All Forum Posts by: Kris Mann

@Nina Shell, @Evan Polaski is right, banks can't even pick their own appraisers, let alone use your appraisal. My commercial bank (non fannie/freddie) uses a blind bid for appraisals to prevent fraud. On top of that, I have seen appraisals vary +/- 10% depending on the appraiser, so the only appraisal that really matters is the lenders. 

Is it a non-standard window? Why is it costing $2000 for a window? 

@Chris Noles, you should simultaneously post this in Dear Annie column as well :) Good title btw!

Kidding aside, there are so many different ways this could go wrong that I can't even begin to enumerate them. Why do you want to mix up your personal issues with investing?

1. Can your MIL not find another place? Sounds like the answer is NO.

2. Can you not find a tenant who is equally qualified as your MIL? Sounds like the answer is NO.

So what are you accomplishing by mixing business with personal affairs? Listen to everything that @Anna Sagatelova, @Karen F., @Patricia Steiner are saying above... OPTION 3 all the way!

@John Warren and @Nathan Gesner addressed question 1. Question 2 - yes, you can put market tenants in the property once the lease runs out. I think all section 8 leases are 12 months. 

My experience has not been nearly as bad as Nathan's, but I haven't been doing section 8 for long enough to speak with authority. But in the current environment, I don't mind having guaranteed payments. My tenant portion of the rent is less than 10% of the total rent on an average. 

@Elena Casey, @Jonathan Greene and others are able to able to spit out so many factors to consider because they have already learnt from the school of hard knocks. Now that you have made the offer, don't worry, just focus on making the deal work. It is not like you made a totally wild bet, you will be fine. And if there are any hiccups, treat them as tuition payments to enroll in that same school. All the best :) 

@Jesse Byrer, that is correct, I am buying and rehabbing cash before I refinance. My current refi rate on 5 yr fixed is 3.46% and my line of credit that I use for purchase and rehab is 3.17%. I have explored 80% LTV options briefly in the past, but the interest rates were significantly higher. So I view the additional 5% tied up in the property as a trade off for better cash flow both resulting from a lower LTV and interest rate.

I wouldn’t mind paying a slightly higher rate (maybe an additional 1%) for a 10 yr fixed with a 30 yr amortization. You’d probably know, is that possible?

@Yosef Ajami, a drop in house values could be a problem regardless of your strategy. It is not specific to BRRRR. If the ARV comes below you expected value, it just means that you will have some money left in the house.

While most BRRRR literature talks about pulling all the money our with refinancing, I haven't been able to accomplish that in my area given the high prices and competition. My average purchase price is around 200, rehab and carry costs around 50, ARV around 300. So when I refinance, I only get 225 back, meaning I have 25 left in the house. I don't mind owning a house for 25k out of pocket.

@Steven Gough, I just closed cash-out refis on 3 properties this morning with a local bank. But I heard that private lenders have been very tight. I am quoting verbatim from an email I received from a broker who specializes in investor loans:

"It's been a very volatile period over the last few months in the wake of Covid-19. Since these types of mortgages are not backed by the government like Fannie/Freddie conventional products they rely on secondary market buyers on Wall St. for liquidity. When the stock market tanked as states/cities enforced stay at home orders and forced businesses to close, the appetite for these loans dried up immediately over night on the secondary market. Lenders are stuck with tons of loans that they cannot offload. This resulted in nearly every Non QM/Commercial lender suspending operations as well as conventional loans being hit with very tight overlays in an effort to survive the tsunami of forbearance requests. We're just now beginning to see many of these programs creep back into the market although at much more conservative terms than prior."

@Nico Burgess, there is no telling, we can't even begin to guess what factors a given bank considers. It is easy to call them stupid, but I am sure they have their reasons. I have seen properties recycled thru auctions more than 10 times over a 6 month period. And there was an instance when I offered 20k below the published reserve, and the bank decided to offload the property to me. So it is a complete crap shoot. That is why I don't look at auctions as a true source of deals, you can't plan around them. Not to mention, a lot of properties get bid up well beyond what I am willing to pay.

@Shiloh Lundahl, couple of questions

1. Is the primary goal of your approach to peg the value for the appraiser? I haven't refinanced enough to run an appraisal issue. I buy mostly in cookie cutter communities with plenty of comps, so all my refis appraised at fair market value; I recently had a $187k purchase appraise at $340k. But I like your strategy, it can possibly applied in other situations too, I will keep it in mind.

2. Do you face any pushback from the sellers because of the added commissions and transfer/rec taxes with the increases sale price? Or do you credit them? I buy mostly REOs, not sure if banks will play ball.