All Forum Posts by: Eric S.

Hello trying to figure out the best possible lending option. Scroll to the bottom if you just want help answer my question and not read all the extra info about the property. Forgive me in advance for any typos.

Here are the facts I am contract with 10 unit all brick 3 story apt building 5 units are studios and 5 are 1 bedrooms located in one Columbus Ohio most vibrant neighborhoods  Victorian Village/Short North area for 599k with 4k closing costs. 

The building is grossly under rented, currently at $5300 per month gross with 1 bedrooms average 1 bedrooms at $650 and studios for $400. Average rents for the area would be $550 for studios $750 for one bedrooms as is with no renovations. Tenants pay all utilities with $25 dollar add to rent for each unit for water.  Two lower units have central ac the rest have window units. 

It has been cited by the city and Victorian Village commission (historical commission) for couple things major ones box gutter and cracking concrete near the fire escape stairwell. I plan redoing 200 linear feet of the box gutters, re pouring the concrete, patch fire escape and repaint, and re build bowing wall at back of it. Also fix columns near front porch as well as few other things. Quotes from previous owner bring in at 80k. My quotes closer to 60k. I plan on investing about 120k interior.  New hallways floor painting and lighting. Interior my goal is to renovate 6 units completely. Other 4 adding some updates here and there. My goal is be able to standardized units have slim dishwasher, combo washer/dryer, and as close to full size fridge as possible.  Currently there is one set of coin op laundry on first floor for the entire building. 

Questions about renovations?

Does anyone have experience with using all in one washer/dryer combos? I feel like I could them fit and work in most units especially one bedroom I wouldnt need run any 220v amps or much additional plumbing. Also will only be allowing one person to be living there in each unit so not like many loads will be done on a weekly basis. 

Also because I don't want blow out many walls. What are peoples experiences with PTAC and Mitsubishi units? My first impression was PTAC but the 1 bedroom units, the bedrooms are separated from the living space so would need two for those. Also some bathrooms have base heaters. That is why I thought about Mitsubishi units. 

On to my loan options. 

I have loan commitment letter. Where we have already agreed to 80% LTV on total acquisition cost of 700k. 1/2 point closing costs and 4.25 interest fixed for 5 years and 25 year amortization. No other closing costs except appraisal fee which I already paid.

600k for purchase and 100k that will be in escrow account to used for exterior code violations and interior deferred maintenance etc. I like the escrow option vs construction because dont have to worry about draws, fees, inspections etc. I originally asked for 50k more because at time I was only going to renovate the studios and few things to the 1 bedroom units. I was told by the loan officer that is the most they can do but depending on the appraisal can request more.  We were both expecting the appraisal to come back very strong and it indeed it did. Just received it. Mind the appraisial was done by very reputable commercial appraisal group.

As is value nothing done came back at...

700k!

Proposing 150k worth of renovations and stabilized after 12 months with proposed rents of $750 for studios and $900 for 1 bedrooms. Came back at....

1.12 million

Now this was more than both the Bank and I thought so I feel I def have some leverage to work against them and since I already paid for the appraiser and can take it to anywhere I want. 

This is what the bank came back with they will not increase the amount in escrow, but after code violations are complete they will give me 100k line of credit for prime plus 1%. 

Option 1

Push for additional amount for escrow having 150k instead of 100k. They didnt want do this but now that I have appraisal in hand may be different.

Pros - No draws, or title fees, its in escrow by third party and anything I don't use just gets check written back to me. So if I come under budget by 40k thats a check I can have to put down on another property or do work on another property with etc.

Cons - Paying for something I may not need? Larger monthly payment and down payment. 

Option 2

100k in escow and 100k  line of credit.

Pros - Pay for only what I need. Can use it whenever I want

Cons - Two different payments, as of now slightly higher interest rate. Payment is not amortized over 25 years believe will be 10 year fixed, need to confirm this. 

Option 3 construction loan

Pros- Interest only for 9 months. This is big becasue I am going to renovate unit by unit renovating 2 - 3 units at a time at most. So I can still be collecting rent for from other 8 units while only paying interest. I estimate I can pocket additional 30k since I will not have mortgage payment. 

Cons- Higher interest rate 4.75%, have to pay additional fees, title fees, draws, inspections etc. 

Lastly I am still talking to other banks and now that I have appraisal in hand would help when trying find other financing options..  I still have 45 days before I need to close and can request extension but would need to pay $100 per day for an extension. 

Any advice on any option would be helpful to include anything I should consider that I may have missed. 

