All Forum Posts by: John Winters

@Chris Seveney @Don Konipol

Chris and Don, good morning to you both -- and thank you both for confirming it can be done.  It's really helpful to be confident that the premise/approach is possible.  

Also, I appreciate your questions for considerations, all great questions.  Honestly, I'm in contemplation of a few of them.  I'm considering two projects right now, this one and one that is much simpler to get started.  This one has more risk, but will set me up better for future projects/investments. 

Chris, thank you for 'interest-only payment' idea.  I like that as a stronger offer. Also, if you don't mind, is there a specific place in the paperwork/process that the owner would defer interest?

Don, thank you for the appraisal advice and reminder to put a value on my time and work.  My goal is, in exchange for my time and work, I have a place to live and financial means to spring into a second project.  This first one will just take longer to achieve that, is the plan.

In the end, capital for the renovation is my biggest concern right now.  Also, I may ask a 'structure guy' I know to do a walk-through with me to get some feedback on the extent of structural work.  It appears to be light work in that regard, but I would value a second opinion for that too.  

Thanks again!

Greetings BP's Community!

I don't know how "innovative" this is or isn't, but I'm still working at my first property.  I have a property in need of renovation.  The seller is agreeable to do some form of seller-financing with me, and I'm agreeing to pay $105,000 for the property and flexible agreement.  I plan to do much of the work myself.  It's currently structured as a single-family, and I'll convert it to a duplex or triplex...renting out each unit as it is ready, and likely move into one too.  That's just some context.  I'm open to input/tips regarding any of this, but here is my main question right now:  

CAN I DO THIS plan outlined below if the owner agrees, AND/OR is there a more financially-sensible approach?  

Step One: I pay seller an agreed upon down payment (or do no-money down, if agreeable).

Step Two:  Record the promissory note that details arrangement for this seller-assist sale/purchase.  Property title is transferred to me.

Step Three:  Monthly payments are agreed to be delayed for 6-8 months while I bring the property back to Life (rehab).  I rent out a unit or two as they are ready, still with plans to move into the final unit once completed.

Step Four: Once the property is restored, I take out a HELOC/equity loan to pay the seller the remaining due (likely ~$100,000).

Step Five: Property is renting, seller is paid, and rental income pays back the HELOC/equity loan + cash flow.

This seems to be a twist on BRRRR that includes seller-financing to get started and a HELOC/equity loan used to pay the seller (balloon payment) instead of a mortgage.

Am I missing anything? 

Thanks for any and all constructive feedback!

@Paul Welden

Hey Paul - thank you! I missed your reply; my apologies.  I appreciate you sharing...  That was definitely a concern, the length of time, but using 75% of the eventual income for qualification is great! 🙂

Thanks again for sharing!

john

Greetings BP,

I have been searching for my first multi-family property for nearly one year. I come across large single family residences in high-renter, multi-family areas. The renovation cost, particularly to put in the multiple units, is a bit over what I can and would like to pay out of pocket. I plan on using an FHA 203K loan and Live in one of the 3-4 units.

Has anyone here ever changed the property usage/zoning from single family to multi-family while using an FHA 203K, thus allowing a larger loan limit?  Is this possible, and if so, how would I approach it -- timing-wise?  I am considering one specific property at this point.  It likely won't last on the market long, and the owners just want to sell it; they do not want to change usage/zoning.

Any ideas/experience to make this happen?

I appreciate any feedback - thanks!

john

@Brent Kane Definitely Brent - that's great news.  I'm glad you found an experienced contractor for your team, and wish/will you the best for your project!

Greetings BP,

I appreciate any tips and/or answers that anyone can share.  Here's the scenario and questions; I'll aim to be concise.  Thank you.

* Scenario: My Wife and I plan to use an FHA in my name to buy/renovate a triplex. Once bought & working on it, we plan to put money down on land, which will then have the title put in our names. We have an opportunity to buy this land at lower-than-value cost. Once the land is in our name, we intend to use the land as collateral (equity) for a 'down-payment' for a construction-to-mortgage loan and build a home (nice, but modest single family). Once built, we pay the discounted land in full with equity loan. In the end (of this scenario) we will have an income-generating triplex and a single-family home (I have some other ideas how to generate income for our single family home.).

