All Forum Posts by: Account Closed

Thanks for responding.

@Karl B. With an FHA loan I would have to pay several hundred dollars a month for mortgage insurance. The VA loan is exempt from that, but the property has to be in excellent shape to qualify. If I were looking at more of a "fixer," I would look at using an FHA loan to get in, adding value, and then refinancing into a conventional loan as quickly as possible.

 @Brian Cole I can see how a "gift of equity" would benefit me, but what terms could I offer that would make it also beneficial to him? 

@Taylor Chiu This is a much better property than anything I've seen available to purchase. I am interested in the property primarily because it's in great condition and can qualify for a VA loan. It's also near my husband's workplace. Rarely have I seen multi-unit residential properties hit the MLS in a condition that would qualify for VA financing, and almost never are they in areas I'm willing to move my family into. So, I'm thinking outside the box and looking for off-market deals. It just happens that I know someone who owns such a property.

The advantages to me include:

(A) I can skip the appraisal and keep the current tax assessed value. He has been diligent about contesting the annual tax-hikes on his properties, and the current tax appraisal is WAY below the market value.

(B) The pace of the deal can be slow. Since it'll be my 1st property, buying it off market allows me to move slowly, think things through, ask questions, and understand the process. I won't be making mistakes in a rush to secure a deal before someone else snatches it up. 

(C) The would-be seller is a very patient, intelligent, and kind person. Talking terms with him will create an opportunity for me to learn from someone whose motives I don't have cause to question.

(D) By avoiding a bank loan, it won't count toward my 4 mortgage cap. (If I refinance later, it would, but I'd like to create that option for myself.)

He may not want to sell this property. He has certainly counted the rental income into his retirement planning. However; I infer from the way he speaks about property maintenance and tenant screening that he regards these things as a hassle, and it's going to be a lot more difficult for him to manage the property the way he has been doing from out-of-town. The opportunity to maintain an income stream without being a long-distance landlord may be the only incentive I can offer to persuade him to sell it.

If he agrees to sell it, but doesn't want to seller finance it. I could use a VA loan to purchase it and he could 1031 exchange it for a rental property in the town he's moving to.

If he doesn't want to sell it, I will have at least have opened a serious dialog about investing with someone who has experience. 

@Taylor Chiu

Hi BP,

     I am preparing to ask a relative to sell me his small multifamily residential property in the city of Houston. He's getting ready to retire and move out of the city. I'm going to ask him to sell his property to me. My family of four will be living in one unit. It will be a bit cramped in a 2/1, so I only want to live there for 1-3 years. Please help me think through some practical options for structuring a deal to get in, and also how to move beyond this property in the future. I want to be able to clearly visualize and understand 3 ways to get in, and 3 ways to get out. I am just starting out. If this works, it will be my first deal.

Our current financial position:

  My husband and I have no debt. Our credit scores are over 800. I have a little over $10k liquid between my savings and taxable brokerage accounts. I am saving into these accounts at a combined rate of $450+/mo. We can borrow up to about $30k from his 401k. I have $7.5k principal I can withdraw from a ROTH IRA. He has about $7k in another IRA from a previous employer. My husband has some company stock that will be fully vested this year. I don't know how much, but his company pays excellent dividends. We are both veterans and can qualify for a VA loan. We are currently renting. I believe we should be able to fund a real estate deal. I am open to insights on which buckets to draw from and why.

The property I'm interested in:

It's a 3 unit multifamily. Comps in the area indicate market value for the property is about $350k. Rentometer estimates market rents are about $1350 for each of the two 2/1 units and $880 for the garage apartment. Since we'd be living in one of the 2/1s, that leaves about $2230 to help us with the note, etc. My husband estimates the tax bill for 2018 to be about $12k. It's well maintained, and I am certain it can qualify for a VA loan. There's not a lot of value add opportunity. I doubt it's separately metered. I have no landlord experience.

My thoughts so far:

   I plan to ask for seller financing. This way he can continue to receive income from the property, but he won't have to manage it from out-of-town, and this spreads out his tax burden. If I'm paying him directly, then he will have a vested interest in seeing me succeed and I'm less likely to be bashful about approaching him with land-lording questions as they arise. I am good at self educating, but there is no substitute for experience.

I'm thinking I can later cash-out refinance into a loan (possibly a VA loan) to finance another deal and wrap the new mortgage so as to keep the installment payments in place and avoid hitting my retiring family member with a big fat tax bill.

I welcome any and all insights from experienced investors. Thanks in advance.

Liz

Thank you for sharing, and congratulations. That's awesome!

There is one Thursday the 27th at 6:30pm at Freeman Branch Library hosted by Robin Williams.

Read your lease agreement. Legally, you may sublease only if the lease agreement allows for it. 

"Section 91.005, Property Code. If a tenant sublets without the consent of the landlord, the landlord may evict the subtenant and sue both the subtenant and the original tenant for any damages caused by the subletting arrangement."

http://texastenant.org/subleasing.html

Hi. I spoke to a family friend of mine who is a local architect last night. I asked her about soil testing.  She told me that even if I take all the samples myself, it would still cost about $1200 to have it tested. So yes, $1100 is reasonable for our local area.

Good luck on your project, and please share details of your building adventure. I am eager to learn more.

Liz

Oh no! I'm already booked for tomorrow evening! I'll have to hit the next one. 

See you next time!

Liz

4) Can something be done to the land to prevent flooding in the future on properties that only got a little flooded this time?

Sometimes, a simple modification can make a big difference. Widening the ditches and improving drainage can help a lot, especially if your team is working on multiple homes in a row. Some plants (such as bamboo, Hawaiian Ginger, banana trees,) rapidly drink up water and return it to the atmosphere. Altering the grade of the land around the house can make a huge difference. These are all relatively simple projects that don't involve much capitol; just a good planning session and lot of sweaty, dirty, muscle-building work. 

Clumping bamboo is preferred, the other variety can take over. Sweet hollow plants like Hawaiian ginger and banana trees should not be planted up against a structure because they are perfect homes for the big water cockroaches that Houston has in abundance. It's better to put these in the far reaches of the yard. 

Liz

Howdy and welcome! I'm a RE noob, too; however, I'm also a native Houstonian. I've seen a lot of flooding. Some things to consider right now with flood properties include:

1) Can you get contractors? Can your contractors get materials in a timely manner? 

Many of us have difficulty getting a complete team right now. The cost of materials has spiked, and availability of materials has declined. The cost and timeline at which a project could be completed before Harvey is completely different today.  

2) Have the houses been gutted and treated accordingly? 

Flood houses that didn't get immediate attention can pose a major health hazard. (At the very least the flood-soaked drywall should have been ripped out, there's a bit more to it, but that's a big, easily identifiable red flag.)  I personally wouldn't dare set foot in one that wasn't stripped and has been sitting like that for months.

3) Are you looking at today's property values or pre-flood values?

Property values in areas that have flooded (especially for the 1st time) are going to be severely lower than they were before the flood. Even homes that did not flood in neighborhoods that experienced heavy flooding decline in value. When prospective home buyers drive through a neighborhood looking for a place to raise a family, if there are rotting unattended flood houses on a neighboring block, most will look elsewhere. If you are looking at blasting through these areas and resurrecting whole neighborhoods, more power to you. It is a needed service to the community. A few "missed" houses in obvious need of rehab can hurt the value of the whole neighborhood. There are likely to be quite a few upside-down mortgages in these areas now.

I have to go for now. If I think of more, I will update. Good luck in all your endeavors.

Liz

Welcome!