All Forum Posts by: James C.

Aylan,

Only buy the quad if the numbers are equal to or better than the FHA loan.

Not much you can do about the % as store... it's pretty cut and dried. You could do a 203K, and possibly add space to the residential portion of the property to get that percentage down to 25%, but that would probably be cost prohibitive.

Personally, I would look at my options and determine where the best return on the money would be. You might consider partnering to increase buying ability.

Good Luck,

Jim

Allan,

Anywhere really. I have asked sellers where they would be most comfortable meeting and taken their recommendations.

A private dining room can be good as well, given the symbolism of eating together. 

In general make sure the location is discrete, not out in the open. Make sure the other party is comfortable. It never hurts to be the inviting party  (So where would you like to meet in Saturday and talk about the deal? What is your favorite restaurant?) If you can, discreetly pick up the tab. It's short money for good relations. 

Hope that helps! 

Good luck,

Jim 

Leslie,

Short sale it. 

Seller will probably have to stop making payments, so they need to talk to an attorney. List it at the correct price point, and your p/s will be subject to lender approval of the sales price.

This process can take a long time to complete. 

Good Luck!

Jim

Oliver,

The only way I can see to do it is to build it into the price, such that you get that as a cash credit at closing.

Good Luck!

Jim

Hassan,

I've never done any wholesaling. My experience for those types of properties was as a broker and NPN buyer.

Good Luck!

Jim

Madeline,

Get the longest term you can and pay it on a shorter amortization schedule.

Here is the logic: If you take the longer term, then you have the lowest possible payment. If you take a shorter loan, you are locked into a higher payment.

If you voluntarily pay on the shorter loan schedule, and something happens (which inevitably it will) then you can always make the minimum payment (revert to the longer payment schedule). If you are locked into the shorter term/higher payment then you don't have any ability to reduce those payments without refinancing, or trying to negotiate with a bank.

This works well for loans with no prepayment penalties. Those with yield maintenance or prepayment penalties need a bit more math to determine which is best.

Good luck!

Jim 

Allan,

That sounds fantastic,  hopefully the numbers all work out. Good job on working with the bank to find a solution.  Make sure that you can sell out the properties individually,  since they will all be on the same mortgage. 

I would take you agent up on the fee, but also learn as much from them as you can. A couple of well placed dinners out or gift cards as a "tip" can only help.

Good luck and keep us informed about your progress. 

Jim 

David,

This depends.  Sometimes Zillow puts an agent in on those FC properties that is just an agent,  they aren't actually listing the property. The best thing to do is to try to get in touch with the owner of the property.  If you get in touch with the owner then they can tell you if they have it listed or not. If you can't get in touch with the owner, then you can try the agent listed on Zillow. Make sure you ask the agent who they represent and get it in writing somewhere. 

As far as letting the owner stay,  as long as it's their property they can stay in it. Once you buy it  or otherwise encumber it (lease option,  sub2 etc.) Then they are out.  You can help them to find a rental  (NOT ONE OF YOURS), and maybe pay a security deposit or first month's rent. Letting them stay is a very, very bad idea. 

As far as trusting an agent goes, in any business there are crooks. 99.999% of agents I know and those that I worked with were upstanding, decent folks trying to make a living.  I would trust but verify, since NO ONE is going to look out for you like you. If an agent gives you that wonky feeling, find another agent that doesn't make your guts go all wonky. 

Hope that helps. 

Good luck! 

Jim 

David,

Your numbers look tight, especially if the units need everything inside, kitchens, walls, bathrooms etc. 40K seems a bit low to me for doing 2 units completely new inside.

If you were going to fix/flip there is no margin in this to make it go. If you are going to OO, then it's a different story. Again, your margins are VERY, VERY Slim. Most investors I know would pass on this deal and look for something with a bit less head damage.

I'd still be looking at my ARV more closely, you could be in for a nasty surprise if your ARV dips much more than 187K. Make sure you are doing your ARV on other two units that have sold, and not on per square foot estimates. They are ok for ballpark, but you need to sharpen your pencil on this one. You are correct in saying you have no equity to start with. What this means is that you are putting in a whole bunch of your time and effort into getting this property up to standard, and you are not getting paid for it. Ideally, if you are doing all the rehab/build out (paying for it) you SHOULD BE expecting a profit on your work. Also, why with MFR being so desirable at this point in time hasn't this one been done? (My guess, it's overpriced for the market)

Also, your monthly estimates for cashflow don't include management, and they should. You need to get compensated for your time. Take off your homeowner cap, and put on the business one. You are looking at 2000/moi income is that for one unit or two? By my calculations at 1400/mo out go, your 2000 per month income doesn't meet the 50% rule by a wide margin. If you rent both sides you are going to be putting in $500 ish per month. If you OO, then your nut will be about 1500 (1000 rent + 500 shortfall). This assumes a 1400 payment, 2000 income, 5% vacancy, 5% capex, 5% repairs, 10% management fee, 1200 yearly insurance, 3000 taxes. This all adds up to some -300 per month.

I am guessing that your 1400/mo is for the HML, so, if you were to do a 150,000 refinance, (80% LTARV, no PMI), at say 4.5%, 30 yr fixed, now you are looking at a payment of 760 ish, and the numbers make much more sense., and you have some equity.

Bottom line, get your homeowner cap off, your business cap on (i.e. expect to make a profit on your work), make the rehab as inexpensive and quick as you can, get your pencil sharpened and get your numbers nailed down.

Good Luck!

Jim

James, 

#1 stay in school.  Finish your degree.  I always advise a technical degree  (nursing is good) followed by or concurrent with a business degree.  This way no matter what happens you have a fallback position where you can put food on the table. 

Degrees in and of themselves are only a starting point.  They provide the function of opening doors for you instead of you having to go around them or kick them in. 

I wouldn't advise being an agent (you generally start as an agent under a broker then work up to being a broker) unless you have at least 12 months or more of your petsonal expenses saved and a good whack of your businesses expenses as well.

Your nursing job will provide you with a good base to start investing.  Besides which you never know if a doctor will want to invest with you. 

I think your goals are great,  but your time line is unrealistic.  To make 25k per month CLEAR you would need at least 3 million worth of  real estate at a 10% cap rate  (clear).  Actually you would probably need much more than that. 

Bottom line finish school,  invest on the side. 

Good luck, 

Jim