All Forum Posts by: Josh Helfer

Thank you all for the insight,this really helps in my approach to how I'm going to handle this. Looks like bank shopping first, and figuring out how to meet the needs of my seller, assuming it isn't a lump sum up front.

Hi BP,

I’m a first time investor with a pending duplex that’s in contract, but the seller is dragging feet (months) to make required mold repairs in order for that deal to happen. So I’m looking into a second to keep the ball rolling.

I’m pre-approved with my local bank, verbally said I could get a 10-15% down payment with 85-90% mortgage on my first duplex. Local bank. Went back to them and emailed saying “I have another deal I’m looking at, what down payment could I get for this simultaneously?” Bank rep then backpedaled and said they only do 20% down for all investments, especially since I’m a first time investor.

So that put my REI to a screeching halt, as I have about 30k to invest, and planned on doing two duplexes (approx. 90k) at 10k each down payment, which is far below the 20% down mark on both. On my second duplex the seller is asking for pre-approval letter or cash proof, which I currently have neither. I can be approved for somewhere around 350-400k for mortgage based on income and zero debt with high credit score. The total of these two mortgaged duplexes would be 180k. I won't be living in the duplexes, only for tenants.

So my questions/options:

1. Was it foolish that the local bank ever said 10-15, and I should consider that a myth?
2. Is PMI/LMI a good route to offer to the bank in order to make the financing happen? It'll lower my NOI, but it's worth it if it makes the deal happen right?
3. Also deciding how to approach seller financing. He's a seasoned REI, looking to back out of some of the responsibility of his houses. Unsure if lump sum or monthly payments interest him more.
4. I hear banks want to wait years in between financing investments, how does anyone expand and grow having to wait in between investments?

First - thank you all for the guidance!!

@Kim Younkin - the slumlord is the owner, the people living there aren't top notch but 5 of the 7 tenants are actually pleasant. Two of them have been living there 5+ years, one is a handyman himself that does odd things around the place because he actually cares. No drugs/guns, not that bad, just lower income. It's the seller's mindset towards the place that turned it into the "squalor" that the inspector called it.

@Thomas S. I'm really eager, and I'm aware of my knoweldge base and trying not to be naive about my first purchase so I'm gathering as much information as quickly as I can (and turning to BP!) By running the numbers it's about 160$/door a month net. Inspector was pretty unhappy with the place, but I knew there'd be a good repair cost going in, I just wasn't expecting 30-40k. And I agree with appraisal and cash flow importance, I'd use the appraisal to take equity out for repairs financing.

BP,

I'm as green as green can be but incredibly passionate about learning as much and as fast as I can. While going over potential properties my wife and I came across an 8-plex. Building is 100 years old. Stats to follow, but quick back story. Current owner last appraised at bout 300k. Went on market two years ago, never sold (it's in bad shape from reinvestment/repair neglect). Went back up on the market about 6 months ago, so its sitting at about 190 days on current listing for 180k. We entered escrow at 160k. Upon inspection report inspector rates it at about 2-3 out of 10. Needs new gutters as current box gutters are a mess (est 14k), wood rot expected from that. Mold in basement, exterior wooden staircase needs replaced (1-2k), retaining wall needs replaced(2-3K). AC and one of three furnaces needs replaced (est 8k). That's just what we know, and that's my concern is the unknown with this kind of neglect. The 30k we wanted to invest into it for upgrades to increase rent would go into just making it livable. Recently seller put in new roof, and a 400amp panel in basement, BUT its not wired for metering and would have to be rewired. Owner pays all utilities, which is about 15k a year. Ok, numbers time.

Last appraisal 300k. Current market price: 180k. Escrow at 160k. Ballparked repairs expected ~30k. It's 8 units, with 7 tenants currently living it, 1 about to move out. Last year grossed 57k, but due to mismanagement (all utilities by owner) NOI was about 23k. Due to the inspection, we notified the realtor we'd be using the exiting clause in the contract because repairs are over 1k, and we really don't expect the seller to drop the price 30k to cover these costs. Units rent between 750 and 400, different sizes but most are 700.

So my question, where did I make a mistake if at all, and should I ask the realtor to renegotiate if this place is worth buying? And if I bought at 160k and it gets reappraised (assuming Code passes!) at ~300k, could/should I use that spread in equity to finance repairs and or reinvest in another property?

Thank you BP!

Josh