All Forum Posts by: Kirby Nichols

I have a question about the rules for delayed financing, although I'm sure this question applies to multiple refi scenarios....

We are under contract on a FSBO for cash. It's in great shape and only needs minor updates and repairs (under $10k). We could easily rent it as-is without even picking up a paint brush, but we specialize in higher end rentals.

My parents will be lending us about 30% of the total purchase price, as we didn't quite have the cash we needed to get into the best school districts. The other 70% will come from a HELOC on another rental. Once we've fluffed the house a bit, we will refi, pay off the HELOC, and go around again.

All of the delayed financing options I've found specifically state that any cash from a third-party must be a gift, and you absolutely cannot use the proceeds to pay off a private loan for the original purchase. I'm trying to understand the spirit of the rule. Is this to prevent folks like me from getting in over our heads? 

My parents are willing to sign off on it as a "gift", which is true in spirit. If we are unable to pay them back immediately, they certainly wouldn't put a lien on the property. Technically, we could shift money around and pay them back from other funds by the time we're ready to refi in 3 months. On the other hand, we could easily eat the interest fees and refinance at 6 months. That just means we're throwing away ~$2,000.

How is this rule enforced? What are the ramifications if we do turn around and repay my parents with the funds? Appreciate any insight!

Investment Info:

Single-family residence fix & flip investment in Saint Louis.

Purchase price: $83,000
Cash invested: $32,000
Sale price: $135,000

Cute little bungalow near the airport. We intended to buy & hold, but got burned by a newer rule in Berkeley that prevents any owner-occupied properties from being turned into rentals. (Call the city before you're locked into your contract!) Luckily we located our emergency exits before take off and came out just fine.

PS. I'm still waiting for the final quote. Once I have it, I'll post all "named perils" that would be covered.

We're looking for new insurance as we close on our second property. (woohoo!) Pretty much every one in our local meet up uses the same guy and is very happy with him. He almost exclusively uses "Named Peril" insurance for investment properties. It sounds like it could save us a ton, but I'm concerned about the "unnamed" risks that I may be signing up for unwittingly.

For reference, we would go with the most comprehensive policy specifically because it covers theft and leaks from plumbing. We would also have a separate umbrella policy to cover Landlord liability, and we always require proof of Renter's Insurance with our name on the policy (so we're notified if the policy lapses). So I'm not worried about those things. Also, I'm ok with taking some risk to save money, especially if it's something more within our control. For example, it looks like "infestation" isn't covered, but we do regular pest control. So an "infestation" would likely be renter liability.

Has anyone had an unpleasant surprise that something wasn't covered by their "named peril" policy?

It's not enough, but you don't need $30k either. Once you get to $10k, you can put $3,500 down on a $100k 3/2 house and get 2 roommates to pay the mortgage/maintenance. (Plus some cash on hand for repairs as needed) This will jumpstart your savings and give you some experience as a landlord. Issuing leases, collecting rents, maintaining a property, etc.
Bonus if you can find roomies to help you fix it up with your savings and some sweat equity. Then sell and do it again. 

That's just one path to add some jet fuel to your $ engine. Either way, it usually starts with your first home purchase and househacking. 

Are there any gov't sponsored deals in Greensboro where you can get a barely livable place for 0% down and fix it up while you live there? We had a ton of those in STL, but we were too fancy to live in a dump while we fixed it up. Lol!

I manage my own properties because I love my properties and I love my tenants. I want to be sure that both are getting the attention they deserve, so that I can collect the top-tier rents that I deserve!

I would hire a personal assistant before I would hire a property manager. At least until I can afford a full time property manager as an employee of my company, so that I can ensure that my properties are being managed in a manner that fits my business plan.