All Forum Posts by: John Worley

Yeah I see what you mean. Sorry about that. I tend to get a head of myself sometimes and stop paying attention to what I am typing. Hence why my wife usually proof reads anything major....lol :lol:

Also I wasn't trying to be insulting and play on anyone's emotions, although after reading it again it does appear that way doesn't it. Honestly am just trying to offer help to out of town or newbie investor who need the help.

I think I will redo the post to show what I currently do for my out of state clients and see if anyone else will be interested.

Thanks. Although I wasn't really tring to actually market the service at this point (hence why the post make a suckly sales pitch) but was looking for things to add or remove to make the service something that investors would interested in using. My primary success with this has been with out of state investors who want a third party opinon from someone on the ground here in GA. Basically I run down all of the local research on their property leads for them, including going out and inspecting the property and surrounding neighborhood, taking pictures of everything, making a list of repairs, etc. I certainly charge more than $50 to do this (gas is $3.00/gallon after all) but I guess I was wanting to see if a condensed form of that service (without having to ride all over town to view properties) would be worth while to to anyone.

Rehab loans can now be done both conventional and hard money.

Hard money rehab loans are familar with many of us. Typically you can get these at around 65% to 70% LTV (based on the subject to appraised value) plus 5 or 6 points loan origination and the usual UW, processing, title fees, etc. Most of the major HML lenders will allow you to roll your closing costs into the loan as long as you are under the LTV requirment.

Conventional rehab loans are still fairly new and there are only a few lenders that are offering them. Basically you can break this option down into two segments:

- Houses that need less than $50K in rehab
&
- House that need more than $50K in rehab or are tear downs/new construction.

Both programs are pretty similar.

The rehab loan for $50K and under is for 90% LTV (based on the total project cost) which means a 10% downpayment plus you pay the closing costs at the table, just like any other conventional purchase loan. The rehab money is put into escrow and can be drawn out as the work is completed. The loan is structured as a conventional Fixed rate and ARM with terms of 10 to 30 years. This is also a Full Doc only program.

The rehab/construction loan for $50K and over is also for 90% LTV (however, this is based on the subject to appraised value) and the lender will allow everything including closing costs to be rolled into the loan, as long as you are under the 90% LTV. This program can be done Full Doc and Stated Income. Other than these things, it is the same as the first program.

If you need some help, I have all of these programs available.

Well Emrah, that depends on what your ultimate plans for your next rental are. What I mean is, how long would you plan on holding your next property as a rental? Having this in mind is the key to chosing whether or not to use the Option ARM or any kind on Interest Only loan program. If you plan to sale the property in say 1 to 5 years, then there is no real need to worry about building long term equity as you will simply make your profit when you sell. For this, I would recommend the Interest only program in order to keep your payments as low as possible so you can make better use of that money in other ventures. However if you are plan to hold the property as a rental for a good number of years, say 6 to 10 or more, than I would say to stay away from the Interest only programs, like the Option ARM, because now you are going to want to have as much equity built up in the property as you can. And personally, I wouldn't have recommended that 5/1 Option ARM on your primary unless you plan to move out of there before the 5 years was up (at which point, your payments are going to get real ugly, real fast). I would think that with your primary, you would be more concerned with building equity quickly, but then again, that may just be my personal preference.
Hope this helpped.

Ok...it was brought to my attenttion that my original post wasn't doing a very good job at explaining what I was looking for, so I am redoing it.

Listed below is a service that I currently offer to out of state investors who want to invest in the Atlanta metro and to newbies who want a second opinon or just simply some help analyzing their deals. Basically I run down all of the local research for your property leads.

Property Analysis (or Property Consultation) Service

The service includes:

-An inspection of the subject and surrounding neighborhood

-Exterior and interior pictures of the subject and pictures of surronding neighborhood

-A detailed report containing the following information:
**All the property details and tax information
**Title Search
**List of local comparables and an estimate of market value
**A detailed list of needed repairs
**Suggestions for upgrades worth considering
**Suggestions for what the property will be best used for (Fix/Flip, Rental, Lease Option)
**A list of financing options and costs of each
**Rental cashflow analysis (if needed)

Cost of service is $100 per house
Turnaround time is 24 to 48 hours.

