All Forum Posts by: Jim Peckey

@Whitney Hutten - thanks so much for clarifying and helping me to better understand the total closing costs! Without that VA funding fee, the closing costs would be much more in line with what I've been reading about for sure.

I haven't watched podcast #340 yet, but I just brought it up and interested in giving it a watch now.

Cheers and have an excellent day!

Thanks for the insight Dan M. I'm planning to follow up with my loan processor tomorrow to find out if there's any negotiating down the VA Funding Fee - that does seem to be the highest fee in the closing costs.

In calculating the total closing costs, am I interpreting it correctly by adding the $7,941.14 "total closing costs" and the extra $2,443.68 "total other costs" for a total of ~$10.4k?  Or should I only be looking at the "total closing costs" number of $7.9k?  

I'd like to make sure I'm accurately assessing the actual "closing costs".

Thanks again and cheers!

Howdy folks,

Greetings. We're wrapping up our first multi-family BRRRR project and finalizing the cash-out refinance process now. We're expecting to close next Monday and just received the closing disclosure statement, I'm trying to figure out if the associated refi costs (~$10.4k) are exorbitantly high or if we're in line with normal costs.

We purchased the duplex in May 2019 for $65k, put about $70k into it and got it appraised for $164k. We're taking out a new 30yr VA loan @ 2.75% for $130k, leaving 20% equity in the property and taking out nearly all of the money we put into it - minus the costs of new tools, education, etc.

Here's a breakdown on the closing costs we're looking at:

In one way, I feel like we lucked out with not paying any origination fees or discount points, but in another way it feels like ~$10.4k is higher than normal of what I've read about closing costs being.  I'm not sure if it's completely accurate, but I've read that typical closing costs range anywhere from 2-6% of the total loan amount.  The $7,941.14 is on the top end of that estimate, with being just over 6%.  I'm unsure if I'm interpreting it correctly, but I'm also adding the extra $2,443.68 to the total amount of 'closing costs' as those are additional fees we've already paid for.

Any insight/feedback on the closing costs and our first BRRRR in general are certainly welcome and appreciated!

Cheers and have a great day.

IT Systems Engineer/Architect checking in here - we purchased our first BRRRR duplex last year and it's been paying off already. We're looking at purchasing our next two multi-family properties within the next 6-9 months.

What's the question here??

@Chris B. - thanks a million for the very detailed & helpful response, this is great info!  Up until this point, we've been advertising on Cozy.co and their sister sites (Realtor and another site not coming to mind) and Craigslist.  I'll need to look closer at Zillow and leverage their platform as well - it sounds like that's been working best for you.  Thankfully we've been hitting on a lot of the points you've made, specifically the nice pictures, no smoking/vaping, minimum income requirement of 3x monthly rent, no section 8, small pets negotiable (with $25 additional monthly rent) and the zero application fee (they're already paying $40 for the credit & background check for a chance at renting the unit).  

We've had the property listed for a few days now and have been showing it when time permits.  Your advice on setting up open house showings on specific days & times seems like a more efficient use of our time, that's great.  We've been pre-screening via a google form, which has been very helpful so far.  I really like the idea of handing out a paper application during the actual showing and being blunt with interested tenants - it seems like a second layer of filtering to weed out unwanted tenants and those that do complete & satisfy both the pre-screening form & paper application are worth further vetting.  We've been having tenants apply through our Cozy.co listing as well as purchasing the credit & background check ($40), which is sent directly to us - it's been very convenient so far and is how I retrieved the info based on this post.

Thankfully we're in a very comfortable financial situation and able to float the mortgage indefinitely, which gives me the confidence in passing on less than ideal tenants and keep looking for a quality tenant.

@Mike Morawski - thank you for the feedback good sir!  We've definitely been trying to be as thorough as possible, staying away from short cuts and trying our best to do right by tenants and the law.  The list of standards is mainly for internal use, but we do list a number of them in short on our listing - we also base the questions listed on our Pre-Screening google form off of the list of standards.  It seems like a fairly quick & direct method to screen tenants before we even show the house and begin spending time with a potential tenant.  How to measure a cooperative attitude is a great question - I'm sure there's room for improvement in this area but at this point, we measure based on the following factors; ability to follow simple directions in the pre-screening form; providing requested information in a complete fashion; responsiveness to phone/text/email; communication abilities (providing more info than just yes/no answers, being forthcoming with relevant information and us not feeling like we're trying to draw water from a stone).  Good point on the permanence factor - are you saying this may just be no evictions in the perception of the housing court?  Regarding permanence, we look for tenants that are not hopping from property to property every few months - the measurement is their prior residence being 12 months or greater.  We definitely screen for & ask about this, and verify via a background check & calling current/previous landlords.  I'm hoping that we never find ourselves in housing court, but I like to operate on preparing for the worst and hoping for the best.  Thanks a ton for asking questions and getting the gears upstairs grinding - I really appreciate your insight & guidance, as well as that of other BP forum members.  I'm very thankful to be a part of this community!

