All Forum Posts by: James Kim

@Doug Smith @Devin Peterson @Kristin Hess @Jay Hurst @Robin Simon

Thank you for your feedback, much appreciated!

Hello,

I've heard the 10 mortgage cap on conventional loans but today I was told by a friend that after 4 conventional loans under your name the fees or cost of conventional loans increases. Is that true?

When I questioned it he said it happened to him so he had to consolidate 2 loans to avoid the higher fees. My friend is in CA but I cannot imagine it to be a CA thing.

Thank you in advance!

James

Thank you everyone, there's so many people with great feedback and I appreciate them all.

I live in a condo HOA , or at least I think it's an HOA and with what James Hamling (@James Hamling) has said I think I need to double check. But here in CA our HOA is $440/month and there's a special assessment every month and it seems the special assessment really never goes away. No amenities either, and there's only about 35 owners. I do know that cost is what makes up everything, the biggest items being earthquake and then anything related to community security like a guard (we don't have) or cameras and server etc. and in some cases where the HOA needs to replenish reserves based on some updated reserve study. In other properties in CA, like parts of San Diego county, I've seen $360/month as well. Those communities are larger (300+ owners) and have gym, pool, basketball court, playground, club house and gated security. I guess the overall cost is spread amongst more owners so the per owner cost is less, so I guess it depends, and I understand CA can be more "costly" when everything is added up. Also, something that I might see as a town home, where other than one attached wall everything else would be no different to a single family house, has been classified as a 'condo'. That townhome/condo being in an HOA I didn't think there was much difference to what I understood to be an HOA (didn't know there was any difference until James Hamling mentioned it), though the town home and the condo (earlier in my paragraph) operate the same, with an HOA board and a PM to help manage and everything is voted on via HOA or board meetings where there's an agenda. I have also seen my fair share of squabbles amongst HOA board members and also with home owners(or condo owners) and boards made up of 'friends' where relationships with and amongst the board and home owners (or I guess condo owners) get tested. I do agree that ultimately, the collective motive is to keep the community and each others homes as valuable as possible, just difference in opinion how we get there.

Separately, with properties in Texas, like Houston, I've paid $300/year, not month, for a single family home in a community, and thought that was more normal in the area. In the homes I was invested in, the HOA did not maintain anything on the home owners lot but did give notices to enforce things. These days I'm seeing communities within the greater Houston are with HOA fees hitting $650-$700/year, and although they are new builds in communities with 300+ homes, that's more than double what I've seen in the past 2-3 years alone and made me start to wonder about the fees as the increase compared to CA is much larger multiples in the same time period.

Thank you again for everyone's feedback, BP forums are always very educational and everyone brings so much to the table for each of us to hear and learn from.

James Kim

 @Bud Gaffney@Janet Behm@Sam Shueh@Daniel Tanasa@Carlos Ptriawan@Steve K.@Account Closed

All, really appreciate the feedback. I've only lived in hoa condos where I am and it's not transparent in almost all cases and high fees, but thought that's just CA. I have investments out of state with and without hoas and have been ok with the hoas. I've been looking at Houston and see that hoas are getting high...and I mean like 650 and 700 for some of the new builds compared to 300 to 400 a few years ago, so was curious.

I've started "noticing" them along with the significant increases in insurance too.

Thank you all!

James

Hi,

I was wondering if anyone buys property in HOAs and if you do, is there a certain threshold HOA annual fee amount that is ok before it becomes something that you "notice"? For example, i have a home where the HOA annual fee is $350 a year and since i bought the property when the interest rates were low enough the numbers work, at least for me. Some homes that I am seeing these days appear to have very high HOA fees like $650 or $700 per year in some communities. Assuming the numbers overall still 'work' for you, is there a number for the annual HOA fee that you live with before it makes you think about it?

when i say it makes you think, I'm looking at it from whether you want to sell the home later, does the high HOA make the home less attractive to buyers etc.

Thank you in advance!

James

Not a transfer tax expert but i do know that there are states that assess the tax on any transfer in any way, there are those that assess it if you transfer to and out of an entity, and there are those that assess if you transfer a controlling interest. For DC i believe they assess if you transfer (and by this i mean convey, grant, sale, assignment etc. directly or indirectly) a controlling interest (i believe this means anything above 50% though you'll need to double check the definition) during any 12 month period preceding the transfer. if you're forming a 51/49 partnership and you're getting 49 then you may be able to avoid the tax because the original owner is not transferring a controlling interest but rather only 49%. You may be able to do this because the 51% owner is deemed to only have transferred 49% by looking through the partnership and be viewed as still retaining 51%. 

This isn't legal or tax advice, so you should check with a transfer tax specialist.

