All Forum Posts by: Hugo Arce Hodgson

One of the things that I learned is to be able to rely on technology. You have eliminate any concerns or fears that may develop with never setting eyes let alone set foot on the property. I've done this by being strict on my underwriting, only working in areas where I can assemble a boots on ground team to augment my weaknesses from being abroad.

Hello Gillian,

I have not been in South Florida for some time, however there are some things that are always ring true. The main thing that I would suggest for you is to first look at the numbers. FHA financing can get you in the door, but sacrificing the things that make an investment worthwhile such as cash flow should not be a motivating factor if your new to this, because I assume if you are willing to sacrifice cash flow your being speculative about growth; supported or not would you have a hedge to that risk?

You have to consider the opportunity cost of your choices. If you get a property in So Fla. with FHA financing how will it perform against your other choice of continuing to rent and purchasing an investment property. House hacking is a powerful tool but make sure the numbers work.

     If you have any questions about that feel free to ask, I'll be more than happy to assist.

Hugo

@Gerardo Lewis

     If you already have tenants in place attached to the purchase it appears that you are gaining a benefit in inheriting costs. Depending on the price of the property and what the rent roll is in relation to what it would be on the open market; it may make sense to inherit the cash flow and defer rehab expense until later. 

     I maintain my properties to always get topline market value, it lowers my vacancy rates and allows me to maximize revenue. 

     I have however been in a scenario where there was a lease agreement in place. I wanted the property but not the tenants in place. The property was well maintained, new construction but was well below market for rental revenue. It was apparent that the tenants were not going to leave early without some additional expense.

     During my negotiation with the seller, who was certain that the tenants could be convinced to move out early, I provided incentive for the seller to take on the responsibility of convincing the tenants to move out early. In the event that they were unsuccessful at my discretion the seller gave me the authority to extend the closing date up until the end of the final lease agreement or to back out at no penalty.

     It turned out that the seller was unsuccessful in the task and I was in a position where I could tie up the property at no expense to me. This enabled me to turn a purchase that was already a winner into a bigger one. I allowed the seller to continue in their attempts to close lease agreements but that for every day that tenants were in place, I secured a discount equal to fair market rental revenue. I was able to get about 7 months of cash flow before I had even in the property, and the seller was able to sell a property that no longer suited their needs and move on to bigger and better things.

     See if there is room to get this property how you want it tenant free. How flexible are your needs in regards to closing? The sellers needs? Will the seller allow you to market the property to prospective tenants? What can you offer to incentivize the seller to help you meet your needs? Is it imperative to get this property tenant free and to rehab? Flexibility allows you to make the best deals possible.

     I'm very familiar with the Gainesville as I attended UF and still maintain a residence there whenever I'm stateside. If you have any questions about your investment feel free to contact me, I'll be more than happy to lend my experience.

Hugo

Information simply hedges your risk as you are able to test your bias on a property. That being said there are several other metrics to use for this property through comps, demographics, current data, etc.

Are there leases currently in place? If there are how old are they, what's the monthly rent roll. They may not have historical data but current data can be provided to offer a snap shot.

Compare the information you receive to other similar units/developments in the area.

How is the property valued? You can use a lack of information to your advantage in a scenario where you are dealing with a motivated seller. Pull up your own facts through due diligence and negotiate so that the property suits your criteria.

If none of it is possible as stated above move on from the deal. I'm not familiar with Plant City but I can offer insight on multi-families and tactics to bring value from a deal that others may simply walk away from. Feel free to message me should you have any questions.

Hugo

Hello @Scott Parker   ,

     Welcome to BP. As individuals have already noted it is wonderful to see another investor active in Gainesville. I own multi-units and that is my primary focus. If you have any questions on the local market or in general feel free to message me directly.

Respectfully,
Hugo

Hello Christian,

     I am in a very similar position to yourself. I currently invest in Florida and recently closed on a multi-family property while being overseas, since I've began investing in real estate all of my purchases have gone sight unseen.  As our scenarios are similar I'd like to offer you some advice. Please feel free to PM should you have any further questions.

     While I utilize the services of a property manager, I did not have the need to utilize a real estate agent. By building your knowledge base on the local market you are targeting to purchase a property, you will be able to identify a list of potential investment properties. You have a state you want to invest in, through research you'll eventually narrow it down to a region, county, city, etc. that has a market to meet your criteria.

     When searching for my property knowing that I would most likely acquire without ever setting foot in the property I set especially strict criteria in order to mitigate as much as possible.

