All Forum Posts by: Larry Zucker

With the I-87 highway expansion, Zebulon and Wendell are becoming great alternatives while Clayton is benefiting from the completion of the I-540 loop. All of those towns are good appreciation opportunities. The only question is how long that appreciation will take. New construction may offset demand and keep your investment from appreciating quickly but as more people push out from the city center, property in those towns will be in higher demand.

My preference is eastward towards Wendell and Zebulon. I believe the current road structures / plans favor accessibility for those towns verses Clayton to the south. I believe they will see quicker appreciation than Clayton because of that.

I think @Ananth NA is right on point. A SFH can generate cash flow but is really more of an appreciation play compared to a MF property. The value of the MF will be determined mostly by the cash flow it brings in. If cash flow appreciates so will the property value. The SFH, however, will appreciate with or without cash flow.

I also agree with the observation about the 1% rule. In the Raleigh-Durham area 0.5% is the prevailing measure. Mostly, this is because of the growth in the area. While some deals may be negative cash in the early years, the area growth will push up both rents and home prices tuning the deal positive within a couple of years.

In your stated price range (200K - 300K) you are likely to find some SFH and some TH but mostly condos (which are totally a cashflow play as they appreciate last). For my first-time investors, I recommend going the townhouse route because they are very rentable, less per door than SFH, appreciate well and much of the exterior maintenance is handled by the HOA.

Happy to chat and answer any questions you have about the area. Just reach out through BP.

Quote from @Jennifer Fernéz:

Quote from @Larry Zucker:

I work with a lot of first-time investors and this is what I suggest for them:

1. Decide what type of investor you want to be. There are many ways to invest in real estate and there is no right or wrong answer for how you do it. Do you want to wholesale? Do you want to flip? Do you want to house hack? Do you want to buy and hold and if so, what part of the tenant market do you want? Long term rentals, short term rentals, student, vouchers, etc.  

2. Identify where your resource constraints are. Are you tight on money down or is income/credit an issue?

3. At the end of the day, whatever money you make in real estate is going to come from appreciation in the property value, cash flow from rent, and/or principle paydown of you mortgage by a renter. Which of these are most important to you?

Once you have a handle on the three items above, many of the other decisions fall into place like where to invest, what type of property fits your investment profile, and what loan product suits you needs best.

For example, if you decide appreciation is most important to you but money down is an issue, you might be best served by buying a single family home, living in one room and renting out the others. Doing so would enable you to get a first-time buyer's loan like FHA 3.5% down.

Or, if money down is not an issue but income verification is, you can go with a debt service coverage ration (DSCR) loan which only looks at the property's cash flow ability and not at your personal income.

Where I see first time investors fail is on a few fronts:

1. They never pull the trigger. They analyze and shop and dream about it but never do it. Don't be one of them.

2. They don't level with their lender and realtor which results in properties that are off-target or a loan approval that falls apart later in the process.

3. They don't build their team. Find a great lender (not necessarily the cheapest, believe me the right lender matters) and find a great realtor that can help you identify the right properties to meet your investment goals.

It is a one-foot-in-front-of-the-other thing. Decide on your answers to the items above, break it down into steps and then pull the trigger.

I am happy to help, just reach out to me on Bigger Pockets and we can jump on a call together. 

 Love this.   Could you help me?   

Strengths:  People skills, carpentry, gifted (IQ), career is math teacher, love analyzing deals, pretty good instincts with numbers, etc, lots of experience flipping home owner houses (hired by others to renovate bathrooms, kitchens, and have done whole house gut renos), degree in mathematics and interior design, basically skilled at making profit for not a lot of $$, knows what neighborhood I want to buy

Weakness:  not a lot in savings, not clear judgement who is a good lender or agent (easily ‘fooled’), credit isn’t strong either because I just went through a divorce

What do you suggest?   I want to pull the trigger.

@Jennifer Fernéz Low money down plus weak credit is a bit of a double whammy but not insurmountable. There are a couple of avenues for you. 

1. You can talk to a credit union or community bank who do not sell their loans off to the market. That enables them to be more flexible on terms. Here in NC we have the State Employees Credit Union (our teachers are state employees), I do not know which credit unions are in PA but I bet you can find one you can join. 