Hope this helps.

James

 @Wesley Weisberg

I'm no expert but i have been talking to my insurance agent about some properties i was looking at and saw this post and asked him the question about mold and how it's covered in insurance policies. He told me that mold coverage was taken off all insurance policies nationwide in 2005. You can still purchase separate mold coverage but you need to get a mold remediation company to inspect your property at your expense in order to get separate mold insurance. He also told me if we ever see anything in our policies talking about mold remediation for say $4,500 then it's just to help cover the cost of the test, not to rid of it. He also told me since mold was taken off in 2005 it also prevents people from suing landlord solely for the existence of mold as of 2005. He thinks if someone is being sued for what appears to be related to mold, it would probably be for something else. Side note he mentioned was to make sure the tenant's renter's policy has 'loss of use' coverage that would pay the renter to live somewhere else while the repair for, in this case, mold was being done. He said to see what the actual exact claim is on the lawsuit as he thinks it's most likely not for the presence of mold itself.

Second side note, he also did say that a lot of landlords are stripping down their insurance coverage to exclude certain things, like water (not flood) coverage and other coverage, he said renters could sue for that, though I don't know how one could sue a landlord for lacking something on the landlord policy.

Bottom line, it could be that any mention of the mold is just there to aid the actual claim which might not be for the mold itself. Hope this helps.

UPDATE: I just re-read your latest post and saw that they are claiming injury due to mold, my comment above may be invalid then, but i'll leave it for reference only. 

 @Devin Peterson - Thanks for the feedback. Yes, I heard from a friend who purchased a new build that he felt using the builders lender didn't feel like a deal though they made it out like one. He went with the builder for the lower rates and credits. In my situation i actually shopped it with my own lender and did a side by side between my lenders best and builders best offer and it was obvious that the builder's lender started at higher rates and bought the rates down. At the end of the day my lender had lower rates, lower monthly payment and lower cash to close but the builder insisted their lender was the better offer as their cash to close after applying 2% credit was lower than my lender. my agent and i were a little dumbfounded by their position.

We ended up backing out for other reasons, but interesting to see how deals are not deals if the starting point is inflated and the bring down sounds like a deal, all marketing i guess.

 @Andrew Postell Appreciate the feedback, always much to learn. My loan was conventional for investment, i guess it makes sense since the lender (builder's - so builder owns 49% of the lender) stated 2% cap on credits. I found it strange that the builder said the credit comes from lender and lender says it comes from builder, but i guess they are both one of the same due to being affiliated.

Quote from @Stacy Raskin:

For investment properties, depending on the lender, I've seen anywhere from 3-6% caps on seller contributions or other interest party contributions for purchases. 3-4% is more common. These contributions are paid usually be sellers but sometimes by real estate agents to bring down the overall cost of the loan paid by the borrower. 

If you're getting a credit from the lender, that means you're paying for a higher rate. This is different from an interest party contribution. Generally a lender's chart for a loan, will have a spread of rates from 0 cost or what the rates are for a loan with discount points where a borrower pays the interest rates down or paying for a higher rate to get a seller credit. 

The below chart is an example. So the first column is the rate, the second is the APR (so the rate with the lender fees in), third is for price of the rate, fourth column is for the cost or credit of the rate and fifth is for the monthly payment.

So to read, an 8.125% will be a 0 cost for a $1,358 payment. A 7.999% would be a $458 cost in discount points paid by the borrower for a $1,342 payment. A 8.25% rate would be a $458 credit to borrower to help pay for transaction costs for a $1,374 monthly mortgage payment.

Builders generally have in house lenders so they can offer different options which will most likely be different than a lender that is not an in house builder lender as the builders need to sell the properties. Important to scrutinize the numbers and terms from builder's lenders.

All lenders and brokers charge for their work. Some do lender paid which means the lender or broker fee is put in the rate so it takes the rate from a 8.5% to a 8.75% or it's borrower paid which means that it's pulled out of the rate and charged upfront at the end of the transaction- similar to a real estate agent commission. This leads to a lower rate for the borrower. It's important for the borrower to consider how long the loan will be held for as far as deciding what type of loan to move forward with.

Some lenders don't like to discuss their fees and when rates were super low, some would just put their fee in take a rate from a 2.875% to a 3.125%. This is a lender paid compensation. Nowadays with rates being higher, some borrowers are doing borrower paid compensation. This is more common for investment property DSCR loans as rates are already higher compared to owner occupied conventional loans. Important for borrowers to read all paperwork.

@Stacy Raskin this is awesome feedback. It's still a little foreign how everything works or rather can be 'manipulated', but definitely learning alot. Your explanation really helped break it down. Thank you!

James