All Forum Posts by: Luciano A.

@Ummad Farooq

That's awesome you found a deal with equity. Most Appraisers will appraise close to what the sales price or refi is but not over. Some banks will want to only refi you based on how much you have in the deal, not the market value. This loan cost can hurt you so check with that bank first before you spend money on an appraisal. Also, some will want to have the first loan seasoned for 6 months before you can refi. As others mentioned the appraiser has the ability to look at what you paid for it so you will want to show why you got under market, for example, was it someone going through a divorce, lost job, pre-foreclosure, etc.

Unlike 2004-2008 the appraisers now are more conservative than before. Back in the day, they will push up values to keep the brokers happy so they can get more business from them. Now the bankers and mortgage brokers don't have the ability to choose who the appraiser will be as its don't from a data poll. 

Best of Luck

@Mark Adkins

Welcome to BP. I think you got some great pointers on here thus far. I remember back in 2006 I started buying in Houston before Texas was the market to be in. In 2008 I moved here and started buying long-term holds as well as flips. I agree long term hold will not get you out of your 9-5 overnight but as others said, better to start now. You won't have all the answers but a good agent, a good inspector will go a long way. You don't have to have a property to learn. Just make every day count by investing time to listening to podcasts, reading books, each realtor until you find places you either know people in or become interested.

I would not follow the herd. Don't go where everyone else is going to buy rental. Find a city that is near other major cities that might have cheaper houses to take on but rents are not low. 

As in anything in life, if you want to be good at it you need to invest time in education and keep learning. Won't be overnight but take action because before you know it, it will be another year past.

Best of Luck  

@Adam Widder

Congrats on getting three properties. You are still growing so I would give you this advice...KISS (Keep It Simple Silly) the last S stands for Stupid when I have to remind my own self. 

Take the money, put it into a credit union or local bank that works with investors. As your reserves grow it will help create a relationship with that bank thus when it's time to go ask for a loan you will have already established this relationship. Small local banks will look at your relationship with them, the amount of money you have with them when they have to make a decision. My local banker uses my relationship with their bank as a way to get my loans approved when he takes my loan to the committee and tries to sell to his board why they should take my loan.

Money sitting in an account might be dumb given inflation and IRR arguments but relationships will lead to deals, the ability to do deals, etc.

Best of Luck 

@Piper D.

  I am surprised why no one first pointed this out..... you are buying used so why should the tenant be responsible. You are cutting corners thus your having items break. Providing such items attracts tenants thus you get to rent your unit faster. If the tech says it is broken because the tenant did something wrong then you can state that to them and let them know if there is an issue they will be responsible but buying used and wanting the tenant to be responsible I don't think is fair. Heck, if I was the tenant I would raise that question and at the time of renewal will remember being billed for the repair therefore not renewing my lease. 

Giving amenities that bring convenience to a resident will help keep your retention thus less turnover and costly make readies. The apartment operators like myself have realized this and we add washers and dryers, stainless steel appliances as a way to attract residents as well as keep them. We don't buy used as that is a headache waiting to happen. Especially in times like this when parts are hard to come by and used is almost the same price as new. 

I found years ago that going cheap never ends up saving you money. Goes for all things, contractors, materials, legal (downloading online lease agreements versus paying for legal advice), and providing cheaper rents versus rehabbing the place. 

Sorry if I sound harsh but take it like a big brother telling you this because he loves you. We are in strange times so landlords have the upper hand but if the market has a correction and people can't get loans the rental market will be inundated with flippers, builders all become accidental landlords. Their product that was built, designed with the end buyer being the homeowner, will have nicer fixtures, and amenities thus making landlords that have mid-grade homes compete for a lower pool of residents. Your property should bring value to those who choose to rent from you. They will enjoy it more and take care of it because they got a product at that price point. Best product at the best price. 

