All Forum Posts by: Matt Fooshee

@Michael H.  DM sent

@David Nacco thanks for the suggestion. I had given up on them getting back to me, but someone finally contacted me. Looks like I'll be going with them. They have a portfolio 10/1 ARM, 25yrs, 3.99%, 85% LTV without PMI.

Are there any lenders out there who are still allowing 20% down payments on non owner occupied small multi family properties? Seems like everyone I have talked to is wanting 25% or more. For reference, I’m in the Chattanooga, TN area. 

Seth, thanks for the reply.  The numbers I was using for the cap rate calculation are based off the napkin method which is basically my depth of knowledge there.  The tax, insurance, water, and pest numbers are accurate.  Vacancy, repairs, and mortgage are estimates.  Assuming all rents are up to $700 for the quadplex.  

Property tax: $150, Insurance: $100, Water & Pest: $117, Vacancy (5%): $140, Repairs (5%): $140, Mortgage: $1,138

Total monthly expenses: $1,785.  Cash flow: $1,015.

Cash flow + Mortgage: $2,153 x 12, divided by Sales price of $275,000 = 9.4%

Long time listener, first time caller.  I'm fairly recently divorced and ready to get into real estate since I can make my own decisions again.  This is my introduction to the game so please chime in with opinions and advice! 

There are 3 nearly identical 2bd/1ba quadplexes being sold by 2 different owners.  They're all listed at $337,900 each, but I plan on offering $275k.  Buildings 2 and 3 have been listed for a couple of weeks, but building 1 has been listed for about 2.5 months so I am assuming the sellers understand that they've priced them too high even in the current market.  

Building 1 has 1 unit open and it needs around $10k in renovations.  Once renovated, it would rent for $700.  The other 3 units in building 1 are renting for $650 x 2 and $700 for a total monthly of $2,700 giving it a cap rate of 9% if I calculated it correctly.  

Buildings 2 and 3 are completely occupied and rented for well under market rate, averaging around $490 each, to longer term renters who are month to month.  The seller has notified everyone of their intent to sell and that sale or no sale, rent will be increasing.  Cap rate on these 2 buildings is 3-4% so I would definitely be raising rents.  My thoughts are to raise rent $50/month for each 12 month term until they reach market rate.  As they leave, reno the unit and increase rent to $700 for new tenants.  I would also entertain moving current tenants around to recently renovated units so they don't end up paying market rent for under market conditions.

For financing, I would like to pursue the house hacking method in order to get a low down payment loan for building 1 and renovate the unit while I'm in it. I qualify for VA loans, but from previous experience, I don't think I could get this building approved by the appraiser without having the sales price increased to cover repairs. For buildings 2 and 3, I don't have the cash to go conventional on both of them. I can swing 20% down on one, but I would like to grab them both so I'm going to ask if the seller would be interested in seller financing with 10% down and 5%. If that falls through, I suppose I will just go the conventional route and only pick up one of them.

Any thoughts or advice?  Hopefully I'm not too far off base with all of this.