.

Lessons learned? Challenges?

Great experience overall!

I should have asked the Seller to provide a Home Warranty since I knew the HVAC was older and I wasn't planning on replacing that originally. Looking at what other properties are now selling for in the same community, I probably overpaid (I paid $241,000 and one just sold for $230,000) in my eagerness to get the deal.

My contractor was amazing - I'll definitely be using him again. I have no Reno background, and he walked me through and explained everything.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nic Owings with High Country Construction in Chapel Hill NC was an amazing GC! Nic helped me find ways to save money after the HVAC broke down, was always responsive, and had some great design ideas. He was easy to work with, open, honest, and made the reno part very easy on me. He would be a great addition to any team!

City of Oaks Law, Jonathan Anderson - was my real estate attorney for closing. Much lower priced than some others. I've worked with him before - always great service!

@Eric Pope

Yes, I did this in April on a rental property I own. Pentagon Federal Credit Union. In addition, I've known several people who used them for HELOCs on their rentals. 80% LTV on non-owner occupied properties. PenFed pays all closing costs. If you close the HELOC within 3 years, you have to pay closing costs back. 10yr interest only, followed by a 20yr repayment period. Took 2 weeks from applying to issuing funds.

TD Bank also does it, although only at 75% LTV on non-owner occupied properties. There are others as well. Search for some older threads here on BP - I know there are some previous threads that listed other banks which folks found that did HELOCs on rentals.

@Chad Ha

Respectfully, I disagree with @Aaron Heiskell. There are many agents you can contact that will be willing to show you a property without a buyers' agreement. If you consistently use 1 agent, and they devote time and effort into finding and showing you property, then don't do what happened to Aaron, and instead stick with that agent. I live in the RTP area and didn't sign a buyers agreement until I was ready to make an offer.

Of course, my agent then accidentally conferenced me in on a call during negotiations where I heard her tell the seller's agent what my top price was, what concessions I'd be willing to make, etc...all AFTER signing a 'confidential' buyers agreement. I did report my agent and shortly after this incident she retired and moved out of state.

YOU are your own best advocate, and you are giving your business to someone. Be smart about it, but it's not unreasonable to expect them to earn your business- if you are expecting this agent to find listings for you, take you out every afternoon, low ball offer a dozen houses, etc then given that amount of work a buyers agreement makes sense this early in the game. If you are finding all the listings, have generated a list of houses from Zillow or somewhere you want to see, are going to your own open houses, etc - then I'd personally find a different agent to show me a house. There's nothing stopping you from calling the listing agent for whatever house(s) you want to see and asking to schedule a time to come see it. Then, when you're ready to make an offer, ANY agent will be happy to submit an offer for you. Agents bring value, no doubt - but be your own best advocate. In my opinion, an agent requiring a buyer's agreement before even showing you a single house would be an agent i'd walk away from.