 Best of Luck 

@Aharon Najafi

If you were to use a private lender or hard money you might be able to buy and have the repairs included. After the repairs are done and rented you can go get a long-term loan thus reducing the amount you have in the deal. 

You might want to check with the city on zoning as you can't just take an SFH and make it into a multi-family. If you are going to have an investor loan make sure you factor in vacancy, cap x, etc as banks will put that into their calculation.

@Christopher Dudhnath

First wanted to say my condolences to you and your family. Real estate is a great investment tool to get ahead and set yourself up for a great retirement. You are on the right path. Keep learning, go to meetups, listen to BP podcasts. Real Estate has so many different ways to make money. Check the different ways from listening to others on the podcast share their experiences then find that one that you really like and double down. If you are in a high tax bracket you can use RE in ways to help reduce your taxes. Whichever avenue you take enjoy it and don't stop learning. Welcome to BP.

Best of Luck 

@Dana Weis

I agree with @Matthew Crivelli (seems like the last few posts I've been in agreement with you :) lol. If you go hard money or private money that you state that and get a letter from the hard money showing you are approved and they will just need to do a few things with the property to get the loan finalized. 

If you have a retirement account or stocks and want to use that to show as proof you just need to send a recent statement. Another thing to consider. How long has the property been sitting on the market, the longer the better as the all-cash might be negotiable. But a word of caution. They might be asking for all cash because they know they will not be able to have it appraised at the price they are asking so even if you have all cash to buy, best to get appraisal contingency so that you are not buying for more than its worth.

Best of Luck 

@Aharon Najafi

You got some good pointers on here from others. What you have to ask yourself is the price you are buying it for at market value or less. If the seller has baked the price with the understanding it needs work then you have to take that under advisement. I have never heard a buyer cant send the inspection report to the seller. It sounds like your agent understands what that does to the seller and doesn't want to hurt his/her relationship with the seller's agent on future deals. 

However, regardless of this. Did you get contractors to come out give you quotes on the roof, foundation, subfloor repairs? Sometimes these inspectors point out stuff just so they can justify their pricing. I would get independent bids from contractors for these items. If you get an honest contractor he might tell you the roof has another 4-5 years. Foundation is not as bad as it looks etc. 

Don't walk away from a deal without hard facts not guesstimate from others, not in the trade. We all want lower than asking but sometimes the asking price is a great price. 

Best of Luck  

@Alphonso Fletcher

That's awesome you have a fully paid mix-use property. I would do a cash-out refi as suggested by @Matthew Crivelli 

You should check with your local community banks as it sounds like you have a commercial property thus having an LLC is the preferred method of holding the property. You will still be signing a personal guarantee. You will get good rates if you don't take out the full 70-75% they will lend out. I would take no more than 65% thus your current property should cashflow, give you a new write-off on the interest for taxes, and use the refi cash to put towards another deal.

Best of luck 

@Account Closed

If you ever used Zillow it seems they overestimate or underestimate home values so not surprised they had to get out of that market. Other I-buyers are making money off their fees to buy and sell. However, like anything that is hot and has many competitors, it takes systems in place, costly overhead to manage and with small margins, I am sure they realized they couldn't keep going. 

We won't see another 2008 because there are many hedge funds that are on the sidelines waiting to snatch up 1000s of REOs from the banks directly before they hit any MLS.

It just shows you we are reaching highs in every market so it's best to find good deals and not marginal ones. 

I am sure this market will have a correction so we will see how the chips fall.  Everyone is in MOFO mode and buying junky deals just so they can add to their door count or be able to say they are a RE investor. 

Back in 2008-12, I was a kid in a candy store getting stuff at well below build price, and rents were great. I think this time around we might see a different result. We might have lower rents as we have more investors with rentals, more apartments built so those with larger cash-flowing properties will be able to sustain themselves with lower rents than those with marginal cash-flowing properties that will go negative with lower rents.

No crystal ball so I guess I will find out whenever one else does.