All Forum Posts by: Meera Lakhavani

@Account Closed yikes! Thank you for your insight that is really helpful. 

By SOW you mean what work specifically I need from the contractors?

Noted about lenders — my current one specializes in 203k loans and seems to be very knowledgeable. 

@Lumi Ispas Thank you so much for you perspective. You are right about me needing to do due diligence in those areas and taking a more educated risk. That is a good point about adding buffer in the rehab quote and time frame.

I will be sure to add an extension request clause.

Are you suggesting I ask them if I can lower the earnest money? I will try but they are very very disagreeable!

@Syed Lateef thank you for the insight! I am no pro at estimating gut rehab costs because I have only done superficial renovations.

The current possible deal on the table is that I get a 5 day inspection contingency (during which earnest money is refundable) but if my financing falls through then it is not refundable. I think this is a bit better because during the inspection period I can get a 203k consultant in to tell me if the rehab is realistic.

@Wayne Brooks I actually already hammered this out with the wholesaler -- I will be directly in contact with the owner but will have a recorded note on the property for the wholesaler's cut. So I will be in contract with current owner for full amount (their price + wholesaler cut) but because of the note, wholesalers will get their cut during closing.

Hi BP Friends!

I am trying to go under contract for my first house hacking deal in Chicago using FHA 203k financing. The market is brutal, 15+ MLS offers rejected so far. All the investor friendly multi-unit properties in decent, safe neighborhoods get multiple offers above asking, including cash. Not to mention, many of the best deals on the MLS hardly even cash flow.

I decided to be creative and look at wholesale opportunities then try to convince them to accept my FHA financing. Shockingly someone is open to it but they want $5,000 non refundable earnest money if my financing falls through. This sounds terrible at first glance because of how often FHA deals fall through BUT the property will cashflow $1000+ per month after rehab. What would you do with an upside this big?

Some more details about the property:

• Duplex with illegal basement unit - I can expand each unit into basement and attic to raise rents significantly
• Price: $310k, ARV 580k. Rehab budget: 180k (possibly 153k because of 15% contingency needed for 203k rehab)
• Will rent for up to $5600 per month after rehab. Likely $5300 though.
• Logan square neighborhood: safe, walk able, desirable, close to public transportation, close to restaurants, gyms, etc. It is where I ideally would like to live.
• Needs a LOT of work: full gut. Demo has already been done but house is full of demo related trash. Basement is rat infested. There are holes in some of the floors from rats. Exterior is falling a apart with fake brick turf like veneer and wood underneath. Currently the roof is pointed but would need to be built up and squared off for the expansion into attic. There must be water damage because some windows are missing.
• The lot is small and there is no possibility for garage. It is also very loud due to being right behind the train.

However, there are multiple new construction million dollar homes on the same block. So i know the neighborhood is solid but perhaps this place is a teardown and I am biting off more than I can chew trying to gut it for only $150 - 180k.

I have attached pictures! Any insight you have on determining whether a house is truly a tear down, or experiences with 203k financing falling through would be much appreciated! Thanks in advance.

@Jon Holdman It sounds like the assignment contract might be permissible by my lender since I am purchasing directly from the current owner. 

Why would a debt against the property not be paid by my lender during the sale? Let's say the current owner is willing to take 100k for the property but the wholesaler is charging me 120k. Why can't I purchase the property with a mortgage for 120k with a 20k note of debt on the property that needs to be paid to the wholesaler?

Thanks in advance for your help -- I am new to this process and really appreciate your responses!

@Jon Holdman That is a good idea about offering to pay the wholesaler fee in cash though... it may simplify the whole thing (although its not IDEAL for me in terms of tying up my capital). I will try to see what their fee is and if I can afford to pay it out of pocket :)

@Jon Holdman Thanks for your response! I ended up proposing this to the wholesaler:

They allow me to have a purchase contract directly with the current owner BUT I give them a courthouse recorded note or lien for their fee. I want to fashion it so that the fee is recorded as a note of debt owed to the wholesaler that will be paid through my lender and title company during closing.

Does this sound feasible to you? I saw during an interview that Jamel Gibbs had done this before, but I am not sure about the nuances surrounding the note/lien.

Do you have any ideas on how I could make this, or a similar arrangement more appealing to the wholesaler? I sent them my pre-approval letter (approved for 200k more than their asking price to prove strong financing) and told them that my lender is on board (provided it is a contract directly with the current owner).

Thanks in advance!

Thanks @Ibn Abney! I am planning to check out Bridgeport and McKinley Park but will look into the areas you mentioned as well! Would you consider them safe?

@Aaron Mazzrillo Thank you for the response!

The clarify on the "option" route: are you saying that you wholesaled to a FHA buyer by cutting yourself out (allowing the contract to be between owner and buyer) but put an option / "title claim" fee on the property?

What does the process look like step by step to do this? Would you be putting a lien on the property for your cut?

Also, you mentioned non cash buyers present to many obstacles but that you have also sold to FHA buyers using options. Why did you decide to sell to FHA buyers, don't they still present a lot of obstacles? What was your closing time when working with the FHA buyers -- still 90 days?

Thanks in advance for your help. I am currently trying to figure out a way to allow wholesaler and lender to let me finance a deal with 203k loan.

Hi BP Friends!

I am searching high and low for a multifamily property on the north west side of Chicago that cash flows -- no easy task! A lot of what is on the MLS is overpriced from a cashflow perspective and when I find a rare gem there are numerous above asking price cash offers that overtake mine.

I have expanded my search to include wholesale opportunities and found something fabulous in Logan Square that requires a gut rehab. However, as I expected with wholesales, it says "Cash or private/ hard money only".

I was ideally trying to do an FHA 203k renovation. I am wondering if it is possible for me to finance the initial deal with hard money then immediately buy it from myself using FHA 203k. Does anyone have experience or ideas surrounding this?

The price is 310k and ARV is 580k. Another thought was to finance everything with hard money then when the renovation is complete I can appraise and refinance conventionally with 30% equity. However the interest payment (assuming 12% annual interest on hard money loan of 410k) alone would be $4100 per month during the construction months. This would be a lot to eat in addition to my living expenses because i only take home 5k after taxes monthly from my W2 job.

Let me know what you think! Any ideas or wisdom would be much appreciated.