Not trying to play on anyone's emotions, just trying to offer a helpping hand for anyone who wants or needs it. Any suggestions to improve the service and if interested in using the service, please let me know.

Thanks.

Many mortgage brokers and loan officers get hung up on the idea of the Interest Only programs. However whether or not IO is good for you depends entirely on what your plans are for the property. If you just want to hold and rent the property for 3 to 5 years and then sell it, then yes an IO fixed rate for that length of time may be the best deal for you. But if you plan to hold that property for longer and do cashout refinances as you go along then no, I wouldn't recommend IO. If you want to make your money by pulling your equity out periodically then IO would make no sense for you.

Are you still looking for help with this? If so, drop me an email with all of the details and I'll look into it for you.

Speaking as a former appraiser, I'd have to say that adding structual changes to the property (i.e. a new bathroom, a new master suite, replacing wood siding with brick, etc.) are the best ways to add a lot of value to your property. The new pools, new carpet, new paint, new built in sound system throughout the house, etc. are what's known as 'fluff" in the appraisal industry. Yes, certain types of fluff may help with getting a slighty higher sales price for a given house, it will not effect the appraised value that much at all, if any.

As for bad improvements, I'd say avoid any extra cosmetic stuff that isn't going to increase your house's value. For example, the expensive mable counter tops in the kitchen and bath, the decortive water fountain in the front yard, the new wet bar in the living room, etc. These are all personal things that a buyer can do after they close on your house, if they want to. The trick with all of this cosmetic fluff is to put enough into the house to make it visual attractive to your buyers, but not to go overboard. You want a kind of generic look for your house, so that you are appealing to a wide range of buyers. Whoever buys your house can customize it to their liking after everything is said and done.

Hope this helps. :D

Hello Everyone,

Here is an article I put together a while back detailing a very basic understanding of the sales comparasion appraisal method (in other words, how to read and understand sales comps.) Enjoy.

[size=18]Understanding Comparable Sales and How to Analyze the Data[/size]
Prepared By: John Worley

Throughout my business dealings, I find that when it is discovered that I was a real estate appraiser for a number of years, the first question out of everyone's mouth (particularly Realtors and real estate investors) is "Can you teach me how to read and analyze comparable sales data?" So I have decided to put my explanations down in print for anyone who is interested (it also beats having to explain it over and over again...haha).

First of all, let me make a couple of things VERY clear:

1) This will be a "crash course" in how to read and analyze comparable sales data (comps.) and will only cover a very basic knowledge of the concept. It is intended for your personal estimations only.

2) THIS IS NOT INTENDED TO REPLACE THE SERVICES OF A PROFESSIONAL LICENSED APPRAISER....it doesn't matter how much you believe the property is worth, the only opinion that the lender or bank is going to listen to is the Appraiser's. This information is for your personal research and due diligence for a particular house or investment deal ONLY.

Appraised Value vs. Listing Price

I often hear people say that you have to have not only the recent sales prices for comparison purposes, but also the recent listing prices as well. This is not necessary the case. The final appraised value of a particular house is going to be determined using the recent sales price only. As a general rule, listing prices are going to represent the highest end of the pricing range for a property, while the actual selling prices are going to be a closer indication of the current appraised value of that house.