 2. If the lenders in 1 cannot help, there are programs designed to help lower income people (you are a teacher like my wife so 'nuf said there) with poor credit. You will have to live in the home for a while (maybe house hack the other rooms). One example is Landis, but they do not operate in PA.

I would focus on properties that are livable as-is but that need some cosmetic work because with your skills you will be able to do those renovations and add value. 

I work with a lot of first-time investors and this is what I suggest for them:

1. Decide what type of investor you want to be. There are many ways to invest in real estate and there is no right or wrong answer for how you do it. Do you want to wholesale? Do you want to flip? Do you want to house hack? Do you want to buy and hold and if so, what part of the tenant market do you want? Long term rentals, short term rentals, student, vouchers, etc.  

2. Identify where your resource constraints are. Are you tight on money down or is income/credit an issue?

3. At the end of the day, whatever money you make in real estate is going to come from appreciation in the property value, cash flow from rent, and/or principle paydown of you mortgage by a renter. Which of these are most important to you?

Once you have a handle on the three items above, many of the other decisions fall into place like where to invest, what type of property fits your investment profile, and what loan product suits you needs best.

For example, if you decide appreciation is most important to you but money down is an issue, you might be best served by buying a single family home, living in one room and renting out the others. Doing so would enable you to get a first-time buyer's loan like FHA 3.5% down.

Or, if money down is not an issue but income verification is, you can go with a debt service coverage ration (DSCR) loan which only looks at the property's cash flow ability and not at your personal income.

Where I see first time investors fail is on a few fronts:

1. They never pull the trigger. They analyze and shop and dream about it but never do it. Don't be one of them.

2. They don't level with their lender and realtor which results in properties that are off-target or a loan approval that falls apart later in the process.

3. They don't build their team. Find a great lender (not necessarily the cheapest, believe me the right lender matters) and find a great realtor that can help you identify the right properties to meet your investment goals.

It is a one-foot-in-front-of-the-other thing. Decide on your answers to the items above, break it down into steps and then pull the trigger.

I am happy to help, just reach out to me on Bigger Pockets and we can jump on a call together. 

Quote from @Nick Conley:

Hi Larry,

Most Non-QM lenders allow you to close in an LLC including DSCR. The question becomes what terms can you get with different type of Non-QM loans?

I am happy to give you a few quotes, feel free to reach out and we can discuss your NC purchase.

Many lenders are requiring personal guarantees even on DSCR loans to LLCs which sort of removes the protection the LLC provides that is why am I asking about non-recourse for DSCR LLC loans

I am looking to finance the purchase of a long-term rental under an LLC. Any suggestions on lenders offering non-recourse loans in NC?

Quote from @Tom Gimer:

@Larry Zucker The proposed law change here (I posted the full text above) would expand the definition of brokerage services to include wholesaling -- 2 or more transactions in 12 months and regardless of whether for another person and regardless of by assignment, entity transfer, option, double close, etc. It's the substance of the transaction, not the structure.

So, the inquiry becomes not whether you are representing others and engaging in 6 defined activities but simply whether you do 2 or more deals involving real estate in 12 moths. I'm an attorney.

Well, then as I said, I defer to any attorney on the forum. 

Quote from @Tom Gimer:

Quote from @Larry Zucker:

I am a realtor in NC. But I can Google like everyone else. The requirement to have a realtor license, according the Maryland state statute 17-102, does not apply when (among other things)

"an owner or lessor of any real estate while managing, leasing or selling the real estate, unless the primary business of the owner or lessor is providing real estate brokerage services or...a person while acting in the capacity of a personal representative" 

Sounds like a carve out for representing yourself to me.

Which would be consistent with the NC definition of a realtor as anyone who buys, sells, leases...real estate for others for compensation.

You left out an important part of the statute:

This title does not apply to: ... an owner or lessor of any real estate while managing, leasing, or selling the real estate, unless the primary business of the owner or lessor is providing real estate brokerage services

To provide brokage services you have to be representing others for compensation. So, unless your primary business is representing others for compensation you are off the hook. Besides, if you are representing others for compensation then you already have a realtor license and you already meet the requirements of the statute. That's how I read it anyways. Happy to defer to any attorneys in the forum.

I would not reduce the rent. You can always reduce it later if the place ends up vacant for a while.

Another way to accomplish the same thing is to create an LLC to wholesale a property and when you find a buyer, you can just sell him the LLC so he becomes own of the property because he now owns the LLC. Just a thought.