Thank you bigger pocket community! Forgive me for typos I typed this in a hurry.

Eric 

I have 2 unit property near major university and cash flows great and have great equity built up. It is 6 bedroom 3 bath rents for 3k a month and behind it is carriage house  that has been renovated and is 3 bedroom 2 bathroom. It currently  all on one water line/bill.

Wanted opinions of splitting the parcel and selling one or the other and I would assume I would need to separate the water meter some how. Has anyone split a parcel and not split the water meter some how? Pros and cons of doing this? If I split the water line how would it effect if work needed to done on the water line connecting to the back house?

The city is actually putting in new main water line here in about a year to the front house and run it  to the carriage house.  They said they can do two complete separate lines and would cost me out of pocket around 4500 no permits would be needed as of now. The city did say that the second line would run through the yard of the first house though. Questions/comments/suggestions let me know. Thanks!

Eric

HI BP community,

I am looking to purchase 2 parcels. On 1 is 2 unit front and back duplex. The other one is 3 car garage and 2 bedroom 1 bath apt above. Both properties use the garages each unit gets one garage space. They share the same backyard. I just found out they are actually two separate parcels owned by the same owners. I knew they had different addresses. I was going to use FHA and live in one unit, but then found out the two separate parcels. I know typically speaking FHA or VA doesn't do one loan for multiple parcels.

I have heard that if it is on the same deed then FHA deal can be done?

Comments on this? Or any other suggestions how to use a VA loan.

Also I have VA I can possibly use. Currently in rental property lived in in for first couple years not it is great cash flowing rental property. I actually have cash out refinance in progress and we are done with paper work appraised for 450k and I owe 257k so I have good amount of equity in it. . I just been sitting on it to finalize becasue I don't have need for the cash out yet. I don't want my payments to go up until I can find another investment property to replace the income I am going to be losing. My payment will be going up about $900 a month. I am currently in 30 year fix. With refinance I am able to to get 80%LTV and fixed payment for 20 years at 4.9% interest rate, but taking big hit on payment becasue my current payment is amortized over 30 years instead of 20. Also my interest rate is currently 4%

Bottomline I can free up my VA loan eligibility if anyone knows of any more options or flexibility that VA allows for 2 parcel purchase.

Lastly we are looking to combining both parcels which shouldn't be too much of a problem and would eliminate both of these problems. 

Also if given both options what would you recommend. VA or FHA. I know VA by far is the perk becasue of no PMI.

Thing to consider our...

FHA fee is 1.85 %

VA subsequent is 3.3%

That is alot on 460k purchase

What I have to bring to the table is similar since VA is jumbo loan I will still need bring about 10k to the table since I need to guarantee the amount over 417k and with FHA I will need bring about 15k for down payments

If I use VA I have to refinance and see loss of $900 rental income. The property brings in $4300 a month between both units my fixed costs are $2053 mortgage, insurance, interest, taxes per month. Not much maintenance need on average $3000 a year is what I spend on expenses. Also I would have cash on hand to invest, but again don't have something picked out yet. Also it would decrease my global debt ratio a lot when banks see that having increase of additional monthly payments of $900 after the refinance which I know the banks won't like and will be harder to use to make purchases.

Lastly I have considered doing a blanket loan and to pull equity out of one to use as down payment and have both just be investment properties. Any thoughts on this as well? Thanks!

Opinions, advice, suggestions ready go!

Cheers!

Some invite once said don't worry about how much I paid for it. Be concerned with how much money you can make off it.

Originally posted by @Russell Brazil: 

A typical commercial loan will have a 20 year amortization. If you are being offered 25 years with 20% down, you should jump all over it.

 Thanks for the reply. I know true commercial mulitfamily more than 5 units that is the case. I just though something less than 4 units and more than two banks would have different portfolio options other than traditional fannie mae options. 

Just  wanted to put a feeler out there to anyone in Central Ohio. What are some good investor friendly banks out there? I am looking to purchase more 2-4 units, but want to slowly get into 5 units or more commercial properties.

I know I am spoiled I currently been using small local bank that I have great relationship with, last two properties I purchased only needed to put 15% down and got 5% 5 year arm amortized over 30 years.  Problem is being that they are small they dont like to lend more than million worth of loans in given year. They want to see the properties stabilize for year and see performance on them as justified on taxes i.e. schedule E.

That being said I am looking for 20% down 5 year arms with 30 year amortizations. Most banks I contact that allow 80%LTV will only amortized over 20 or 25 years with exceptions.

