All Forum Posts by: Jon Puente

Hey Sheena, 

Going off of the 2 options you have presented and having never seen the property myself, please take my opinion for what its worth.  I would probably go with Option 2 for a few of reasons - 

1) It looks like remodel #2 adds more value, both in monthly rent increase, but also long term appreciation, and the time to recoup your money is relatively the same (both in year 5). 

2) You mentioned the kitchen is very small, so if for whatever reason you decided to sell this property prior to year 5, you would have a lot more buyers excited with a bigger kitchen, rather than a 50 sqft space. Kitchens matter a lot to families and I dont think just updating it provides enough value.  It needs to be bigger.

3) Doing a more in depth renovation also opens doors up to STR and MTR, not just LTR. It looks like you are in Florida and I know that market is hot with STR, so a really nice renovation could actually yield more than you are predicting if you get creative. More risk, more reward! (Although renovation is not a huge risk in this case because you already plan on doing it!)

Great Question!

Hey Chris, 

I would use a personal line of credit, or just cash on hand to do the rehab. Hard Money right now will have interest rates upwards of 10-15%, especially if you are a new investor with little experience. 

The personal line of credit however might be a variable rate and could bite you long term, so just be careful how you go about this and make sure you are not overspending your way into this rehab (happens a lot more than you think).  I would even consider just getting a small personal fixed rate loan at like 7-8%, rather than variable rates or hard money. 

The goal is to keep the rehab as cheap as possible, while not borrowing high interest rate money for a long period of time.  

Great Question!

Hey Kristen, 

CPI growing yesterday was a little unexpected on my end, as I have a few clients going under contract and it impacted their note rates.  

I think the only way to really combat these higher interest rates right now is to get better deals upfront on the homes, which now we have more ability to do.  It's either that or considering private/seller financing and negotiating custom terms.  

If you are an investor right now, you need to be VERY conservative on numbers unless you are purchasing for appreciation, rather than cashflow.  Its tricky, but just takes a little more effort!

Hey Hariharan,

You will need an EIN to obtain a business checking account. You can apply using the name of your Sole Proprietorship or LLC, for example "Hariharan DBA Home Rental Team" or whatever name you want your business to be. You have to file it with the state that you are in.

If you are going to create a true rental property business, then just open up an LLC and get it done with. However, if this is your first rental property then I would just use your personal bank account to collect rents. No sense in turning this into a business and spending the extra time and money to setup an LLC, if it's only 1 rental property.

Hey Candice, 

If you are months away from paying off your mortgage, then it doesn't really matter either way.  Some will say "Be debt free!" and some will say "Leverage your money!"  It really depends on your risk tolerance.  

The truth is that if you payoff your mortgage, then you take that payment (you used to make) and stack up as quickly as possible to invest.  If you do not pay off your mortgage, then you have money readily available to invest, but you also have a mortgage payment on the side.  

But if we are only talking a few months then it does not matter much, unless you need that money right now. 

Hey Charlie, 

I would approach it very genuine and serious, because this is your living situation!! I would not approach it as an investor stand point quite yet (running numbers, cashflow, CoC return, etc...) because you need to live somewhere first.. This is a primary residence.

Just say "We are very grateful for living here and we love this house and we want it to be our own.  We were thinking of "X" purchase price or somewhere close to that (ballpark).  We are not in the business of lowballing, we want to make a fair deal, and these are some of the comps in the area with similar attributes to this home.  What do you think?"

You need to present DATA that supports your offer, not just feelings.  Chances are your landlord will be very respectful about it.  

Also, figure out what the lady upstairs is doing.  Are you going to continue leasing to her or will she be removed? Do YOU want to become a landlord at the same time?

I used to live in Kalamazoo, MI and Grand Rapids is a great area! Great Question! 

Hey Connor, 

One BIG thing to keep in mind that not one person mentioned, is if you have 25K or 50K to put down, can you still afford that payment or will the property cashflow with that payment?

With interest rates the way they are right now, you either need to put down a good amount of cash to cashflow, or buy severely under market value.  Still have to make the payment too! 

Get with a broker or lender and run some numbers on what that payment looks like before you dive in.  Low and no money down only works if you can make that payment.

Hey Damon,

As a mortgage broker, PennyMac does have strong pricing, but I work with A TON of other lenders who have just as good, if not better pricing.  Mortgage Brokers in general have the ability to shop around for the best deal for you, whereas retail lenders like Rocket only show what Rockets pricing is for that given scenario. 

FYI - No such thing as a free refinance! It's a gimmick that seems to be working. They just increase the rate to cover your costs for you as a lender credit, and its surely not coming out of their pocket!

Great Question!

Hey Jayleen, 

Buying now will have higher interest rates, HOWEVER you have a lot more room to negotiate, so you might be able to find a good deal and negotiate seller credits to buy down your interest rate. 

Timing the market in real estate is not something that you should be concerned about.  Just buy a decent home, in a decent area, and do not make yourself house poor.  You will be just fine! 

I am a mortgage broker and would be happy to give you some tips on how to do this properly (including house hacking and what loans to use) and can refer you over to someone in your area in Florida!

Great Question!

Hey Michael, 

I am a local mortgage broker here in Charlotte, NC! I own 2 homes currently here and am familiar with the area.  I HIGHLY recommend you talk to @Stephanie Walker pertaining to investing and the midterm rental space.  She is amazing!

She will be able to show you some of the CoC returns and what she is getting for her rentals at the moment. Hint: The outer markets perform better than inside in Charlotte.

Great Question!