All Forum Posts by: Jamie Derasmo

Hi Elizabeth! I wondered the same thing and I chose to get my license. While I did feel it helped grow my understanding of real estate all around, there are some downsides. What I've found is that does create some red tape. Real estate agents have to adhere to many rules and etiquettes which sometimes conflict with the different investor-driven negotiation strategies. While it's nice to have access to the MLS to search properties, especially to determine current value and ARV, your best deals are going to come from off-market properties. Unless you're actually interested in the salesperson side of it, as the others said, focus your time on gaining knowledge for the investment side and growing your network, connecting with local investor-friendly realtors, lenders, and contractors, etc. Consider joining a local meetup. Best of luck!

I agree that you should request an extension for the contingency period due to insufficient information regarding the foundation. Request all info the seller might have. In RI, contingency periods are 10 business days (this does not include weekends/holidays) Is it different in CA or did you already agree upon Sunday? Either way, that can be a costly mistake to move forward if the foundation is so questionable that two companies refused to sign their names to it.

If you're going by traditional formulas, you overpaid for the property. (70% rule for Flip, 80% rule for BRRRR) However, that doesn't mean it's a deal that won't work for you. When you entered the deal, what were your goals? I know lenders who will do 75% LTV refi, make sure to shop around. I think you have some serious number crunching to do.

From the math you provided and the two loans your repaying, you have a slim profit margin for a flip and you might be a little upside down if you choose to refinance and rent it out, depending on your monthly payments plus loan payments. It’s okay if cash flow isn’t ideal but do you expect appreciation in that market?

I’d say to get your rent number more narrowed down now. $2000-$2500 is a big spread that a lender won’t be satisfied with. Figure out the real number. If you think you can get $2500, put in the upgrades necessary for that as long as they’re in budget. 

Use the calculator on this site to run both scenarios and be honest about your numbers. Does your construction loan come with a prepayment penalty? 

Refinance: If you refinance for 70% that’s $196K or 75% is $210K, both scenarios are well under what you owe ($150K “heloc” + $90K rehab loan) I decided to use $90K as your Reno budget to stay in the high side of your estimate. So you’ll still be paying 3% of your heloc each month and will owe the full $150K (or other balance) at the end of those 10 years. I know you say your only $5200 out of pocket right now but that Heloc is still your money, just in equity form.

Potential Flip numbers: $280K sale price - $150K heloc - $90k rehab loan - $20K (or more in closing costs/realtor fees) - $5218 monthly holding costs = roughly $15K profit. 

Bright side of these scenarios is you don’t have to repay the heloc and can use that money plus your profit for your new project. No good or bad deal, just what works for you!

Hi David, you have two weeks to shop mortgages around and as long as those hard credit checks are in those two weeks, it counts as one hard credit check. For most mortgage brokers, the credit check suffices for 90-120 days so as long as you close in that time, they don’t do another credit check. In your preapproval, they will tell you when it expires. My advice is to run your own numbers, get a feel for what you want and are able to spend each month. I don't recommend going to look at properties until you are preapproved so if you like something, you can make an offer quickly.

@Nico Dandini FHA loans aren't all bad but they are not viewed favorably because they have stricter safety standards so a house might pass an inspection with a conventional loan but might get flagged with a FHA home inspection. Also, because of the lending process, FHA appraisals *might* come in lower than an appraisal from a conventional loan. Because of those two big factors, sellers view these offers of having greater chances of falling through. Some of these are the unfortunate stigmas attached to FHA offers even though they truly are a great way for younger/first time investors looking to start. They are not impossible to have accepted in this current market but they are difficult.

Hi Evan and Katherine! From an agent's perspective, I would say do the conventional with less down and calculate what you're comfortable with as a down payment to balance out your PMI. FHA has stricter standards and are looked at less favorably (by sellers) compared to conventional loans. If you're the only offer on a property, the seller might consider it but if you're entering the spring market and it's a competitive property (most are), your FHA loan might fall to the bottom of the pack. From an investment standpoint, FHA is nice because of the decreased down payment. The reality of this market is that cash or conventional loans are the top prize, but that doesn't mean FHA won't work, you'll just need to stand out in some other way. If you choose to go FHA, choose a mortgage broker who will call the seller's agent and give them assurances that they underwrite efficiently and close on time. It's a tough market but it seems like you are set up nicely for whichever route you choose. Are you already working with an agent in Salem? If not, let me know, I can refer you to someone who can help get you what you want! Best of luck and enjoy the first step of your REI journey!

Jamie

Sorry you are dealing with this Hannah, it sounds like this might be how they operate.They say they’ll have the money, they wait until close, and then they stiff you and sign a new agreement. They probably had no intention of bringing money to close or they are truly scrambling to organize their business, either way their actions are not reputable. I assume they take advantage of investors this way because most likely people want to resolve without going the legal route. So when you sell, you’ll get your money back and you’ll split the profits 50/50. Hopefully you’ve checked into some legal recourse or professional opinion to see if they can provide any further insight.

I may have missed it, but what did/do they bring to the deal? Are they holding up their end of the bargain, aside from the down payment money? 

Hey Julie, I was in that predicament a few months ago and decided to hold and rent because of the continuing appreciation and good cash flow. If your monthly payments are $2K, figure out how much cash flow you can clear each month. You have a good mortgage rate and have great equity. I think it'd be worth looking at a HELOC or cash out refinance and holding the property. But it depends on your goals. My vote is to hold as rental for now.

If you want to go with the galley style kitchen, it would be worth spending the money to center up the laundry room doorway and moving the fridge more down that way on the garage wall side so it does not stick out. In the laundry room, the left side can be laundry and the right side can be pantry shelving. Lot of possibilities with the floor plan! 

I would definitely line the sink up under a window, or it will look very off. Also if you are going to keep cabinetry on the garage wall, have it end at the wall so you don’t have a bump out that you have to walk around coming in from the garage!

That is unfortunate about the garage stairs and door to laundry. That really is a great mud space.