All Forum Posts by: Joe Facenda

"I keep hearing about all the people that got started 4-5 years ago..."  If you don't start, you will be saying the same thing in 2023 about the people who started in 2019.  It is never too late.  Your hometown market may not be a prime target - all markets go through cycles. But I guarantee that some market somewhere in the country has the kind of deal you are looking for.

2nd thought - and a very important one - the first deal does not need to be a home run.  Just get on base.  It doesn't matter if it is a single, walk or you get hit by a good deal.  Just get on base. It doesn't even matter if it is a dropped 3rd strike and you scramble to first.  You can't score unless you are on base.

Then at your next at bat, you've seen the pitcher, know what might be thrown at you and can better square up and get a multi base hit.

P.S.  Guess you kcan see I like both real estate and baseball. 

@Daniel Whitmore A few thoughts on financing as you said you "may not live there" and you probably need a co-signer.

1. You put in an offer - If you did, you had better have your financing and plans squared away.  Much better chance of acceptance if you present a strong lender letter.  Plus if you change your mind about the type of financing or whether or not you are going to live there, it could, depending on the contract terms, put you in default if you do not settle.  Read the contract carefully.

2. If you were pre-approved for 10% down, almost certainly it was based on you being an owner occupant.  If you decide to not live there, all traditional investor loans I am aware of require at least 20% down.

3. DO NOT MISREPRESENT WHETHER OR NOT YOU ARE GOING TO LIVE IN THE PROPERTY.  Owner occupancy means a lower rate and lower downpayment.  (should be closer to 4%)  Investor means a higher rate (5% could be fair depending on your finances.)  If you say I'll live there but never do, that is mortgage fraud and not the way to go.  How long do you have to stay before renting?  That is an open question.  Some say a year.  Some say at least one tax reporting cycle.  Others may have a different opinion. Check with an accountant.  But make sure you abide by the rules.

4. I am sure you already checked this out but a non-occupant co-signer throws a wrinkle into many loans. FHA is fine with that. Some but not all conventional loans are okay with that. For FHA, that would not cause in increase in the rate. For conventional loans, it would be program specific but still 5% seems high to me.

Hope that helps. 

I see your first deal as a worthy one to start with. I say that without knowing the alternatives but you will have cash flow AFTER factoring in cap ex so why not? My question though is why 5% on the mortgage. That seems a bit high for an owner occupied home which this would be at the start. Current rates are a point or so less. Even if you built the MIP into the rate, that seems high. Maybe there is something I don't know. But if you got a rate closer to 4, well, it is even a better deal.

What are you looking for - a long term rental or a flip? 

If  a long term rental, just do it.  if it cash flows anywhere close to what you want, take a shot.  You only learn by doing, not by reading and over analyzing.  if you are wrong, you may feel a little pain but it won't put you on the sidelines. 

However, if you are looking to flip a property, analyze once, twice and then again. A mistake here could be very costly. The renovation costs too much. The ARV was aggressive. The market changes quickly (which can happen).

But on a buy and hold, the downside - if it cash flows - is minimal.  If the market turns, you still have cash flow.  If repairs cost a little more, well,  you have cash flow to help rectify the mistake.

Just my two cents.

Where are you looking?

What are you looking to do?

I mostly agree with @Scott P..

On the one hand, doing a cash out refi is not a taxable event and gives you the cash to buy more property.  Plus there is no time crunch as with a 1031.

However, if your goal is to build your portfolio closer to home, take advantage of this lapse in the lease and do a 1031.  (personally, I have not problem investing out of my home market - see my tagline.  But each investor has their own comfort level and if a nice nights sleep means a property close to home, do it. )

For a 1031, you have 45 days from settlement of your old property (relinquished property) to identify a replacement property or properties (not limited to a 1 for 1).  And then 180 days from the settlement of the relinquished property to settle on the replacement property. 

But here is the big, big rule to understand.  If you identify a property within 45 days and it is scheduled to settle after those 45 days and something - anything - happens where you can't settle, you are out of luck.  No second chances.  Bad title, house burns to the ground - doesn't matter.  Capital gains due on the relinquished property. 

Yes you can identify more than one property and fall back to a 2nd or 3rd choice if deal one blows up but will they still be around?

Do ALL you can to settle within the 45 days so if it doesn't settle, you get a 2nd chance.  You can probably start to look seriously once the relinquished property is under contract.  Do it. 

Again, a cash out refi has no time pressure.

What do you want to do?

Let me say personally I am a buy and hold investor.  And I  have worked with many many rehabbers. I have not wholesaled or worked with wholesalers but certainly understand the model. 

Also when I say shotgun approach I don’t mean sending you dozens of properties, I mean their business model is to work with as many people as possible to see what sticks. 

Okay, that said I think wholesaling is a private endeavor.  You need to find a great mentor/teacher (and not someone charging outrageous fees- high price does not mean better outcome)

You need to find a marketing model you are comfortable with and stick to it 

And then you need to cultivate a list of rehabbers which may include Realtors with clients who flip. 

If a wholesaler approached me with a deal for my rehabbers/client, I would not try to elicit a commission on that deal.  I know the upfront margins are thin and I don’t want to kill it for my client by adding in a fee. I would be comfortable knowing I will get paid on the back end and I would know I am sending a good deal to my client. All works out in the end. 

Again, I am not sure how a Realtor can get paid a worthwhile amount from a wholesaler.  And if I found a seller wanting to sell at a price low enough to allow for a rehab why would I bring it to a wholesaler instead of a rehabber? 

Not saying you can’t make money doing this but you don’t need a Realtor. 

I have been a Realtor for almost 30 years and heavily into the investment side for 10 or so.  I have yet to find a way a Realtor and wholesaler can find a profitable way to work together.  I should perhaps reword that and say an experienced and active Realtor. A new agent may gamble that with the extension of tons of effort a wholesaler relationship may lead to a listing but an experienced agent will know that the time extended on that would be more productive elsewhere. Basically a new Realtor may use a shotgun approach to getting deals and an experienced agent use a rifle. Please correct me if you think I am wrong. 

Big state. Where and what do you want to do?