Does this plan, based on simple outline, have any glaring flaws in it?  Does it seem realistic, especially the financing aspect of it?  Any tips or suggested alterations to the plan?

Again, thank you for any and all constructive responses - answers, tips, suggestions.

Good morning Brent,

I have not used an fha203 yet, but I have also been preparing to use one in PA.  For what it's worth, my lender here told me that any contractor that has worked with fha203 buyers previously are already aware and are financially capable of working with the payout schedule.  They know what to expect, is what I'm told.  If the contractor is new to fha203, they will have to be approved by the lender, which would include a financial check-in (with evidence) to make sure they are able to work with the payout structure.  Also, while there is a range in what's considered "quality work," if the contractor's work doesn't meet specifications, payment, I'm told, will not be released.

From the contractor's perspective, it's highly monitored work, but also secured money for the job well-done, so many contractors will do it...is my understanding.

I hope your project goes well!

Greetings BP,

I'm a HS teacher & NEW investor in PA. I see a few property packages and a single-family properties of interest, some above the FHA caps, but worth what's being asked. Of course I will only buy a property or package of properties that will pay for themselves, so I am not overly concerned with paying for them over time, & I am approved at the max FHA rates for single family & multi-units. However, to pay for properties over the caps (package or single) -- with motivated sellers -- would something like this be possible, if agreed upon?

**Single property:  Buy property at half-asking price with an fha (or conventional) loan.  Make it 'subject to' me taking a loan from the instant equity to pay the seller the other half.

**Property package: Pay the price of one property at asking price with fha (or conventional) loan, seller agrees to deed both/all properties to me, 'subject to' me using instant equity to pay the remaining price for the remaining original asking balance.

Is this legal & workable if the seller agrees?  Are there any challenges/obstacles to this approach, if agreed upon?  (I know the lending institutions will typically lend a percentage, I think ~80%, of the appraised value.). I feel like there must be a 'catch' to this approach - something obvious (or not) that I'm missing.  However, if this is possible, great!  I'm guessing a real estate attorney would be the best person to draw up this type of contract? I'm new & learning, and I appreciate all support and tips.  Btw, I'm okay with using the current equity, as long as the cash-flow is positive. Thank you for any and all insight, even if it may seem obvious!

@Eric Greenberg Hey Eric, thanks for jumping in too!  I see you're in Philly as well.  Nice.  That's a good point.  It has the sprinkler system required (I believe) for 4-units+, but I don't recall there being a zoning variance specifying 5-units.  I'm going to check on that...thanks!

Thank you everyone for sharing!  I greatly appreciate your feedback and the information.

@Steven Goldman Steven, it's good to meet you here online.  I see you are in PA too.  I am definitely starting to see the value of your point -- 'find the product to match the problem.'  I am beginning to see the depth of options - and parameters!

@Steven Goldman @Wayne Brooks I appreciate the insight about the 221d4. I'm not there yet - constructing large multi-units is a goal, but for now, I have to humbly work up to it -- the 3.5% down (FHA) is working best for me at this point. Thanks Wayne, for the straightforward clarity - '5 units is 5 units.' I'd like to use the fifth as a personal office, even with the kitchen for ease, BUT I hear you - that's not going to work without alterations.

@Greg H. Thank you! For this property, I believe this will be the path. It's already priced a little on the high side ("upcoming neighborhood" price), and FHA 203k won't let me do the work of taking out the kitchen myself, so that's more money of course. I might be able to slide this in on a 203k and still have the numbers work - or maybe the current owner will agree to do it for a somewhat quicker close.

I'm guessing taking out the kitchen means removing appliances, faucet(s), and capping lines; cabinets can stay.  Then this space can be my personal office, and lenders will be satisfied.  If so, that's not too crazy.

Again, thank you everyone for sharing - this is much appreciated!