All Forum Posts by: James Mc Ree

Good point. I assumed you signed a lease when you said you accepted the application and took the deposit. In this case, you just need to adhere to whatever you agreed to with your prospective tenant. My apology for assuming you signed a lease.

I tell my prospects their deposit is non-refundable if they don't adhere to the written terms of the contract I use for the deposit. That would allow you to keep the deposit if they don't adhere to the agreement.

You have a legally binding lease. You can walk away from it and the tenant can sue you to hold you accountable to the lease. They can also sue you for damages if they incur temporary housing costs, feel you discriminated against them, etc. Bad idea.

It is common for new tenants to ask for an change to the move in date ahead of the start of a lease. I've had it happen several times. The way to handle this is to tell your tenant they can move in anytime they want and the lease starts Oct 15, since you already agreed to that change. They can move in Oct 15, Nov 1 or whenever. That is up to them, but they start paying as of Oct 15.

You get up to 10 subsidized mortgages through FNMA and FMAC. I would use those for your cash out refi before going to DSCR if you haven't already used them. There is a lot more paperwork for these traditional mortgages and they will probably take 2-4 weeks longer, but you could save quite a bit in fees and rate.

Otherwise, DSCR or a commercial loan is the way to go.

You may be engaging in overkill if this is your first property and you are trying to put it into an LLC. Insurance is a better solution. It is simpler and lower cost. Folks use an LLC for anonymity and liability protection. You won't have anonymity since property records will show Jasmine sold the property to the LLC.

You will get liability protection with the LLC if you do it right, but you will pay more for it and might not tangibly benefit from it. For example, you will have insurance either way. Adding a liability policy can provide up to $1M in coverage. It's very unlikely that you will have a claim or judgement that large and you won't incur the LLC overhead.

@Jason Skinner

Your post didn't say how much seller financing you were looking for, so I asked and assumed it was 100%. The $2,500 payment you proposed is the interest only portion of a 5% loan amortized for 30 years of $600,000 principle. That may have only been amazing coincidence, but that's how I got to the 5%. It is why I asked if you really intended to offer seller financing with a 5% rate.

@Gregory Schwartz has great advice on the approach. Understand Seller's goals and interest first. They may be money in the pocket, getting out of maintenance headaches, no more chasing rent, etc. If money in the pocket is not really the interest, then 100% seller financing may be acceptable to Seller; but maybe not if Seller wants money in the pocket. In that case, maybe 80% or some other % less than 100% would work. 

You will most likely get better offers as you increase the size of your buyer pool. Offering to a couple investors gives you negligible data. Listing it in Zillow or the MLS will give you maximum exposure.

After getting broad exposure, then decide how those investors' offers compare.

Are you looking for a 100% seller financed deal? Your $2,500/month payment would be a 5% interest note if it were interest only if it were for the $600,000 deal. Owner would be stupid to take that, but you never know if Owner is desperate. Even desperate though, this owner would literally walk away empty handed - no cash and no property. I can't see that happening.

Consider what LTV % you are willing to consider if less than 100% and I recommend raising the rate you would pay since you can't get 5% anywhere. You will already be saving substantial closing costs with a private deal. You probably also want to share with Owner your 780+ credit report to show you safe you are as a borrower.

I had a SFR Section 8 annual inspection today. The inspector told me there is a new smoke detector requirement for Section 8 homes coming January 1:

https://www.congress.gov/bill/117th-congress/house-bill/7981...

https://www.us-hc.com/blogs/new-smoke-detector-requirement-f...

Has anyone heard of this? His mention of it was the first I heard of it. The article referenced above says no implementation date has been set, but the inspector said it was January 1, 2025. It's time to buy stock in smoke detector companies if that is true.

I use 10 year lithium radio connected detectors. Some have sealed batteries and some are replaceable. Most of my detectors, maybe all, do not have a visual indicator for the hearing impaired. I think I will be buying a bunch of detectors, but I don't yet know what "tamper resistant" means for a sealed detector.

You may have a more profitable exit if you can build them as 1-4 units versus larger and can subdivide the buildings into separate properties. A 1-4 unit will qualify for residential mortgages while 5+ is a commercial mortgage. The 1-4 unit buildings will have a larger buyer pool and maybe a larger price per unit as a result.

I would charge the tenant as it sounds like more than what might be considered normal holes in the walls. As mentioned, there are 2 major approaches: contractor or DIY to resolve.

Contractor: Get bids and charge the tenant what it costs you.

DIY: Tally your materials and labor cost, then charge your tenant. Your labor cost needs to be defined in your lease and can't be more than a reasonable contractor bill. My lease says I get paid $40/hr to do work tenants are supposed to do or fix their damage.

The job sounds easy, especially if you have leftover paint or the paint formula. Spackle the holes. Sand them. Prime the spackle spots. Paint 1 coat of the same color over the walls. This would probably be about $300 in my area to contract out if the walls are otherwise in good shape and there is no trim work.

Focus on bringing your current debt current. Being delinquent on your mortgage tells lenders you can't handle the debt you have now.

Next, get an income and build savings. Buying land and building anything can be a great thing, but it is expensive and you aren't going to get 100% financing. This approach is probably your most expensive path.

Consider buying existing homes and possibly renovating them if you want to be a landlord. Your investment can be a lot less and you will be much closer to rental income.