All Forum Posts by: Jake Burkons

Hi Bigger Pockets Team,

Eric here from Northern Virginia. I am new to real estate investing. I recently retired from the military and now I am ready to start Chapter 2.

The goal is to build long-term wealth. I am more interested in buy & hold properties. I am interested in multi-family and commercial properties.

I have (13 months) remaining on a lease of a townhouse I am currently renting. Afterwards, the plan is to utilize my VA home loan to buy a multi-family property. I thought about breaking the lease but then decided the juice is not worth the squeeze. Meanwhile, I am educating myself on REI and analyzing deals for the next year.

I am looking to find a mentor who has carved a path in multi-family & commercial real estate to help build my confidence and investing skills.

I am also open to finding partners in the area to go in on deals with. Potential locations for my first buy preferably somewhere close to where I reside (Virginia, Maryland, or North Carolina). I have set aside funds for a down payment.

Additionally, I have signed-up for a couple of meet-up events in my area to get any advice and insight.

I hope this intro makes sense.

Thanks in advance.

EB

 there is high crime everywhere in Cleveland, means nothing. Pricing has doubled tripled and more over the last 6, 7 8 years everywhere!  I have bought and sold about 500 there, and of course kept many. We are buying everything we can in parts of East Cleveland, what does the internet tell you about that area? Run right, well they are incorrect. Its ALL about knowledge, 

All the best 

From memory we never had the tenant sign a form for rent increase. We just notify them certified mail and provide MHA the request form, 3 comps and proof that the tenant was notified of the increase 60 days prior. From there we just way on MHA approval. 

Hi Jimmy, there are DSCR lenders that will take the AirDNA profile and take a 20% expense factor if the occupancy rate is high enough.

Some more info on DSCR loans in case helpful:

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then next credit category is 740-759 and so on.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals

At this point with very little credit history, so long as you can remain responsible with the cards, applying for them is pretty good. Note that you can only get a chase card if you haven't applied for 5 personal credit cards in the last 24 months. You shouldn't need any secured cards if you already have a bit of history from your mom. A lot of the travel cards also don't have ForEx fees too.

Some other good cards in no particular order:

1. Capital One Savor (I believe they made this a student card)

2. Citi DoubleCash

3. Discover IT Student

4. Anything Chase IMHO

5. Amex gold if you believe the annual fee is worth it

6. Check out your local banks/credit unions to see what promotions they run. My regional bank offers a card with 1.67% cash back which is targeted towards folks without a ton of credit history.

7. A gentleman by the name of Ben Hedges on youtube is an expert on a lot of this stuff, maybe give him a watch.

Also it's important to say that while getting a credit card through a bank with FDIC insurance isn't a requirement, it says a lot about the bank itself and I don't really know of any good banks that don't have it. The ones that don't are usually more investment-related and probably wouldn't issue credit cards anyway.

Hey Jake.
I’d say just go for both the Chase and Discover. Seriously. 
It gains you experience with two solid CC companies. When you travel, you can choose to use the card with the best foreign fees. 
And most importantly in my view. Credit is built very well simply through TIME. The sooner you have them in your name the better. Your credit profile needs time to grow. And credit balance will slowly increase with time. 
So. Just get both is my opinion.
As long as you’re careful and track them and pay them off : ) 

 Great questions Jake, make sure to buy your Mom a nice dinner once you get the card for adding you to her card and helping you build credit!

So a few points I want to clarify, FDIC insurance is for bank deposits and won't have anything to do with a credit card so don't worry about that terminology when you're searching.

As far as building a relationship with a bank I would say it is more important if you don't have good credit and want favorable terms, in your case with good credit it shouldn't make a world of a difference.  My focus if I were you would be on a card that enhances my lifestyle and doesn't charge me unnecessary fees.  Living abroad is a perfect example, it would be crazy to get a card that is going to charge you foreign transaction fees if your plan is to live abroad.  However, an airline card that will give you an intro bonus, has no transaction fees and can help you build points to go back and forth from home could be attractive.

There are millions of credit cards out there, the nerd in me would make a simple spreadsheet to compare them.  Look for something that is going to support your lifestyle aka will give you points in categories where you spend AND reward you with points that are useful to you.

Hope this helps, let me know if I can clarify at all