All Forum Posts by: Jason Kaye

When a lender is calculating DTI for an individual, who owns real estate but does not have 2 years of schedule E returns, will he/she recognize 75% income from the properties if the properties have 6 month leases rather than 1 year leases? Does this also apply for the FHA loan?

It's that time of month again; let's meet, have a beer, and discuss real estate!

This month we will be hosting an open forum meetup at Steel Bonnet Brewery. We hope to get as many aspiring and veteran investors and real estate professionals out to discuss all things real estate. Topics range from buy-and-hold to fix-and-flip to lending and out of state investing.

This is a no-pressure meetup without any sales or pitches; just a relaxed environment to grab a beer, connect and talk!

Looking forward to seeing everyone there!

Jason Kaye

We've had a break, but, now we are back and ready to talk real estate investing!

This month we will be hosting an open forum meetup at Steel Bonnet Brewery. We hope to get as many aspiring and veteran investors and real estate professionals out to discuss all things real estate. Topics range from buy-and-hold to fix-and-flip to lending and out of state investing.

This is a no-pressure meetup without any high pressure sales; just a relaxed environment to grab a beer, connect and talk!

Looking forward to seeing everyone there!

@Ned Carey I believe that BARRR, (Buy-Add Value-Rent-Refinance-Repeat) would be a better term for what I'm getting at. We generally take Rehabbing to be the vehicle with which we add value and can thereby refinance, however, in this case I am looking to assume the back taxes as my value add.

"You are paying just over $100"

Notice, in my example the purchase price is 44k. The back taxes are 58k. Together, yes, the price would be over 100k, but, I am not including the back taxes in this. The listing indicates that it is possible to go on a payment plan for the back taxes. I view this essentially as a separate "loan".

At this point I have bought a 120k house for 44k and I have a separate back-tax "loan" with the county. A 75 ltv refi at this point would allow me to pull out 90k. This would leave me with a 90k loan and a 58k back-tax "loan" as well as 46k cash in hand. Yes this depends on some conditions like the terms of the back-tax "loan", but, assuming that the property cash flowed in spite of this, I would have 46k cash more than I started with plus the property.

Now my question was, would a bank allow this type of refinance? i.e Would the back-tax payment plan have any bearing on my ability to refinance? Or is there something else that I am missing in my calculations/assumptions?

@Blair Poelman All the listing shows is "back taxes with the county" which the borrower will assume. I'll have to check out the title report for more information. 

I came across a property that is for sale at a very good price. It is steeply discounted because of back taxes owed on the property. I believe that there could be a BRRRR opportunity in this situation and wanted to see if my theory has any legs.

Property Details

Purchase price: 44k

Back Taxes: 58k

ARV: 120k

My general idea is to purchase the property all cash so that there is no seasoning requirement for the refinance. I will then negotiate a payment plan with the county for the back taxes. After getting on a payment plan, I would cash out refinance the property.

Assuming that the property appraised at 120k and I refi'd at 75 ltv, I could pull out 90k, recouping my initial investment plus some.

Am I missing something in my understanding that would prevent this from being a viable option?

Am I missing any underlying assumptions?

Wish I could be there, going to be out of the country then. Have a great meetup and Ill catch you all at the next SC meetup.

I am currently evaluating some small commercial multifamily properties (6 units). My understanding is that the pricing of a commercial property is based upon the Net Operating Income (NOI) and the Cap Rate.

I have found a couple of properties that I am interested in listed on Loopnet. They appear to be underperforming, mismanaged properties that I believe would be perfect to implement the BRRRR method on.

The LoopNet listing for one has the property for sale at $400,000 based on a proforma NOI of $29,000 and a cap rate of 7.36. The actual NOI listed for this property is ~3,000 for 2016. Based on this I would expect the property to be worth about $22,080 at the above cap rate of 7.36.

I am curious how to approach this scenario from a high-level perspective. Am I right in using actual numbers to price this property? If I were to make an offer should it be at this price? Should it be closer to the value based on proforma numbers? Somewhere in the middle?

**Disclaimer** 

I am not making an offer based on just these numbers. I will investigate more deeply why performance is currently so far below proforma. What type of work would be involved to get it closer to proforma, etc. 

@Shane Pearlman I had actually seen your event listed under the events section of the site. I am planning on attending. I look forward to meeting you and others!

@Ori Skloot I'd be interested to hear your take on opportunities in the area. I have no doubt that opportunities exist everywhere, however, given my lack of experience I am not sure what those are in the Bay Area given my current resource constraints.

@David Faulkner David, I take your point on the loss of control with going out of state. Being from California your self I'd be curious to know what strategies you'd pursue in place of out-of-state investing. Specifically for someone such as myself who has decent income and full-time employment and wants to start building semi-passive income.

@Sean Walton Nice! I'm a huge burrito fan, but, trying to quit as they become a little less forgiving with age. I've looked at the BRRRR method a bit and will check it out some more. But yeah, time is my biggest obstacle at the moment. Not sure how much rehabbing I could do.

@Leslie Pappas Thanks Leslie.

@David Thompson I have an interest in syndications for larger investments like you mention.  As an engineer at heart, part of me likes to jump into a project where I'm in the driver seat to understand first-hand how something works before moving on to larger endeavors. That said, I'm always open to learning and talking to others. Thanks for the podcast rec's; I'll definitely be giving them a listen.

@Account Closed The meetup looks right up my alley. I'm planning to attend, thanks!

Hi BP community,

I'm Jason and I'm just getting started in the real estate world. I have aspirations to achieve financial independence through REI and all of my Google searches for educational info seem to ultimately lead me to BiggerPockets.com. I figured it was about time I introduced myself.

I am a front-end software engineer for a smaller tech company in the Bay Area where I build software for Credit Unions. My coding expertise is in html/css/javascript (specifically Angular) for those interested. I really enjoy my current career; however, I would like to take advantage of my stable employment and income to enter into the real estate investing world.

My goal is to achieve financial freedom through buy and hold investments in multifamily/small apartment complexes while working my main job. i am also interested in gaining domain-specific expertise in areas of real estate investing with the hopes of using my software background to build technology and solutions to better the real estate world.

I recently purchased my first owner-occupied home in Santa Cruz. I lover it! However, I have also realized that the size of the down payment, coupled with rents that barely (if it all) cover the monthly expenses for residential property in the Bay Area make it difficult to get into the buy and hold real estate game. As such I am interested in focussing on out-of-state investing. 

If you have made it this far, thanks for reading. I look forward to getting involved with the BP Community: hopefully forming partnerships, doing deals, sharing ideas and more with like-minded individuals.

-Jason