All Forum Posts by: Ken Virzi

This is silly, if James Wise is guilty then all of us are. The A-D class descriptions for investing are used nation wide and are a helpful tool to establish risk. All James did was superimpose this same subjective measuring tool onto an area that he invests in and knows quite well. This does not affect bank decisions etc.

Let me know when you do another one, missed this one :(

It seems all lenders tell me the same thing. That if the rents were on my taxes than we have to go with those numbers. On my taxes the properties are written down so much that it shows no income from the rentals. Those new rentals not on taxes yet can be counted at 75%. Are these not accurate?

My tax guy is good, so he shows my rentals as taking losses with depreciation etc and as a result when I go to get more loans, I cannot count my rental income.  Since banks will look at my mortgages but cannot count any rental income, my debt to income ratio is not accurate and my income is much lower as well according to their evaluation. 

Is anyone else struggling with this problem? Are there any workarounds? Is it always a choice between tax benefits and loan approvals?

My first rental is a condo and I love it. The HOAs are fixed and cover the water costs so my numbers are firm and predictable. Also major capex is incorporated in the HOA costs (roof for example). I have also seen a ton of appreciation, but heck anything in the LA area over the last couple of years has seen crazy appreciation. I have a few out of state duplexes, but I would trade them in for condos in the right place any day. Love the predictability, and fixed costs make the cash flow real.

@Darius Burgan @Mathew Nebel Congrats to both of you. I have a couple Old Brooklyn duplexes too, and both of you house hacking is awesome

Utility costs can eat up all the cash flow. Also I have noticed on cheaper properties, often they sit longer when the life of the main items is near end. If in the first year you have to replace 4 water heaters, 4 HVACs, and the roof, well you just added $20k to the price. If it has foundation issues, that scares most away. Back taxes? make sure and check that as you would get stuck with those unless specified otherwise. Is it a legal quad or a converted property without permits? That could also keep people away. Is the current owner a slumlord and the units are no where near livable and safe, meaning you would be adding about $80k to get the place in decent shape? What are the comps? Can you get a SFH in the neighborhood for under $80k? Lastly, for an investment mortgage you are most likely looking at 25% down.

@Lee Haenschen loans are killers are cheapt properties. When you take into account all the closing costs and inspections etc. You are paying around $5,000 just for the loan. If what you have in is $10k because it is a $50k house, then you are losing half of your deposit to loan costs. 

The only way BRRR works in regards to absorbing all the costs is when the value of the property is higher. This means that same $5k is not 10% of the property value, but myabe 2%. Also when you are collecting $3,000 a month in rent, the closing costs are less than two months rent, but when the rent is $500 that is equivalent to 10 months rent.

@Lee Haenschen loans are killers are cheapt properties. When you take into account all the closing costs and inspections etc. You are paying around $5,000 just for the loan. If what you have in is $10k because it is a $50k house, then you are losing half of your deposit to loan costs. 

The only way BRRR works in regards to absorbing all the costs is when the value of the property is higher. This means that same $5k is not 10% of the property value, but myabe 2%. Also when you are collecting $3,000 a month in rent, the closing costs are less than two months rent, but when the rent is $500 that is equivalent to 10 months rent.

 went from 1 unit to 11 in a year, then back down to 5 after another year. Be careful who you work with is all I have to say.