All Forum Posts by: Melissa Kirchhoff

@Brandon Dubisky - I don't disagree at all. I know a lot of people don't like Section 8 but I've heard great things from people I know who offer it. They say the tenants are amazing because they don't want to lose the privilege and if you have a problem, you can just talk to their officer (I don't think that's the right word but can't think of it right now) or threaten to and they snap back in line. Also, I've heard there's lots of advantages to having the remaining rent come from the government (not late, no issues, etc) and that typically, they are higher than average because of that. However, I do know there's codes and rules for the units to "pass" to be section 8, so I would look into those before the purchase (see if and how much you might need to put in) and know some basic things like that if you don't already. I would talk to the housing in your area and see if you can get someone to give you information before closing on something. I think it's a good idea and worst case, have an exit strategy in place in case it's not your thing (or a property manager!) but otherwise, if the numbers work, I'd say go for it!

@Bryan Lee - Have you talked to a lender? Could you do a low money down set up (since it's owner occupied, I'd imagine you wouldn't have too much of a problem on that end, but might have a problem with the money, since you aren't a previous landlord, they won't count the rental money as income)? That would be cleaner. Then he can just straight rent from you and there's nothing weird there. 

I'm not a big fan of situations like that, personally. I would wait and save and get yourself into a situation where you can do it more on your own. There's lots of opportunities still out there, and you wouldn't feel like you would have to leave this guy in, like you owe him something. IMO, I bet he's wanting to pay less rent than a normal tenant might, and he might still want to run the show. I think it could create a sticky situation - I mean, are you going to evict him if needed or make him pay fair market value for rent? My point is, don't feel like this is your only chance to get in on this, like the opportunity might slip. Work hard, save, and get in the situation to do this in the future. If you still want to do this seller financing, go for it, but make sure you have a good agreement and an attorney by your side and making sure the situation works for you too. And seller financing I also don't like because usually the situation has to greatly benefit the seller, otherwise why assume the risk? So if it greatly benefits the seller, it isn't necessarily greatly benefiting you... Just some things to consider.

@Vanessa Montoya - I know IL is one of the few states that still does this, but do you have a real estate attorney or someone to be handling title, not you? Personally, I would recommend that. Even if it's not an attorney, it should be a title company and I'd prefer something like ATG (which again, may be more like IL thing) that is giving you a policy on that so you are protected. Your realtor should be able to point you in the right direction on that. I'd imagine it varies from state to state, it should be coming out from their remainder of the proceeds from the sale, and shouldn't be transferred. Get someone that has your back working for you though, I don't like to take risks in transactions as big as these.

@Heidi Lutz - Honestly, pre-foreclosure thing on Zillow is basically pointless (and something they are using for leads, which Zillow is famous for). Let me explain.

The term pre-foreclosure is a very vague term. In most states it gets flagged by something called Lis Pendens which is a legal document that the bank is sending to the borrower saying you haven't paid your mortgage and we are moving forward with the legal process to foreclose. From there, so many things can happen. First, the people could call them and work out something to repay and keep their house. But for your purpose, let's say they don't. Lots of states still have a time period they allow the borrower to redeem their property. Again, let's assume they didn't. So let's say the bank has legally foreclosed on and is in their possession. Still, from there, I've worked with companies that still sit on the property for months, easily. They like to have an agent or appraiser come in and tell them what it might be worth, from there, they may still have internal layers they have to go through before the house actually comes on the market. From pre-foreclosure to an actual foreclosure that can be purchased, it can easily be days, months, years, and that's assuming the borrower doesn't try to get in good standing.

Also, to make the waters more murky, I know situations where people have switched over the property from their name to an estate or LLC or such and it marks the property as pre-foreclosure. Another broker explained this happened to friends of his, they live in a *very* nice house in a *very* nice area, and they had people all hours of the day driving up and looking in the windows in their remote area.

Now, keeping an eye on those is a good idea, I just want you to know what you're really working with here. And to answer the question you asked (not my rant about the question you didn't ask lol) if it will qualify for 100% is dependent on condition. There's a list of FHA requirements that other people have discovered, which can help you decipher yourself. Where you would begin is by talking to lenders, knowing what price you can and cannot afford, what your payments and types of financing could be. I would start there. I recommend talking to at least 3 lenders, I recommend someone you bank with, a small local bank, and a big bank to get some variety in your options. They all have strengths and weaknesses. From there, find a good agent and please, for the love of all that is holy, DON'T USE ZILLOW! They also keep years old listings that have sold and cancelled, and it's just the most inaccurate place for data tbh. I can't stress this enough, please use anything else, redfin or realtor.com are my favorites that I use for other areas outside of our MLS. But if you find a good agent, they can get you setup on something MLS based and that's always better than third party sites in general. Good luck!

@Jacob Flores - Okay, thanks, I listened to the guy and I get what you're saying. It's really all just a numbers game, and the numbers have to work. If you have the numbers we would all be happy to help you work it out and see if that's the best option or if there's something better.

