All Forum Posts by: Jeff Kushner

@Tony Pardini (here comes another long post!) Don't worry too much about timing. Good deals are like buses, if you know what to look for another will come along right behind the one that you just missed! I'd think that getting an affordable 6mo lease or even looking for a rental negotiable month to month for the first couple of months in a new town would be worth the time to really explore, get to know the area, markets and submarkets, meet local investors and attend REIA and to network and such.

In the mean time, keep your eye on the market and evaluate as many properties as you can in the next few months before you get there to determine how frequently you see the 'good deals' come up compared to the rest of the market and how long said 'good deals' are on the market before getting tied up in contract.  Watch where the deals are most common, how the actual sale prices compare to the list prices to determine how competitive the markets are and take note of average days on market for the properties that have sold.  I find that a Google Docs spreadsheet works great for tracking this info and is always only an internet connection away when traveling.

Even try contacting the new owners of these properties that you considered deals (I'm assuming you're talking about multi-family 3-4 plex investments) and if they are willing, pick their brains about what they initially offered and how they negotiated the final sales price, how they calculated their numbers beforehand, how the returns have held up, how much if any trouble they've had renting, quality of tenant in specific areas, etc, etc.  

Consider this time waiting an opportunity to really study the market so when the time is right, you'll be a couple of steps ahead of others looking at the same properties.  Remember, pretty much every property has a price point that makes it a 'deal,' if you crunch the numbers and know what kind of return on your investment YOU demand and know what the property should produce income wise, you can reverse compute your offer price and anything below that should be a 'deal for you!'  Now you just have to find the necessarily motivated seller willing to accept your 'deal' offer or negotiate to whatever you've pre-determined is a fair price for your expected returns considering market rental conditions, and if the seller demands a higher price, you walk and keep looking for that next deal to come along!

That's my thought process, no guarantees on results, but sure sounds like a good plan from where I'm sitting!

@Kate Horrell You raise a good point regarding the VA funding fee of 3+%. Most people think that 100% financing is the same as 'no money down…' and forget to take into consideration the funding fee and closing costs, which as you mention on a $400k house adds up quick! I do believe that you can add the funding fee into the mortgage to finance it over the course of the loan, so you could almost substitute that additional monthly increase as PMI, so depending on the numbers, can end up back to where certain conventional loans become competitive...

For any veteran reading this post, if you rate VA service-connected disability of 10% or more, the funding fee is waived, so that's a pretty big deal if the budget is starting to get tight…

Hope my above information is accurate.  If not, again, please feel free to correct any misunderstandings I might have.

-Jeff

@Benjamin Timmins It is my understanding that banks will VA finance well over $417k…I've known active military members with VA backed jumbo-loans $700k-$1M+, albeit in SoCal (near Pendleton/Coronado in San Diego/LA) where cost of living/housing is quite ridiculous (in my opinion). Interest rates are higher, and I'm not sure how they can actually afford the mortgages, but 20+yr career officers making $5-$7k/mo salary plus $2k+ housing allowances that are also married with dual incomes can end up in some pretty nice places with no money down...

@Tony Pardini Welcome back to the US! (come August…) Having spent a decent amount of time overseas myself both mil and civ, I can relate to the sacrifices made to live outside of the US while serving. For me, it was very frustrating to be accumulating so much knowledge yet not be stateside to apply it since owner/occupant is contingency of VA loan approval…

I've had the same idea to use my VA loan benefit to purchase a multi-family 3-4plex owner/occupant to get started investing. Once you find 20+% equity, whether from appreciation (speculative) or loan balance pay down, you can re-fi the equity as down payment on a conventional loan and then utilize the VA 0% down again on another property. When you crunch your numbers, be sure to consider the fact that if you 100% finance, your cash flows will be slightly less due to the slightly higher debt service, but obviously ROI should be strong because you have little to on money tied up in the property.

With interest rates under 4% for 30-year fixed, I'd try and tie up as large a loan as possible if the numbers work for cash flow in your area.  Talk to other investors in the area regarding cash flow vs appreciation; if your plan is to re-fi within a year and appreciation is less than or slower than anticipated or non-existent, that could put a damper on your plans.

If you've got enough cash to do conventional financing on a second deal, I personally would get leveraged up while interest rates are so low.  Others might disagree, but to each there own.  I think inflation is inevitable with the current US fiscal policy, but that's a whole 'nother topic…

Obviously, there will be a learning curve, but if you've got good cash reserves and steady income from DOD, working through unexpected issues shouldn't be to difficult if you've got a good team in place and play the numbers a little conservative on your first deal or two.

