All Forum Posts by: Cara Lonsdale

James, again, you are missing the point.  You claimed that I was advising the OP of illegal activity to evict under a tenant holdover.  Under the Minnesota moratorium language, this is a reason that is provided as acceptable to pursue eviction.  I am just trying to clear the record of your accusations toward me advising illegal activity which is WRONG! 

Whether in practice it is a difficulty, or not is not the point.  You challenged me incorrectly, and I was clearing the record.  AGAIN, I ask you for a link to prove that the links I included (and others also included that ARE located in MN), and you choose to instead give me your resume, and bully me with your arrogant responses.  

 And while I am not in MN, I have holdings in other states.  In fact, I had a holdover just evicted in May 2021 at a property located in Michigan, which has equally strict restrictions for the process.  It was all done through an attorney.  All legal.  A judge signed off on it, and even ordered the court to service the lock out. 

I don't need to go back and forth with you anymore.  You have already proven my point that the moratorium provides for other reasons.  All this other stuff you're throwing at me to bully me, I have no interest in.

 James.  Read your Minnesota specific moratorium.  I provided a link.  If I am wrong, please provide me with the specific info citing where you are getting your info as I did for mine.  I haven't posted anything that wasn't backed by proof.

Additionally, you admit in your rant that it CAN be done, but it may be difficult.  So, even you have admitted that the moratorium is not a blanket eviction restriction.  It does come with IFs.  One of them is a holdover Tenant, which is what the OP is dealing with.  Non-renewal of lease is another reason.  These are basically the same thing.

So you just proved the only point I was trying to make.  Landlords CAN evict for other reasons legally.  The courts may be busy or delayed, but there is nothing illegal about proceeding with an eviction based on acceptable reasons.  There was another BP'er that claimed my comments were advising the OP illegally, which is not correct.

 This is very negative, and doesn't really provide the OP useful info, John.

Winston Churchill once said, "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."

The question isn't whether you can do it or not, Caio, it's a matter of HOW.

I think you have a good plan.  I think you will have an issue with the scale you have planned.  It is very aggressive for a beginning investor with little capital.  You may find that in the first 1-2 years, you get 1-2 properties under your belt.  Maybe your owner occupied and 1 rental.  Or maybe you do both as owner occ properties to maximize your down payment funds.  Keeping in mind that you must live in the property for 12 months to satisfy your lender's requirement.  However, after that, you can convert it to a rental, and not be in trouble with the Lender.  So having 2 properties in 2 years that you only had to pay 3-5% down for is a realistic expectation.  15 in 5 years is a bit aggressive without the capital.

Your plan to start with a purchase for yourself is good (House Hack). The FHA 203K or B is a GREAT product! It allows you to wrap your rehab expenses into the initial loan amount. The only caveat is that the appraisal needs to support the ARV (After Repair Value). You also need to find a contractor that will be willing to cooperate with the FHA terms, which require the contractor to wait for payment until the FHA inspector comes out to confirm that the project was completed. You have the ability to use up to 3 contractors. So, make sure that the ones you choose will be able to do all of the work. You cannot do ANY of the work for this program. The funds are held back in escrow, and are released when the inspector verifies and approves the project. Since this is an FHA product, you could get into this home with as little as 3.5% down. You will have closing costs, but those could also be negotiated, or built into the rate. You may also be able to get a down payment assistance as a first time home buyer, so ask your lender about that. You can't just go to any lender for the FHA 203K or B program. Only approved lenders are allowed to offer these. So, go to the HUD site for the approved lender list.

When using hard money lenders, John is not entirely accurate in his statements. Hard money lenders concentrate more on the project than they do you, this is why they are called asset based lenders. They may look at your experience, but this is likely only going to be reflected in your terms (rate and LTV), not in whether they will do the loan or not. Try saving this option for down the road after you have an established project count under your belt.

It is true that there are great success stories, and also great failures.  However, having a realistic plan, good reserves to fall back on, and an exit strategy will be your key here.  Don't grow beyond your comfort level or leverage yourself to thin. I think in researching the big failures, you will find that they strayed from their plan, leveraged themselves to thin, and didn't have a pivot plan or exit strategy.  Just like any investment, if you aren't strategic, you can and will get burned.