If anyone has any suggestions for banks or brokers please let me know. Cheers!

@Nathan Gesner I feel that would work, but I don't know if group wants to release her from all liability. I feel they want to not let her use any facilities if she isn't paying rent.  Also tenant A as another suggested wants to take advantage of both sides. Be able to stay there even though there is no desire too and not have to pay rent. Just sticky situation on both ends. 

Thanks for the suggestion!

Hi All,

Thanks for the feedback. The guarantors parents/guardians are just that guarantors. I essentially want to remove myself from the situation as much as possible and figured if don't have to communicate with any guarantors  then one more party don't need to manage. At the same time I don't want get on bad-side of any parents as well. Thanks all so far for the advice. 

Hello BP community I am a landlord to single family home in a college area in Ohio. I have 6 ladies that all signed a lease and each have a guarantor. My lease states jointly and severally for each tenant and their guarantor. They all moved in August and here is where things get interesting. Here is the bottom line up front. One of the girls on the lease has not been living there for almost 2 months and I have been told she has not been paying for her part of the rent. I do not know for sure as we require one check from the entire party and the rent has been paid every month. One of the guarantors sent an email recently that they would like our company to retrieve the key from the tenant that is no longer there because of safety concerns. I have talked to both sides prior to this email - the lady and her parents who decided to move out the home and also tenants from the remaining the group that are still living there. I have stated that because she is still on the lease I can not just change the locks or demand her key. I have also stated to both groups that rent is required to be paid even if one or more members fail to pay. Obviously the remaining group still is not comfortable with this situation. Here is more detail of the situation paraphrased from correspondence No written agreement was reached in this issue between the tenant who left (or her guarantors) and the remaining tenants (or their guarantors)regarding transferring the responsibilities sharing as per the tenancy laws. The tenant who has left for the last two months is paying no rent; still the rent is being paid to on time. The most important issue here is that at the same time the defaulter tenant has not returned the keys to the tenants who are still occupying and paying the rent on time. The defaulter tenant has even come to the premises and removed some items from the house, which were co shared and co paid by all tenants with out even notifying any of the tenants regarding her intention. Considering the above scenario under the RC 5321 as a parent/legal guardian of a current tenant I am worried for the SAFETY of my daughter and other girls in the premises. With the keys still with a defaulter tenant I STRONGLY feel that the premises are not safe for the co tenants. And I am pretty sure that all the other tenants and their guardians STRONGLY feel the same. I would ask you to consider this scenario seriously and get the keys back from the defaulter tenant as soon as possible and thereby making the premises safe for all the remaining tenants as a landlord responsibility. Here are my questions I seen guidance and confirmation on? For one tenant to removed from the lease all the tenants need to agree to this including the one being removed correct? If the tenant that wants to be removed refused or can not be reach to sign termination of lease what can the group Or I do. If there is court order such as restraining order do I need to remove the tenant if so how would I do that? Also is the restraining order enough that I don't need to do anything I.e. If someone is on the lease or not they can't come to the house of someone they are be restrained from. As far as security and safety issues. At what point or documentation is required under Ohio must I take action. If there are threats or uncomfortableness that is local authorities issues not a landlord issue correct? Also do I have legal responsibility to communicate to guarantors which in this case mostly parents? I do so as I understand most parents care and are concerned with their kids, but our responsibility is to the tenants correct and guarantor is only there for fiscal responsibility if one or more tenants decide not to pay. Technically do we have responsibility to the guarantors to communicate to them at all be it repairs, showings, or any demands they may have. Thanks again and please let me know if you need any further clarification. I tried to keep it as straightforward as possible without listing specific grievances or drama as much as possible that the tenants have expressed to me.

Thank you all for the advice! Truly appreciate. The property is zoned for residential and plated. Lot is the exact same size as the one I am purchasing that has the triplex. Also the same size as the other lot next to it,  owned by a different owner.   It is currently being used as parking for the tripled, and although Will hurt it a little. I would say about 40% of housing in neighborhood has off street parking attracts very good tenants. I own a 3 bed 2 unit few blocks away with no off street parking and have no problems getting too dollar comparable to any other rental in the neighborhood. I am going to put some pressure on the selling agent to find out more details. It is zoned for residential. So I think they took that as all that is needed but I will ask these questions that all of you have mentioned and more to prove the value. I believe the seller and sellers realtor are just trying to use that fact that it's a very hot neighborhood that it should automatically be sold for top dollar with the property next door and because its zoned residential shouldn't be problem to build on. Thanks again all!