I can't offer any advice as to FHA vs VA, just crunch all the numbers for the different financing options against your desired ROI and funds available and it should be pretty obvious which way to go. I like the idea of investing in a military town, near a large established base. Just do your proper due diligence on researching rents of multi-family vs SFH vs purchase price and consider who in the military you might be renting to, especially if they are going to be your neighbors; you might find the returns/cashflow are better in areas that you don't necessarily want to be an owner/occupant for whatever reason, or that returns are highest with E1-E4 BAH when you want to be living with other E5+ and Os… That is all market/sub-market specific. Again, the numbers should tell you what to do. On the positive side, if you do end up with E1-E4 tenants that are active duty, you can inquire as to their chain-of-command to 'motivate' them to be good tenants or else their could be professional consequences...

 @Benjamin Timmins My understanding is that the VA is not itself a lender or a bank. You still secure financing through a regular bank/lender of mortgages, the VA only guarantees the 20% that you don't have to put down, so the risk to the bank is less. I think of it as the VA has the bank's back if you end up not living up to your obligations since you don't have any cash in the deal… (also saving you the PMI). The property must also meet more stringent appraisal standards for VA financing approval so that also helps to offset the bank's risk that the property won't back up the loan. I could be all wrong, but that's the way it's been explained to me. If anyone understands it differently or has a better way of explaining it, feel free to correct me.

Sorry for the long winded response… Best of luck and keep us posted here at BP as to how things end up working out!

-Jeff

@Jeff S. Thanks for the confirmation that subject to contingencies weren't just for existing structure purchases.  Fortunately, the lot I'm considering is in an unincorporated part of the county, so won't have to deal with extra city zoning/permitting.  As for timelines, they are more related to financing and just my excitement to put the rubber to the road, money where my mouth is!  But I'm definitely not going to rush into this ;)

@Wayne Brooks I agree that I can't expect for existing owners to wait for months of what-if's from the county building/zoning/permitting department to fully approve my project before completing the lot purchase, but I'll definitely need 15-30 days just to get a proper site assessment to determine build feasibility and basic initial response from whomever I can speak to in person at the county regarding my design intentions.  If the site works, I can always refine my design as necessary to fit within the county's guidelines…

@Lynn Currie Walking away from this specific lot will be easy if it can't support the project I'm intending but the location is almost unbeatable for my specific desires (this is an owner/occupant new construction build for me, not a grand scale development real estate investment).  Certain aspects of the lot make it less than perfect, but will also probably help to keep me within reality budget wise as I move forward building my first (and hopefully my 'dream') home!  The lot is fairly priced in my opinion looking at comps, but I think there is some wiggle room to catch a deal, so hopefully I'll get an offer submitted in the next week or so.

@Joe Fairless Sounds like your project is significantly larger and more ambitious than mine, but that probably correlates with your significantly larger experience level, so I wish you the best of luck!  I'd love to hear more about your project as it moves forward, even if only still in the due diligence phase.  I can only assume that a certain portion of your project's budget is dedicated to determining if the project is worth moving forward.  If it turns out that it isn't, I'm sure that would be considered money well spent!  Got to pay to play, one way or another.  I'm still in the 'spend my TIME and EFFORTS' phase and am dedicated to learning, but it's about time for me to put my money where my mouth is and start applying some of this knowledge, so wish me luck! ;)

Thanks again to all for your responses, perspective, and advice.

-Jeff

QUESTION:  Are contract contingencies common when making an offer on a vacant lot?  If so, what specific contingencies would be considered 'common' vs out of the ordinary or unreasonable?

SITUATION: I've got my eye on a vacant lot in South Florida on which I'd like to build a custom/spec home (owner/occupant).  I'm currently out of the country on business and my realtor is also on vacation… The location is very specific to my desires and lots that will suit my intentions to build in South Florida are few and far between in my price range/specific location.

I'd like to make an offer on the property ASAP but being that it is a new construction/spec build, there are A LOT of issues that could come up that could derail this project and leave me holding a vacant lot unsuitable to my needs.  I understand that the vacant lot needs to be determined suitable to build on as well as permitting and design approval for my home via the county and also possible construction loan/financing approval.  Lots of variables here.  Oh, and did I mention I have certain time constraints, hence the urgency?

Would submitting an offer contingent on determination of suitability to build by the county (soil samples, utilities/infrastructure improvement costs, design approval/permitting, etc) be considered common and reasonable for a vacant lot purchase?

Thanks for any feedback or advice.

