All Forum Posts by: Jeremy Hunter

 Absolutely!!! One thing we never talk about with the high cost of housing now is what a house needs to be or should be. Many, especially younger people talk about how boomers had it so easy.... Well, part of that is becuase they were happy having 2 kids and living in a 2 or 3 bed, 1 bath, 1 car carport house that was about 800sq/ft with 3'x3' closets. All the old, sadly "bad" neighborhoods in cities all over the country are these kinds of homes that we now call "functionally obsolete."

But to be fair, besides people not being happy with those kinds of houses anymore, builders couldn't build them and make any money due to high costs of planning, permitting, sewer and water hook ups, electric hook ups, etc.

What Dylan said, then look for a house hack.

Yeah I can't see giving up that 2.6% unless you found a smoking deal off market or something, and agree HELOC for $18k isn't worth it. Not to mention that means your next purchase is all debt and odds of getting that to break even, let alone cash flow isn't good. And you mentioned you don't have a lot of cash now. If anything goes sideways like an unexpected large maintenance expense, unexpected vacancy, tenant stops paying, etc. you could find yourself in a pinch real quick.

Agree with save up some money for reserves first, then for the down payment and look for your next deal.

You should find your own agent for sure, doesn't need to be a "commercial" agent, but someone that understands rental property and investing would be a huge plus. Maybe there is an agent in the agent finder here on BP in your area?

Cap rate is one way to value, but 6 units is pretty small and the rental calculators here on BP or any others you may find will be able to value the property based on income and expenses so you can determine what it's worth based on what you are going to put down and what return you want...though cash on cash returns day one are hard in this market in most areas.

Full disclosure, not a lawyer or a lead paint expert... but been in real estate for 22 years and dealt with lots of lead paint disclosure issues.

The only thing you "have to" do is now update lead paint disclosure for current and any future tenants that lead paint is present in the property when you fill out the legally required lead paint disclosure form on any property built before 1978.

What would be good to do is find out where lead paint is being accessed. It's of course not 100% that the kid got the lead exposure from your property. Fact is lead paint has been found in toys, and has even been found in paints just a few years ago that were from China.

ANY property built before 1980 likely has lead paint somewhere. Most have been encapsulated under layers of non lead paint since and generally aren't an issue. But now that you have proof of lead paint you need to always disclose it to any future tenant or buyer, and if you can have it properly remediated or encapsulated and have that evidence to show them that to minimize them being afraid of it.

I would guess mostly younger tenants/buyers will freak out more about it than older people. I'm 45. Almost everywhere I have lived since I was born up till my current house was built before 1978 and likely had lead paint. It's just a fact of life. Same with anyone else who has lived in any house built before 1980 or so. I say that because though lead paint was outlawed and not manufactured anymore after 1978, it's not like all the paint on store shelves and in warehouses, let alone people garages and sheds on shelves was destroyed. It was around and used likely well into the 80's in some cases. But to people that never lived in an older house or had to think about lead paint they may be scared by it and that could devalue the property unless you show it was fully remediated, at which point I would argue your property is worth more than other old houses as you can sell it as a value add that the house is guaranteed lead paint free unlike the competition of older houses.

Wonder what we find out about next that we have been using for years and becomes illegal in the future when we learn it's killing us! lol

In all seriousness though, I hope the kid is ok regardless of where the exposure happened. It can be a major health issue for sure.

You do it the same as you always should, make sure the numbers work! You should always build in margin for the "what ifs" including if ARV doesn't end up being as high as planned.

A LOT of people got away with being sloppy over the past several years and rapid appreciation saved them. That's not normal or healthy. Now is the time the pros shine and make $ working with real numbers and the wannabees go away. 

Once 10 offers in 2 days of listing days are gone (and they are in many areas) then sellers get real. You will likely have to offer on several properties to find the deal that works, but the good news is the properties will be out there to offer on. Persist and you will find the seller that needs to sell, and will make a deal that works for you and them.

I've done 2 commercial loans this year with 25 year amortization so you should be able to find that, but yes 30 year is not likely. And also keep in mind you likely are looking at 5 year fixed interest rate. Not the life of the loan so keep that in mind for your longer term plans. Will the numbers still work if rates are higher in 5 years? Do you have confidence rents will increase, or value increase in that area so you have refi or sell options in 5 years when that time comes? When highly leveraging a property like this you need to think about that more. I'm at 65-70% LTV on my properties so not as concerned.

The purchase triangle... Cash, Credit, Income. Those that have all 3 get the best rates and loans. If you have 2 of the 3 that's where specialized loans and creativity come in.

You have some challenges as your cash is low, your income isn't there, and being only 20 probably not a lot of credit history. Not trying to discourage you and awesome you are getting into this so young! House hack is for sure the way to go, it's a matter of can you qualify for a 2-4 unit property and have your own apartment or do you need to rent rooms in a single family situation? Do you have a family member in financial and credit situation to buy with you as a partner? That is likely your best bet.

And a little advice, don't think about this first deal as something that is going to "make" you money. If you can put together a first deal at your age that you are house hacking and paying equal or less to own as you would to rent, paying down principal and starting to build equity even without appreciation, and get some depreciation to offset tax liability on income you do make..... at 20 years old, you are WAY ahead of 99% of people your age!!

It's always a good time, if the numbers work. What numbers work depend on market conditions. Rates are what they are so that's part of your calculation. Based on the running assumption the fed will raise rates another .75-1% in the next few months, expect mortgage rates to follow. So I'd use a refi rate estimate 1%+ higher than current rates to be safe. Rehab costs are what they are so that's the 2nd part. I THINK those will start to soften as material costs and demand are coming down some. But don't count on it. The ARV is always a moving target in any market. But with things softening in many areas it certainly is more important to be conservative here. Over the past 5+ years you could be off 5-10% and still be ok because it's very likely the market moved up 5-10% in the months the rehab took. Those days are likely over, and that isn't a bad thing. Again, it just is.

Figure out what your numbers are and what you can offer based on those numbers for it to work. If offer is accepted great! If not move on. 

Having been in real estate since 2000 I've done up, down, and relatively flat markets. The plus side of a softer market is you are likely to have more properties to choose from and lower offers will be appealing to sellers who haven't seen any offers after 30 days on market, which rarely if ever happened in the craziness of the last few years. 

Conventional lender is going to want to be in first mortgage position and in most cases will go 70-75%LTV. Being 10 units this would be a commercial loan of course, so I'd check with a small, local bank or a DSR lender. Questions will be 1. Does the 1st position lender care where the balance of funds for purchase are coming from (they may or may not). 2. Is seller willing to have their note to you be 2nd position. Maybe if conventional lender will do 70% and seller only has to carry 30% (assuming you don't plan to bring any cash into the deal) would seller feel ok in 2nd position only carrying 30%?

I'd write the offer that way and see what seller says.