Thanks again and have a great evening folks!

@Chris B. - many thanks for the response and helping a rookie landlord make necessary improvements!  I'll update my post to remove more specific information to the tenants.  Question:  if you have a couple apply and 1 meets your list of standards, but the other does not (including lying on their application), how do you move forward with the application process?  do you rent to 1 of them, but tell the other they are not welcome?  or do you disqualify both by nature of their relationship?  At this point, this is where things get a bit tricky for me.

@Mike Morawski - thank you kindly for the plethora of information and sharing your personal experiences as well.  I've taken your advice to heart and refined our otherwise loosely defined standards by documenting them on paper.  Here is what I've come up with:

• Net income - 3 times the monthly rent
• Income stability - at least 12 months with same source of income
• Assets - 5 times monthly rent (bank accounts & automobile equity)
• Credit - established, nothing negative; FICO score of 620 or better
• Credit cards - at least 1 major credit card
• Checking account - established
• Rent punctuality - prompt, never late
• Pets - small pets negotiable (large pets not allowed)
• Waterbeds - not allowed
• Vehicles - two automobiles allowed, no motorcycles louder than an automobile
• Current & former landlord’s recommendations - good
• Personal recommendations - one available (preferably local)
• Number of tenants - maximum of 2 in 1 bedroom apartment, maximum of 3 in 2 bedroom apartment
• Attitude - cooperative
• Smoking - not allowed
• Drinking - in moderation (maximum of two drinks daily)
• Illegal drug usage - not allowed
• Permanence - at least 12 months in each of the last two residences
• Cleanliness - average (or better)
• Interest in the dwelling - average to high (willing to pay more in rent than asked)

We're using a google form to pre-screen interested tenants and I've just updated it to essentially touch on all of these standards.

@Aigo Pyles - thanks for the response and good advice!  I've verified employment for the girl by calling her employer and asking if she's been employed since the month & year listed on her application, which checks out.  I'll be asking her for copies of pay stubs to verify income for sure.  The guy however is unemployed, has horrible credit and I just found out a few minutes ago that he lied on his application, specifically about his current landlord and how much he's paying in monthly rent.  Question:  if you have a couple apply for a vacancy and you're willing to rent to 1 of the applicants, but not the other, how do you deal with that?  Do you allow the girl to rent the unit, but tell her that her boyfriend is just not welcome? lol  

@Crystal Smith - thank you very much for the response, I appreciate it!  I've taken your advice as well as Mike Morawski's to heart and have documented a list of objective standards (see response above).  Admittedly, our internal thought process has been a bit more subjective in nature and is only being shared here privately with fellow investors in the context of helping us screen tenants to place in our first rental unit.  I suppose the subjective standard can be construed as an objective standard in the "attitude" department - we're looking for tenants who are "personable & cooperative".  Question:  when you have a couple apply to rent one of your units and one passes your list of objective standards, but the other fails, how do you move forward with renting the unit?  do you disqualify both?  do you tell the passing tenant they can live in the unit, but the failing tenant that they cannot?

Update that I'd like to share with everyone:  my gut feeling towards the guy has turned out to be correct.  When I called his current landlord to verify residence & monthly rent amount, his place of residence turned out to be correct but the amount he listed in monthly rent is a lie (he lives with family for free).  This combined with the fact that his credit is shot; has a long list of unpaid debts, including his phone bill; and is currently unemployed with no income; makes this a non-starter in my book.  I'm just trying to figure out how I should go about moving forward with the rental process with the girl, but disqualifying her boyfriend at the same time.

Thanks to all for the help and guidance here, we sincerely appreciate it!

@Alex Olson - I'll definitely be calling their employer tomorrow (assuming the bank is open tomorrow) or Tuesday.  It's encouraging to know that you would rent to them based on favorable employment verification.  What type of questions do you typically ask during the employment verification step?  I wouldn't want to ask inappropriate questions, but am I allowed to ask if she's a dependable worker; if she arrives to work on time consistently; whether she has been "written up" for any transgressions while employed there, etc.?  Thank you for the response!

@Lynn McGeein - Excellent advice!  I've just updated our pre-screening google form to include current & previous employment/landlord information.  I'd definitely like to pre-screen as much as possible on the front end to save time (and headaches) on the back end.  As mentioned, I've also considered renting to them so long as they have a co-signer, such as a parent.  It's helpful to know that you would consider renting to them with a co-signer.  Now that I have their employment & landlord contact info, I'll definitely be reaching out to them in the next day or two - hopefully there won't be any discrepancies.  We're of the same mindset in that if they're not providing truthful information, we have no choice but to disqualify them.  As mentioned to Alex above, what type of questions do you typically ask their current/former employers & landlords?  Thank you very much for the feedback!