Here's some points I'd recommend you consider:

- Cost of the rent where you are renting and living

- Est. Property taxes of the two rentals you'd plan on buying

- Est. Insurance of the two rental properties you'd plan on buying

- Utilities and holding costs of the properties if not rented (like around here landlords have to pay water and trash and we have to keep heat and stuff on in winter to prevent pipes freezing and we have to keep AC on to prevent floors warping and such during summer)

Those would equal the amount you need to be able to afford. Also, consider there might be some vacancies and you would have to be able to cover all that if there are for a while. Also, would you be buying a property that needs some work before you get it rented. Can you float the work and the vacancies? What if a furnace goes in the future? I would build all those into my numbers when considering this option. It can work, but I want you to know all the facts and numbers and make sure it does.

Also, I would consider some alternatives.

- House hacking - So in this situation, say you buy something like a duplex for cash or small mortgage (using your 100k to put more money down and maybe improve it) and you could live in one side and rent out the other, having the other unit's rent completely take care of your mortgage, taxes and insurance, so you're living for free or very little (just paying utilities, say). You and your wife save your money to put toward another future investment, and, most lenders require 1-2years of "landlord/rental" income before they will lend on something like a future rented apartment. So in that time you can save up the money for say a 20% down payment on something bigger, like a 4-plex or so, and finance the rest and be making money off the rest of the rents. And you keep doing that basic formula as much as you want, until your passive income is where you need it.

- Taking the 100k and using that to leverage another mortgage, say for another 100k and you have 200k to buy maybe a 4-unit and having a mortgage payment still lower than what you had before, and again, living for free if you want to occupy the building, or doing your rental concept if renting elsewhere is cheaper than renting your own unit. Then, same thing, you can save and later use the rental income to leverage financing for another unit, or do an equity build and refinancing/selling and going bigger or for more properties.

As far as the lending goes, yes, you can talk to a bank. I usually tell people to talk to at least 3 lenders, and I like to spread them out, one smaller local bank or credit union, one big bank, and one bank you actually bank with. Let them tell you what you can do and not do and see if it's a fit for you.

Ultimately, you sound like you are in the right place, and right mindset. I do think you overextended yourself in your current living situation (which I did too, so don't worry!) and now you want to flee and get in a better situation as quick as possible. And actually, I would say take it a bit slower so you make the right decision. I would look at all the numbers and run as many as possible. I would also still suggest listening to as many podcasts as you can to learn more about your options. You're in a great situation right now, even though it might not feel like it! But do your research and make sure you're making a decision based off numbers, what will get you where you need for the future and what will put you in the best place financially now and in the future, in the best case scenario and worst case scenario.

@Whit Dhamer - Okay, I understand. And yes, I've had a similar-ish problem before. That may be a problem across the board then, but wouldn't hurt to talk to some others just in case. Again, someone may have a bit more flexibility in their underwriting. I'll message you someone to try... Again, might be worth waiting or partnering like others said.

@Account Closed - I'm sorry your last agent did that, that's really ******! But yes, that's how they work around here as well (actually the 1k is decent compared to many other properties around here) but I never think that should be an excuse to bail. And I have no issue with dual agency, especially on REO. I just thought you weren't really be represented! Good luck, those bank-owned can really be great and around here they are drying up big time. So get on them while you can!

@Samuel Garcia - Welcome! I'd recommend listening to every podcast you can, it's really helped me evolve in my plans and helped me understand different facets to better understand what will help me get started, where I want to be going, and other options I might want to explore as I go along this journey. It's a great place to start and believe me, it will get you where you need to go!

@Matt Bennett - Listen to some podcasts, it's a great place to start. On there, they seem to always say to not go the LLC route unless there's really some strong reason to do it. So in your situations, I'd lean toward saying no, but I'm no expert on that.

As for the capital gains, look into that. I'm doing something similar to you (working 2 other jobs full time and flipping on the side in what little spare time I have!) and in situations like those, it's not considered not capital gains. Also, my understanding of what I've read is that if it's not your primary job and source of income, something you do on the side, it's also not subject to capital gains tax. Also, I don't believe an LLC saves you from that at all. However, it is fair to say from my readings that the flip may throw you into a higher tax bracket and that may be something you want to look into as well.

@Krista Porter - Interview, like you would anyone else! Find someone that fits what you need and are looking for and make sure you like them!

Just set your expectations reasonable, not all places do private listings and pre-listings. We don't locally around me and many buyers ask about that. We do stuff inter-office and I have connections to put the word out there, but ultimately, unless that system exists in your market there's not a guaranteed way to get an agent who can get you every listing before it's a listing.

IMO, I would never tell a seller of mine to do a listing like that (which is why we don't do them locally) because part of the fair market value involves it being exposed to the biggest pool of buyers for a reasonable amount of time. Why would I recommend any seller present it to a much smaller pool of only select buyers for a shorter period of time? I'm sure I could argue with other agents on that, but I tell buyers to keep the seller mindset in mind when looking. 

If you're looking for this because you're having trouble finding deals, there's other options. Look off MLS as well as on, and be ready to move quick if it is on the MLS and a good deal. Have your pre-approval ready if financing and have an agent that can advise you on strong offers. There's some agents in my office who have won bidding wars with offering less money than other offers because they ruled out some other contingencies, so have someone that can advise you on options like that!