All Forum Posts by: Jaren Woeppel

Hey, Richa

A follow up comment. What I have ran into several time in the St. Augustine area is the permitting for an ADU. The regulations here are stricter than other places, so if you're building an ADU on an existing property, the zoning may not allow for it. If you're purchasing a property that already has an ADU, there is potential it's not a "legal" ADU. That doesn't necessarily mean you can't rent the ADU out as a STR, but the issues I have seen come up with this are on the appraisal side. The appraisers will generally disregard any value and income from an ADU that is not legal. For example, say we are doing a DSCR loan, which is based on the debt service and the income generation of the property, we usually see much lower appraisals, especially on the rental income value side, because no value or rent is given to the ADU.

This is something to take into consideration when buying a property but also when selling the property, especially if there will be a mortgage involved in the purchase or sale. 

 Welcome to the BP community, Louie!

@Nancy Kittleson Have you any updates on this? We have a similar situation where we have a multifamily under contract and have a traditional lender set up and had insurance good to go. The seller offered seller financing terms later on in the game, and we wanted to pivot to seller financing, and when we did, our insurance carrier said they would no longer issue the policy if the seller was going to hold the note. I have never heard of this before but I was wondering if this was happening in Florida because the insurance market is a mess right now, or what. 

Hey, BP

Would love your perspective and any possible help on our current situation. We have a 4-unit multi-family property under contract. We had lender financing and a great insurance quote. The appraisal came back poor, and the sellers have offered seller financing terms. We would like to move forward with the seller financing terms, but then we just heard back from the insurance company that they would not offer the insurance if it is seller financed. I did not know that an insurance company cares who holds the note, so this is new to me. 

Has anyone out there had a similar experience and found a good solution or what the next step should be? The next quote we received from a different carrier was 3.5x higher than the previous quote, only change being seller financing. 

This is in Florida (FL) by the way. Thanks!

@Tyler Gibson had a lot of great advice there!

From the financing side, condos are difficult to finance as a qualified mortgage, because there are so many variables with the HOA and the fees, especially in Florida since the collapse of the condo in Surfside and the new Condo 3.0 safety laws were passed.

That being said, most condos would have to be financed as Non-QM loans, which have higher interest rates compared to a qualified mortgage. I say all this to say, a big automatic disqualification for a condo to be approved by HUD, thus being a condo that can be financed with a qualified mortgage, is short-term rentals. If the condo association allows for short-term rentals, it most likely is not going to be HUD approved, which will mean each unit has to be purchased in cash or using a Non-QM loan. Ultimately, that may drive the price of the units down because it is affordable to less people.

I am not sure what condo association you are in, but if you want to connect offline I can help you look into that information. 

Hey, Abigail

There is a lot of great information provided here and I agree with most everything. I would reiterate; 1. Do the math. Look at both scenarios using your numbers for your area, and if the ADU pencils out better in your investment criteria than a new purchase, great. 2. Think about the lifestyle each investment brings. That is something you can not put in a spreadsheet, but is a very important consideration in real estate investing. Running an Airbnb on the same property as your primary residence, is much different than a separate property. Trust me, I've done both! Even if the numbers are great, the lifestyle factor is something to consider. Everyone has their own preferences, but I will tell you that we converted the Airbnb on our property to a long term rental.

Best of luck and keep us all updated on the process and how everything works out!

Hey, @Mat Garcia 

A lot of great questions in there. Couple of quick thoughts that may help. 
-Getting into a situation where you’re borrowing additional funds to close, which if it is an unsecured personal loan, will have an astronomical interest rate compared to borrowing a secured debt like a mortgage. So I would try to avoid that kind of debt, and try to only get low interest debt if you are needing to borrow. 
-Have you thought about potentially buying a house-hack property? Buying a house for you to live in, that also generates income. For example, buying a duplex and living in one side and renting out the other. There are may other ways to do it but the point being, you are not only buying a primary residence for you to live, but it also is an investment because it is bringing in money for you every month.

Great question, Jamie. I often ask the same question for my local market here in St. Augustine, FL. I always end up coming back to asking myself, do I want the lump sum cash now, which will be subject to potentially capital gains tax, or do I want to build equity over time? Sometimes, especially if you have another project in sight that you could roll the proceeds from the flip into a larger deal, maybe that will be the best move for you. Also, it would be hard for me to imagine, in 5-10 years, assuming your BRRRR strategies were all purchased and refinanced at appropriate risk levels for you, that you would not be cash flowing and the value has appreciated substantially.

Either strategy, you will need a good GC or your own subs because that is going to be crucial for either strategy. Question for you would be, what is your long term strategy for investing in the Tampa area? Are you bullish on the long term value in Tampa?

Please do!