@Bjorn Ahlblad - This gave me a good laugh, I only wish I could say that! lol  Agreed, we're okay with the female and would likely rent to her if she was single and/or had a co-signer.  The boyfriend really dents the application process and certainly isn't doing her any favors at this point.  Thanks for the response and the laugh good sir!

@Mike Morawski - These are excellent points and as we become more experienced Real Estate Investors & Landlords, we certainly believe in setting realistic standards and sticking to our guns.  Our listings & application process states that applicant's must make at least 3x the monthly rent; have a minimum of 620 credit score; current & 2 previous employment and landlord references and at least two personal references.  Good point on defining standards for employment & rental history - I'd say we're lacking in that area as we don't have any pre-set standards there.  What type of standards have you defined for employment & rental history?  I really like your strategy on asking a reference for another reference and blindly contacting the secondary reference without the applicant's foreknowledge.  Thank you very much for the advice, this is great!

@Chris London - Before posting, this very point was going through my mind and I was trying to redact as much personal information as possible while still trying to be as specific as possible.  I feel there's something for me to learn here and if you don't mind me asking, what information in particular is throwing a red flag for you?  Aside from the metadata, I think I've omitted any personally identifiable information - although, I'm always looking to improve in the communications department.  Thanks for the advice as well as the response, we really appreciate it!

Hi BP,

As

rookie landlords, we've recently listed our first unit for rent @ $850 per month - an upper 1bed/1bath apt in a duplex that we owner occupy & currently live in the lower unit. We're hoping to get some feedback & guidance on the first couple that have applied for the unit, so we don't wind up making the mistake of renting to a couple that the Pros would take a hard pass on.

We've already made the rookie mistake of not pre-screening the first potential tenant before they viewed the unit, but we had the opportunity to talk with them while they viewed the unit & had them apply online via Cozy.co along with purchasing credit & background checks. We will be pre-screening future potential tenants via a Google Form, an idea we found here on the forums and have already put into action.

The potential tenants are a younger couple, are "very interested" in the unit, applied to our listing on Cozy within an hour of viewing the unit and each purchased the credit & background checks as well.

The couple currently live separately from one another and they're now looking for a place together.

Brief background on the girl:

- Non-smoker
- Monthly income meets the 3x rent requirement
- Background check looks clean (SSN Trace, Civil, Sex Offender, Global Watchlist, National - all are Clear)
- Credit score meets the 620 requirement
- Credit report looks okay with the majority of her lines of credit showing as current

Brief background on the guy:

- Non-smoker
- Currently unemployed due to the coronavirus situation
- Background check looks clean (SSN Trace, Civil, Sex Offender, Global Watchlist, National - all are Clear)
- Credit score does not meet the 620 requirement
- Credit report looks horrible (no lines of credit are current, and plenty are in collections)

Our thoughts & concerns at this point, and I'm trying to place weight on those where we should and lessen the weight where we shouldn't:

-The girl seems to be friendly & polite, her parent's live nearby, and her credit/background checks indicate that she's relatively financially responsible.

-The guy seems to be polite, but short and to the point. His lack of employment and horrid credit history would seem to paint him as financially reckless. This is worrisome and raises a red flag - if he can't pay his phone bill, we feel there is a higher chance of him not paying his rent (or renter's insurance for that matter).

-In the background and short of contacting previous landlords directly, I've been verifying the information the potential tenants have provided and I've identified discrepancies. The girl has listed previous addresses/landlords that are not listed in the Address History of her credit report. Additionally, the landlord she's mentioned for at least 1 of the properties does not line up with the owner of the property, as verified via county property record search - the property "owner" has the same last name as her, but the "landlord" has a completely differentname. Same with the guy, the previous addresses he's provided are not listed in the Address History of his credit report. I'm leery of this type of activity and potential tenants trying to pull a fast one by directing us to talk to a "friend" that's willing to lie for them
instead of the actual previous landlord.

-The girl does have a small cat, and is okay with an additional $25 a month in rent. While she didn't disclose this up front despite having "small pets negotiable" on our listing, she did answer the question whenI asked her directly after applying. I'd prefer the interested party to disclose that info up front and during the application process, but I don't want to discount her for me not doing a proper pre-screening before they even visited the property.

-We're concerned that the girl is the only one bringing in an income, has monthly expenses and barely meets the 3x monthly rent - compounded by the coronavirus situation, we'd prefer both were actively working and had at least 1 source of income if the other was laid off.

- Lastly, my gut is telling me to pass on the couple (primarily due to the guy) and wait for a better tenant.

That about sums up the information we have on them to date. Any questions, insight and/or guidance is always appreciated!

Thank you kindly in advance and we hope everyone is having a great holiday weekend!


Jim Peckey