All Forum Posts by: Jon P.

In my weekly dealings with vendors/contractors, it is not uncommon to pay in 33% increments.  Having said that, after establishing relationships, in my experience, if you pay them in a timely fashion and call them often, they will allow for simply material based payments upfront with the bulk of payment due upon completion of the job.

Massachusetts needs an end game for its Lead Law. Officially, “the Lead Law requires the removal or covering of lead paint hazards in homes built before 1978 where any children under six live.”

The law, as is true of most laws, certainly had the best intentions. The mass.gov website states the laws intention as thusly: “The Lead Law protects child's right to a lead-safe home.” I feel like everyone is on board with this mission.

However, we are now 37 years into the laws stated purpose and any and all construction or renovations since have been lead free. In Massachusetts, an overwhelming majority of houses were built pre-’78 but, I would assume, 37 years out lead free improvements have made their considerable mark on the landscape of child safety.

Is the problem solved? I would certainly doubt it. Sadly, I am sure families deal with this issue throughout the state and beyond. I have not researched current numbers of lead poisoning cases, not because I don't find the stats important but moreso because I now have kids of my own and I don't feel like going down that rabbit hole on my Saturday night. But I write this to ask the question: What’s the end game for this law?

Again from mass.gov: “The Lead Law requires the removal or covering of lead paint hazards in homes built before 1978 where any children under six live.” and furthermore, “owners are responsible with complying with the law. This includes owners of rental property as well as owners living in their own single family home.” The removal process? Well, you know, this is Massachusetts after all, so the amount of licensed professionals that are required to be involved escalates quickly. If you had to guess as to wether or not this is an expensive or inexpensive process your guess would be.....?

Seeing as how it is illegal to descriminate against families, the stringent nature of these laws puts many landlords into a choice between adhering to the laws by diving head first into a cost prohibitive, cap-ex hell or trying to find their way around the laws thereby exposing themselves a litany of fines and possible jail time that I couldn't even begin to comprehend….you know, not to mention endangering the lives of children.

So What is the end game? If the risk today and into the future is as great as it is was in ’78 then by all means, let's continue on as we are now. But assuming these laws have been effective over the course of the last 37 years, then isn’t it reasonable to assume that within the next 20 or so years (an arbitrary number to be sure) won't we reach the point where this law is no longer necessary? Won't the remnants of lead paint eventually drop to a non-zero amount?

I would like to move toward an end date for this law (in the event that anyone cares). I don't mind if its 5 years or 30 years away, but we need to move towards a date when we can rest assured that that all families and their children are safe in their homes and relieve property owners of this financially burdensome law.

I'm going to bed.  Be Good. Be Well.

I'm not entirely sure what I'm doing blogging right now, as there is something on HBO right now called "Cannibal Cop," but something has been bothering me today as I begin my search for a small portfolio lender in my area.

The innovators in finance, some of the great minds of our time have lost the trust of the public for so many different reasons, not the least of which is that, on the whole, they gave up on common sense.

Bill Gates wrote an article discussing the globalization of the economy where he pointed out that  (you'll excuse me if I butcher his words through paraphrasing) the third world countries on this planet are often mistakenly thought of as essentially being void of financial activity. In reality, he argues, the bottom X amount of third world countries combine for an economy of almost 1 trillion dollars (again, paraphrasing).

Compared with the economies of the US, China or Europe, it seems trivial, but his point is that there's a TRILLION dollars lying on the table that everyone is either too stupid or too scared to go after.  The first companies to branch into these markets are going to find themselves with a brand loyalty on their hands that is second to none.

How is this relevant to Bigger Pockets?  There are qualified and competent investors who are turning to private lenders and crowd funding sites and walking directly past the banks front door to do so. The banks inability to use their own common humanity in the face of regulation and bureaucracy is resulting in their leaving trillions on the table by not dealing with us "little guys."  Perhaps "not dealing with" is a bit of a stretch. Banks do help small investors but I think we can all agree that they make it harder than it has to be.

I'm not advocating we revert back to the mindset of 2004, but we should take pride in our brains as assets.  A banker should be able to looks at a small investors portfolio history, look them in the eye and make a decision.  Josh, you want to know "what distinguishes successful real estate investors from those who give up or don't start?"  The answer is: most people are discouraged from even walking into the bank if their fate is, all too often, a slave to redtape.

Maybe I'm just whining. But I know this:  I have perfect credit, a fantastically performing, cash flowing, equity filled portfolio filled with dream tenants and instead of walking into the banks ready to make a mutually beneficial deal, I instead walk in prepared to leave frustrated.

Alright, I'm outa here..."Cannibal Cop" isn't gonna watch itself.

Talk to you soon.

With lending standards just now beginning to loosen from a historic tightening, I find it bizarre (and frankly, offensive) the idea that Private Mortgage Insurance will now be something that will be permanently affixed to all FHA backed loans...even long after the property has the 20-25% equity that has formerly resulted in PMI's vanishing.

It's as simple as this: If the bank is going to hold potential homeowners to high standards, that is fine by me but stand by your underwriting process. For the record, I find the underwriting process to be absurdly stingy, but that's a different story for a different time.

It is hypocritical to make someone run through a gauntlet to qualify for the loan and then slap them in the face with the idea that these borrowers still can't be trusted with the loans fulfillment.  In theory, PMI shouldn't be necessary if the underwriters gamble on the right applicants.

Of course things happen.  Great borrowers can lose their jobs and default.  Obviously underwriters are not soothsayers, but the banks putting money into the market place in the form of a mortgage is an investment on their behalf.  Investments fail some times.  Sometimes you lose...and you lose big.

It is a choice to apply for an FHA loan so certainly there is a "if-you-dont-like-it,-go-home" argument to be made against me. But the fact of the matter is that more often than not, the FHA is what will allow the first time home buyers into the market. If your goal, as the bank, is to protect your investment with such vigor that you negatively effect the market from you reap so much benefit...well, then...bravo.

But if FHA is going to compound their lack of faith in borrowers on top of these high lending standards, I'd appreciate it if mortgage brokers out there would stop pretending like we're all in this together

firstly: congrats on the new property. welcome to the club.

2 things stuck out to me about your question and as i answer, please note that i am completely unfamiliar with your tenant farm.

• 700 is a very high bar to clear for a lot of renters.  you are going to be weeding out (i would assume), a lot of solid tenants. i often find great tenants with scores around 650.
• on the other end of the spectrum, twice monthly rent is a fairly low threshold (again: without knowing your price points or tenant base).   in my A class apartments, I have had success with allowing rent to be no more than 33% of monthly income.  In my C class apartments, I change that figure to 40%.

hope that helps.  good luck and keep us posted on your success.

Jon

A partner and I have decided to pull equity from our individual properties to purchase some multi families under an LLC. Should the LLC be created prior to finding the property or can it be created after the property is purchased? Thanks in advance for any advice.

A partner and I have decided to pull equity from our individual properties to purchase some multi families under an LLC. Should the LLC be created prior to finding the property or can it be created after the property is purchased? Thanks in advance for any advice.

DeAngelo Melone i have been wrestling with that same question. thanks Brandon Turner for chiming in.