For example:

- You are looking to purchase a property in ABC Subdivision. Said property is 3 bedroom/2 bath, all brick ranch, on a slab. Now, in the last 6 months, you find that there have been 4 sales of houses that were 3 bedroom/2 bath ranches and that there are currently 4 houses of similar design for sale, all in ABC Subdivision. Your data list might look a little like this:

Sale #1 = $150,000 House #1 for sale lists = $165,000
Sale #2 = $140,000 House #2 for sale lists = $160,000
Sale #3 = $145,000 House #3 for sale lists = $158,000
Sale #4 = $152,000 House #4 for sale lists = $165,000

Now, assuming that you had no other information in regards to the housing market in ABC Subdivision, it would be reasonable to conclude that you could list the house, that you are looking at buying, in the range of $160,000 to $165,000 and could reasonably expect to sell the house in the range of $140,000 to $150,000. Based on that information, you could reasonably assume that the property you are looking at buying would appraise in the range of $140,000 to $150,000. This is an overly simplified example where all of the houses are the exact same (this almost never happens in the real world), but the general principle holds true regardless.

Reading Sales Data and Making Adjustments

First of all, for the purposes of personal due diligence, don't try making all kinds of adjustments to your comparable sales. This is a long, detailed process and if you don't really know what you are doing, than you'll spend hours trying to figure it out and that's just time and money wasted. Let a Professional Licensed Appraiser handle this, that is after all, what you are paying them for.

Listed below, you will find a list of items you can look for to help select better comparable sales and therefore have a better idea of the range of value your property will appraise for (this list comes from the actual appraisal report, so they are the same things that the appraiser will be looking for as well).

*Distance From Subject Property - you want to try and keep your comparables within 1/2 mile of your subject property and nothing that is more than 1 mile away. Also if subject property is located within a subdivision, try to keep your comps. also in the same subdivision.

*Date of Sale of Comp. - keep your comparable sales within the last 6 months and no more than 12 months.

*Construction - if the subject is an all brick house, then pull comps that are all brick houses; if it is a wood or vinyl siding house then pull comps. that are wood or vinyl siding.

*Condition - subject is a dump, pull comps that are dumps; subject is new, pull comps that are new.

*Age - try to keep the age of your comps within 10 years, older or newer, of the age of the subject property

*Square Footage - pull comps, with as close to the same sq. footage as possible, as the subject property. Within 100 sq. feet is ideal, but no more than 250 or 300 sq. feet, if possible.

*Bath Room Count - pull comps. with the same bath room count as the subject, or as close as possible.

*Type of Basement and Sq. Footage - Crawl Space/Slab for Crawl space/slab, basement for basement; if on a basement, try to keep the sq. footage as close as possible (same as above), within 100 sq. feet is ideal, but no more than 250-300 sq. feet.

*Garage or Carport - again pull same for same.

*Lot Size - subject is on 1 acre of land, pull comps on similar size lots.

There are other adjustments that an appraiser will look for, but these are most of the high dollar ones. Generally you want 3 or 4 comps., as close to the subject as possible, in all of these areas, in order to have an estimated range of value that is going to be anywhere close to accurate. Again, this information is simply to give you a basic understanding of what an appraiser looks at, when coming to a value of your home, and will at best, give you a good range where the appraised value might fall. It will also, I hope, provide you with enough knowledge of how the process works, to the point that you are not deceived by and can protect yourself from, appraisers who are being unethical or, flat out, just don't know what they are doing (though please, give them the benefit of the doubt; they have endured A LOT of training and work to get where they are. Be very sure of yourself, before you start trying to tell them how to do their jobs).

Hope you have found this information useful. Thanks for taking the time to read it.

Generally speaking your local MLS is usually one of the best places to pull comps. However if you don't what to run to a Realtor everytime you need comps, then I recommend a combination of the local county tax records and a service like RealQuest.com (paid service, however covers most of the country and is very accurate, in my experience.) Generally I say be leary of the free sites (Zillow and Homeradar, to name a few) as a lot of these are giving inaccurate comp information or are using AVM's, which are usually sketchy at best.

Of course, once you have reliable comp information, you need to know how to read it and put it into prospective. For this I recommend going down to your local real estate school and take a basic course in the Sales Comparision Appraisal Method. I believe this is a must for any real estate investor. Also check the General forum here. I'll post an article I wrote a few months ago on this subject. Look for post entitled "Understanding Sales Comparasion".