Never turn away free money.  Contribute up to the company match.  

Check your company's policies for lending and withdrawal so you know your parameters.  Also understand the consequences for each.  Most likely a loan from your 401K could be limited to half of your balance or $50K, whichever is less. Also, if you are ever severed from the company (fired, laid off, or quit) the balance is required to be paid back immediately, or taken as a withdrawal with penalties applied.

If you withdraw from the 401K, there is a 10% penalty if you are not retirement age.  The funds are also taxed.  So, whatever your tax bracket is, will be applied to the withdrawal.  This usually isn't applied at the time of the withdrawal, but will apply come tax time.

Some people will tell you that the costs or penalties associated with these options for using your 401K funds for Real Estate will not make it worth doing it.  Only YOU will be able to determine that for yourself based on the proposed investment.  I would argue that sometimes the cost for taking the hit on a penalty can be just another cost of business when you factor in the proposed gain on the Real Estate investment.  So, you have to run the numbers and figure out if it is a good tool for you to use for your real estate purchase, or not.  That's what they are....tools.  Use them as they make sense.

Also, as a side note, if you ever leave your current company, consider rolling your 401K into a self directed IRA, or even a self directed 401K (if you ever become self employed, or get to the point where your real estate has become a business). This will allow you to purchase Real Estate with the funds, and have more control over what you invest in. This will NOT be an option for anything you intend to occupy as these are intended for investments only. However, you can use them to make purchases for rental properties or long term holds.

You are EXACTLY why we need to be having this conversation.  Misinformation!  You are incorrect.  

Tenants CAN be evicted for other reasons.  Please refer to the link below that is direct from the CDC and is the form used to declare.  Please reference the last two lines in the BOX at the top.  You will see that evictions can still go forward that are not related to non-payment of rent.

CDC Declaration

Additionally, I went to an advocacy site for Minnesota specifically, and it too states very clearly that evictions can go forward for other reasons, other than non-payment of rent.  That link is also below.     

Minnesota Specific

COVID only protects for non-payment of rent.  It sounds like you have other issues at play.  I would start the process to evict.

You can always throw money at it.  That can sometimes quicken the process, but it's a hard pill to swallow sometimes.

First, CONGRATS on being financially free!  It's amazing how little we need when you take out all of the debt in our lives, right?!

The short answer is yes.  You can qualify for a loan for your next purchase.  

By yourself, it may be tougher, but still can work. Lenders look at 29% of income to account for mortgage payment of subject property. Some guidelines allow for more. The debt to income ratio is 43%. That would be the mortgage payment PLUS all other debt (which it sounds like you have none). So, your DTI would be pretty clean. On $2K, 29% is only $580. So, if you found a property sub $75K, you could most likely make that work.

Now here is where the out of the box thinker goes..... search for properties that already have a Tenant in place.  If you put a property like that under contract, the Lender will be able to use up to 75% of the rental rate to add to your income used to qualify you.  So, let's say that the rent is $1200.  The lender will add $900 to your $2000 monthly income to qualify you.  That brings your 29% up to $841.  That should get you into about a $140K property with 20% down.  Again, final payment will all depend on taxes and insurance expenses for the exact property, but gives you an idea of what a lender would be able to do.

Keep in mind that a Lender can only use what you have listed on your taxes (Schedule E).  They can usually add back in depreciation and mortgage interest (which it sounds like you don't have), but any other expenses deducted would mean a deduction in your income that you can use for qualifying you.  Your CPA might have more insight on this as I am NOT an accountant.

This is tough.  You either have to have a way of keeping them separate, or including them in the rent.  Otherwise, the long term Tenant can claim that you are stealing their utilities for the Airbnb.

You can do a RUBS system where you figure it by square foot, and divide the bills accordingly.  That is probably your best option.

 Most hard money lenders also don't use your SS to obtain the loan since they usually qualify the property, not the borrower.  So, he would not necessarily be able to establish credit this way.  He would have trouble when it came time to refinance into a more reasonable conventional loan.  So, before going the hard money route, make sure you know how that will report or not report to your credit bureau, and have a good exit strategy planned before you commit to a high interest rate and short term hard money loan.

If short term is the goal (for flips), then this would be a viable option to consider.