All Forum Posts by: Jay Coombs

@Tom S. So if that is the case, no matter how great a deal you find, there has to be 20% down in the form of cash, but it would be 20% of purchase, not LTV. So in my example, the actual LTV would be pushed down to 58% with 13k down on the 65k purchase.

LTV is a mortgage term, so "actual" LTV is LTV and that is that.

On a purchase mortgage LTV is arrived at by using the lesser of sales price or appraised value, like above poster said. $80k loan, $100k price, $200k appraisal, that's an 80% LTV loan. Due to guidelines, the lender can't "see" the extra equity.

People getting great deals end up doing cash out refinances because after six months, sales price is disregarded and only appraised value is used. So after six months when a new appraisal is conducted, this would be regarded at that point as a 40% LTV loan. Now that no purchase contract is being referenced, the lender can "see" the extra equity.

Very well explained, seasoning is so much clearer when framed this way.

Originally posted by @Stephanie Irto:

@Jay Coombs In a purchase, the "V" in LTV is the typically the purchase price. As the other responses mentioned, the value will be the lesser of the appraised value or the purchase price.

So in your example, purchase price is 65K, the appraisal comes in at 90K but the value for loan purposes is still only 65K. If your down payment is $0, you would be at 100% LTV, which is very hard to find.

Explaining it this way makes so much more sense!

Thank you all for the help.

Sometimes I just nuke it.

-Jay

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Ok, I thought I understood equity, down payments, and purchasing. But maybe not?

Hypothetical deal incoming:

Purchase price 65k

Value 90k

Down payment $0 (not counting closing costs etc. it's an example!)

LTV: 72%

Okay, there's our deal. Now we call the lender, lender asks how much you're putting down. Of course, you say 0! You tell him that you have a great deal, and the equity is there already, and they ask how much you are putting down... Now you're confused because you thought you understood enough of lending to know that the LTV was the important piece, and you realize you don't know.

In this totally and completely hypothetical situation... What am I missing?

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@Andrew K. Would you mind PMing me the name of your property manager in Fayetteville? I'm looking to buy out there and would love a jump start on a quality PM!

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Originally posted by @Mike Wood:

@Juan Ramos With the rent numbers you stated, I dont see how your can make new construction work. My last three builds have been 2/1 or 2/1.5 per unit, and the construction cost has been between $165-200k for a duplex, not including land and soft costs. I would never consider building if your rents are only in the $600-700 range. My new construction units go for $1050-1350 per unit, which makes the numbers work. I cant see how anyone can build for much less than $75-80/ft2 on a duplex (mine run in the $90-100/ft2 range, but I don't build for low end rental markets), unless you are the GC or do a ton of the labor.

Local banks are the only way to go for construction loans like this. Some of the majors will do construction loans, but only on owner occupant single family houses. Finding banks that will do construction loans on investment property will take some looking, but they are out there and generally local or regional.

Are you only building duplexes or are you also building tri and quads? I assume you are outsourcing all of the builds?

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I'd definitely like some contacts to get started with! There's not a lot of information, or discussion that I have found about build to rent. With it being a single build, instead of a tract, how did you work your deals if I may ask?

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Thank you both for the welcome!

Finding a contractor seems to me, to be the harder piece of the puzzle so far, definitely!

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I'm usually pretty reticent to post introductions, but here goes!

I first found Bigger Pockets back in, sheesh, must have been '09 maybe? While I was still in Hawaii, browsed off and on for a while, and read threads here and there. I have been a investment book reader since I was a kid, always fascinated with real estate because it's tangible. I've invested in stocks and FOREX for years, but haven't ever taken the RE plunge. I'm active duty in the Navy, and as such, spend a lot of time on deployment (like I am now), I've been listening to the podcast for the last few months as I downloaded them all before I left.

I was struck by podcast #168 guest starring Cameron Skinner and have been inspired to build to rent in my market. I'm always reading and trying to learn more, but build to rent keeps pushing it's way to the forefront in my mind. So here in the (hopefully) not too distant future I'd like to get my first deal underway!

-JC

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All Forum Posts by: Jay Coombs

Jay Coombs has started 2 posts and replied 8 times.

Post: Down Payment vs. Equity confusion

Post: Down Payment vs. Equity confusion

Post: Down Payment vs. Equity confusion

Post: Best cities to find 1% (or more) rule

Post: Building a new fourplex

Post: Newbie from Oak Harbor, WA

Post: Newbie from Oak Harbor, WA

Post: Newbie from Oak Harbor, WA