All Forum Posts by: Marcel Miller

You know I had (before looking at rentals rates in the area) figured the best rental rate I could expect would be $750-850.  Is there a method or process that I should be using besides comparable rentals based on sqft rooms/baths and immediate area?  Frankly, this is the part of this that gives me the most pause.  

Thanks Gary!  I will explore those options and resources.  Appreciate it.

Hello all,

We are somewhat newbies to the RE investing world. My wife and I (both veterans) have had three properties that we have turned into rentals in the past but we have strictly used VA backed loans to accomplish this.. Our credit scores are over 740 and we have an LLC that we would like to use for our investing ventures.

So we have found a SFH in Lafayette, LA. The property is a REO that is listed at $39,900. It is a 3/1 with 1350 sqft and it is situated on .85 acres. It is structurally sound but needs a little bit more than a moderate amount of work. All appliances have been removed from the home. The home has ducting for air but the AC unit was removed as well. We will want to add a bath to the master and covert this to a 3/2. We will want to remodel the current bath as well. Besides this the home will need a total of eight (8) new exterior windows, deep cleaning, paint, new overhead fans and light fixtures. We have done a rough price estimate of the appliances, fixtures, AC, etc and we are looking at $6k for these items. We estimate no more than $25k in total for all rehab items and labor.

We have a local agent that has run comps for us on 3/2's with similar sqft (but less acreage) and these are ranging from $145k to $175k. We are conservatively estimating the ARV to be $130k to $140k. We have contacted property management companies in the area and we have determined that the average rents, for a 3/2, are about $1 per sqft (ranging from $1100 to $1300 per month).

We anticipate being to acquire the property for $15k to $20k (discussions with the agent lead us to believe the bank will accept an offer in this range). So we are looking at $20k purchase and $25k rehab for a total $45k upfront (plus closing fees). We have access to these funds personally but we would like to get some experience using hard money lenders (HML) but we really do not know where to begin. We have looked at HML's online but we have not gotten any responses back.

So:

Listed Price: $39,900

Expected Offer Price: $20,000

Rehab Cost: $25,000

Expected ARV: $130,000

Refinance Cash (at 70% ARV): $91,000

Repayment of Upfront Cash:  $45,000

Approximate Profit:$46,000

Any input would be appreciated.  Especially if we are missing something in our analysis.

Thanks all!

Greg,

I am very much confused as I felt this was common knowledge. But maybe I have been operating on very bad information with this. Having said that, the VA Lenders Handbook seems to say the same thing but it is possible that I am simply not understanding it.

This is from VA Pamphlet 26-7, Revised Chapter 3: The VA Loan and Guaranty

a. The Law on
Occupancy

The law requires a veteran obtaining a VA-guaranteed loan to certify that he
or she intends to personally occupy the property as his or her home. As of the
date of certification, the veteran must either
• personally live in the property as his or her home, or
• intend, upon completion of the loan and acquisition of the dwelling, to
personally move into the property and use it as his or her home within a
reasonable time.
The above requirement applies to all types of VA-guaranteed loans except
IRRRLs. For IRRRLs, the veteran need only certify that he or she previously
occupied the property as his or her home.

Example: A veteran living in a home purchased with a VA loan is transferred
to a duty station overseas. The veteran rents out the home. He/she may
refinance the VA loan with an IRRRL based on previous occupancy of the
home.

Have I misunderstood the meaning?

Truly appreciate that. 

Completely forgot that the purchase agreement addressed the possibility of the financing falling through.  We will reach of to the lender for the Texas home to see about getting the occupancy requirement removed.

Thanks Gary!

 My wife and I are both veterans with disability ratings (100 and 70).  We own a single family in Texas which we have lived in since 2018 and we did a Streamline refi on (Dec 2019).  Our daughter (and is paying rent that covers the mortgage) moved in with us January 2020 and we began traveling a lot.  Although we consider this still to be our primary home we are in and out for long periods of time.

We found a home in Minnesota (Duplex) that we decided we wanted to buy. This home is set up with one unit upstairs and one downstairs.  It also has a detached garage that we intend to covert to a livable space and ultimately declare as our primary residence while we continue to travel.  Really a space to call home and leave our stuff.

 So we got pre-approved, made an offer (with an earnest money deposit of $1000) and we are days away from the scheduled closing date.  Here is where we are starting to have issues.  To the point that we are convinced we are going to lose the deal.....

The lender (on the duplex) is signaling that they are concerned that we will not occupy the home. We have signed the declarations that we intend to do so. They have asked the the current owner issue a Notice to Vacate (NTV) to one of the tenants. One of the tenants has a lease that expires in September (technically 64 days after scheduled close...but I had to argue that this was within VA guidelines as it specifies a date and the date is reasonable). Even with the signed lease they want the NTV issued and signed. The seller is not comfortable with doing this...especially under the pandemic and the current non-eviction status of the state of Minnesota....This is problem number one.

This is problem number two; The lender is also asking that we provide proof that the lender on our home in Texas does not have an Occupancy requirement. When we purchased the home (in Texas) we had no intention of moving or renting it and as such we simply did not know about things like; refinancing with a VA Streamline removes the occupancy requirement. Having said that when we signed the refinance documents we signed a declaration that did NOT remove the occupancy requirement and in fact it requires us to remain in the home for one (1) year after close. So we are unable to provide a document to the lender for the duplex in Minnesota.

So I am trying to figure a way forward here.  Figured I should ask for help and guidance with this.  

-Should I simply walkaway from the property in Minnesota and lose the earnest money deposit, costs of the home inspection and the appraisal fee (which was paid by the realtor as a result of a negotiation we had with him over his commission and I assume he will want to be reimbursed for if the deal falls apart)?

-Is there a way to get the lender of the home in Texas to change the occupancy requirement given that IRRL's (VA Streamline) are supposed to trigger this?

-The issue of the lender (Minnesota home) requiring an NTV to be issued on one of the tenants is a firm roadblock.  If the other issues can be overcome....should we consider a change of lenders?  The seller has advised that they are open to extending the closing date another 30 days if need be to accommodate this option.

Thanks in advance for any and all advice!