     There is the strong possibility that your investment will be acquired sight unseen, it is especially prudent to negotiate terms that are favorable to you in terms of assessing the property and that affords you the time to make decisions from afar. You will also need to identify local area vendors such as inspectors who are reputable to provide accurate information to enable you to make accurate determinations. This may entail some additional cost to get to hedge your risk to a point that a local investor would have but it is very prudent to do so.

     Work with lenders in advance, if you require unique financing or have a unique scenario. It is best to use an established relationship with a lender, or to identify one with enough time to let you know what you will need to have in place for your scenario.

     I hope that this can serve as assistance to you and if you have any questions again please feel free to PM me.

@Jeff Copeland Thank you PM sent

@Bill Gulley Thank you for your input. what makes this more interesting is that in early September I provided letters of explanation and a letter of intent to clarify occupancy concerns, underwriters said nothing, in October Appraisals were ordered and the property was approved, leading one to believe that occupancy was no longer a concern.

Hello BP,

I have a question with regards to a scenario that I am facing with my VA loans. I'll provide some background info.

     I am currently working as an overseas contractor after finishing active duty I still serve as a reservist.

     I identified a quad that will serve as a great rental. The quad is in the same city as my unit (Gainesville, FL)

I own another investment property a SFR that is currently leased.

     In order to make up for my military training/drills my employer allows me to participate with units on the base I am at, I also take my R&R's to conduct additional training with my unit.

     Based on income both from employment and passive income, my debt to income ratio after financing is will within tolerable guidelines after financing for the quad without counting rental income from the three units I will be under 28% for my back end ratio.

     Inspections have been completed and the property has been approved. However currently my lender is providing some pushback on technicalities. I'm unsure as to whether or not this is legal as I am proficient on financing laws/regulations.

     The first issue that my lender identified was owning another investment property, and what they view as a better property to reside in than one of the quad units. I provided a letter of intent to occupy, as well as the current lease agreement for that property valid through Oct '16. The property has been leased for as long as I've owned it and I've never resided in it.

The second issue the lender identified is in regards to VA occupancy requirements. I currently work overseas on a military installation in Afghanistan, have done so for the past 3 years. The VA has a 60 day move-in requirement, that I am unable to fulfill the soonest I'll be in the states is in late February '16 to move-in. The VA has guidelines for situations where an individual may go beyond 60 days but less than 12 months for move-in. The requirements for approval beyond 60 days are

 "The veteran certifies that he or she will personally occupy the property as his or her home at a specific date after loan closing (I provided a date of February 26, 2016). There is a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date (I have provided my employment contract that defines my annual R&R schedule.)" VA Pamphlet 26-7, Revised Chapter 3 Section 5.b(this is known as the lenders handbook it provides potential lenders with guidelines on what is acceptable to the VA and what is required to successfully underwrite a VA loan)

     Additionally the lender identifying that I work overseas identified an issue with occupancy. The VA provides guidelines for intermittent occupancy for individuals who work overseas or for soldiers who are deployed.

     "The veteran must have a history of continuous resident in the community and there must be no indication that the veteran has established, intends to establish, or may be required to establish, a principal residence elsewhere" VA Pamphlet 26-7, Revised Chapter 3 Section 5.h

     In order to clarify this with the lender, I established that I attended the University of Florida from 2007-2010, '10-'12 I went to training and deployed but maintained residence in Gainesville. I subsequently became a reservist with a unit based out of Gainesville with a contractual commitment through 2018 and provided a documented history of my travels to Gainesville to conduct training on R&R's since I've been a contractor overseas. I've also provided a standing acceptance to return to the University of Florida to complete my degree upon completing my overseas work.

I've additionally conferred with the VA Regional Loan office in St. Petersburg, Fl to ensure that my scenario is within guidelines they have cited that it is and the VA would have no issue underwriting.

Given this information I have recently received a rejection from my lender citing that the VA would not underwrite, as I do not meet the requirements for occupancy noted in the VA lender's handbook. I subsequently called the VA and they indicated that they never provided that type of response to my lender.

Is this legal? Can a lender arbitrarily deny an application in such a manner? I have never been denied for a loan before but I've also never had a VA loan before, and despite my research I can't help but think that I am missing something, and if not I'm having trouble seeing how this rejection is ethical or founded. Any insight would be helpful. The lender that I am using is one of the largest in the nation and I'm almost certain that they've successfully completed loans under similar scenarios.

Respectfully,
Hugo