-Jeff 

@Matt Devincenzo @Albert Bui @Jimmy Wilson 

Thinking outside the box... Could an LLC be formed to hold title for the rehab/flip house with the intention of profit, not primary residence, to find the hard money? Once the rehab is complete, could the property then be purchased by the friend as a primary residence with VA financing as an original mortgage at full market value, not a re-fi? I'm not familiar with the inner workings of Dodd-Frank (isn't it hundreds of pages?) or hard money and am not a lawyer so don't beat me up too bad if the answer is no.

Obviously the friend would have to disclose the hard money loan on his financials when applying for the VA loan so would still have to make the numbers work. There might be tax considerations on the business profit since it wasn't a re-fi loan against equity, but all rehab costs would be deductible plus other legitimate business expenses, and the profits (equity) could be rolled into another real estate investment via said LLC... Might not be a viable solution but like I said, just trying to think out of the box to get the deal done.

Thoughts?

-Jeff

QUESTION: What information does/can a paid title search reveal that can't/won't be found relatively simply by searching public information on county websites?

BACKGROUND: So I'm considering purchasing property in a very specific geographical area (a few square blocks). I recently saw an MLS listing in my area of interest for a vacant lot/land described as having a "highly motivated seller" and "title defects" explaining the "low price." Obviously there is more going on here than meets the eye...

I searched on the county (Palm Beach) websites for information related to the property (GIS, Property Appraiser, Property Tax, County Recorder).  I found court records indicating BoA vs. current property holder on title & WashingtonMutual so I assume that is the title defect?

Would a paid title search (potentially) result in more details of the situation or would they just (potentially) find the same public records that I have for free?  Just curious… it seems to me that the 'owner' is trying to pawn this property off onto a land speculator?

I'm new to the due diligence process so am sure that I am missing something.  Thoughts?

@Wayne Brooks  Wayne, you're familiar with PBC and a wealth of knowledge here in the forums.  What's your take on my research process and the above situation?

-Jeff

@Denise Gabbard

I saw that you mentioned looking for hard money lenders and that no one had responded.  I have no experience with hard money/private money but BP has a link to "Hard Money Lenders" under the "Resources" tab at the top of the page (at least in the beta version of the website).

http://beta.biggerpockets.com/hardmoneylenders

Out of curiosity, you didn't mention where you bought/rehabbed/sold your mobile homes or where your son is looking at houses… OH, FL, or elsewhere?

Hope the above link helps, best of luck!  Please let us know here on BP the results of your search and return on investment if the above mentioned deal goes down ;)

-Jeff

Welcome to BP!

Whereabouts in FL are you planning on moving/investing?  Florida is a pretty diverse state.  Huge difference in lifestyle and investment opportunities/markets between South Florida (Jupiter/West Palm Beach and south to Miami and the Keys), Central Florida (Orlando), North East (Jacksonville, Saint Augustine), Panhandle (Gold Coast, Destin, Fort Walton Beach), West Coast (Tampa/Clearwater), I'm sure I'm leaving some other areas out but those are just where I've passed through in my time…

There are a lot of people here on BP that both live and/or invest in FL so be sure to search the forums and seek them out.  Also, if you haven't already, set up 'keywords' like Florida and other specific areas of interest so that you will be notified of threads that mention said topic.  I've been away from BP for 3 days and have 30+ threads to catchup on!

Good luck ;)

@Tom Reynolds  Thanks to your guys' encouragement, I have enlisted the services of an agent familiar with the area. I'll keep this thread updated as to what we find out about the property and county zoning restrictions and such.

@Tom Reynolds @Karen Margrave  Thank you both for the advice.  I've got my realtor looking into zoning restrictions on the property as we speak.  The county's property appraiser website shows the property as Use Code: 0000 - VACANT, Zoning: RS - Single Family Residential ( 00-UNINCORPORATED ). I'm interested in the property to build an owner/occupant primary residence, but styled after a steel building type structure, so obviously I need to further investigate how RS-SFH is defined by the county. Again, this is NOT a commercial venture.

@Wayne Brooks Do you have personal experiences in Palm Beach County that might lend to this discussion?

I know I'm taking a pretty big bite, with this being my first real estate transaction and all.  I've lead a pretty tumultuous and nomadic life these last 10-15 years.  Between my military service and working overseas, I've never really had a place of my own, much less anything that felt like 'home.'  I'm making a pretty big life's change and am in a position financially (at least I think) to make this dream 'home' idea a reality, so I'm going to pursue it to the max.

If the county zoning or building design or financing or whatever impose restrictions on my 'fairy tale' goal then I'll revise as necessary within whatever limits are reality and drive on.  Regardless of the outcome, I'm enjoying the learning process and will be better off for the experience one way or another.

Again, thanks to all for the tips and guidance as I begin this adventure ;)