All Forum Posts by: Jeff Copeland

How long did you live there?

If it was for a year or more, you met the intent of your primary residency declaration. 

Likewise, if you lived there for less than a year and are moving due to an unexpected event such as an illness, death, or job transfer, then you would likely pass the sniff test for intent. 

Your mortgage company does not expect you to live there for the rest of your life. In either of the above scenarios, I would not worry too much about a change of address (though I agree paperless is the real way to go). 

If you just lied on your mortgage application and had no intention of living there, that is another issue and I would be much more cautious.

For relatively straightforward projects such as a single family spec home, the financing shouldn't be too complicated or difficult to find (especially if you have a proven track record). You just need a local bank with a focus on commercial lending. 

Many of them will already have new construction loan products in their suite of offerings, that often include an initial disbursement, and then additional draws when certain construction milestones are reached. 

An appraiser is going to compare other comps to determine the the value of a particular characteristic (called linear regression analysis).  

In other words, find several recent 1-bath comps and several recent 2-bath comps, and compare them determine the actual market value of a second bathroom (or some other property characteristic) in your market, then adjust for that. 

In other words, with everything else held constant, if 3-bedroom 2-bath homes sold for $15k more that 3-bedroom 1-bath homes, then the market value of that second bath in three bedroom homes is $15k. 

They may also consider the cost approach. 

If the average cost to add a second bath to a 3-bedroom home is $20k, they might assign a certain weight to each approach and value a second bath at $16 to $18k (somewhere between the market value and the cost), for example. 

When you are learning to value and compare properties yourself, it can be very helpful to learn the basics of appraisal techniques, and get your hands on some actual real estate appraisals from your market to see how a professional appraiser actually makes these adjustments. 

For real estate market statistics, look for the local board of realtors for that market. Most of them have a "stats" page with regular updates. 

For economic indicators, look for the local chamber of commerce, regional planning commission, or convention & visitors bureau. 

There's really not much you can do until it is listed for sale. 

HUD will do what they have to do, at their own pace, as far as title work (which can take months) and property preservation, and then they will list it with a realtor and via the HUD Home Store. All offers will have to be submitted through a HUD registered agent via the HUD website, and it's a very nameless, faceless, emotion and negotiation free process: You submit your offer, and you get a yes or no answer a week or so later. 

There is usually a 2-3 week "first look period" for owner occupants and non-profits only, then they start accepting bids from the general public. 

In the meantime, keep an eye on the MLS and the HUD Home Store.

Quote from @Ruby Trinh:

@Jeff Copeland: Do you mind if I ask what information you need to send non-paying tenant to collection? I am sure you will need SSN but is there anything else?

I am taking back my properties from my PMC and they said they no longer have the tenant application to provide me. So far they have only provided me with name, phone, email and that is it. No SSN, no emergency address, no work address. Can I request them? 

You can request them, but that doesn't mean they can or should provide them. Many software systems gray out the SSN or only store it for a certain period of time. The privacy Act requires procedural safeguards to prevent the unauthorized disclosure of PII. 

As far as what data your collection agency of choice needs to pursue the collection, you would have to ask them. 

Your HML would normally wire the funds directly to the closing agent (and the closing agent needs to know there is a lender involved, because they will need to prepare and record the mortgage and note - dropping this on them at the last minute will cause delays).

Your cash to close would come directly from you to the title company. 

As far as sourcing the funds later on for a refi, your source for the HML portion is "private lender, secured by a mortgage"). That part shouldn't be an issue, as that mortgage will need to be paid off in order for you to sell or refinance anyway (for more info, see https://www.biggerpockets.com/... - although the title of the post is about seller financing, it explains financing in general, and hard money works exactly the same way). 

As far as sourcing the remaining cash to close, as noted above, how they are treated will depend on whether they are considered a loan or a gift, etc. But this really only matters for the first 6 months after closing. 

@William Barr

I posted an update, but not sure if it saved/published:

Correction (typo): at 5% market cap the value would be $2M, not $500k. 

If investors are willing to accept a lower return, that means they are willing to pay more for the same NOI. Sorry for any confusion (need more coffee)!

Value of $100k NOI at different market cap rates (NOI/Cap):
3% = $3.33M
4% = $2.5M
5% = $2.0M
6% = $1.66M
7% = $1.43M
8% = $1.25M
9% = $1.11M
10% = $1.0M

To qualify you for a conventional refinance (which will get you the best rate and terms), the lender will look mainly at four things:

1. Credit

2. Income

3. DTI

4. Employment - As a general rule, conventional lenders don't like self-employment. A $50k W-2 job is probably better than a $100k self-employed gig, as least in the short term (because conventional lenders will require two years of tax returns showing stable self-employment income before they will consider it). 

So you'll want to be very strategic about how and when you quit your W-2. 

In fact, sitting down with a mortgage broker and discussing all of this in advance (like now) is certainly a best practice - they can help you develop a strategy and timeline that will keep you "financeable" when it matter most to you.

An appraiser will use both methods: The comparable sales (comps) approach, and the income approach, when valuing the portfolio (and possibly a third approach as well: replacement cost).

Then they will assign a weight to each derived value (probably with a heavy emphasis on comps, since these are SFH) and then determine their professional opinion of the value of your portfolio as of a given date.

When using NOI to derive value using the income approach, one would use the "market capitalization rate" or market cap. What cap rate are other similar assets selling for in your market? That determines the market cap (and it almost certainly isn't 10% right now). 

If your NOI is $100k and the market cap is 5% (and I'm not saying it is, I know nothing about your market... the market cap will vary from market to market, and vary over time in the same market), then your portfolio would be valued at $500k, rather than $1M.

@Carolyn Yates has experience in commercial appraisals and might be a another good resource here for general questions.