All Forum Posts by: Marc Estepa

Hey @David M. thanks for the response! To answer your question, my plan is to use it as my primary residence when the renovation is done. This is primarily why I decided on the FHA 203K loan also. My understanding is that the FHA loan is for a primary residence. This is why I initially planned for this loan. Since it seems very few lenders are currently offering FHA Loans, I started looking at other options I've never used before. Hard Money being one of them. If Hard Money can't be used for owner occupied homes or just for renovations - I guess I'm back to the drawing board and looking for other options! I have no rich friends or family members unfortunately. Any ideas?

Background:  Currently stalking a house.  It’s an animal hoarder situation, and the family has put the house up for sale.  Conservatively, the homes in the neighborhood and nearby comps are worth $500K.  They are asking for $385 and have had it on the market for close to a year.  The family has been standoffish with potential buyers and won’t budge on price as they continue to work on it.  

As time has gone on, they have hired a realtor, are slowly softening their stance and opening up to offers.  From what my realtor says, it potentially requires about 100K in renovations.

 Based off my analysis on rents in the area and what I can do it for, I need to negotiate it much lower.  I intend for it to be a primary residence when all is said and done but will be leaving in a few years and will use it as a rental investment property.  

Being that this is potentially my first true investment property, I was looking at financing through an FHA 203K loan. My numbers are based off that loan. I have $20K in cash on hand I'm comfortable with using for a downpayment.

As my luck in 2020 would have it, the 4 lenders I’m talking to have said that the FHA 203K loans are on hold due to CoVID. The one lender that is reinstating FHA 203K loans can’t approve it because I am just coming out of forbearance on my other properties and need to see 3 continuous payments before approving it.  That means it can’t happen until at least January 2021.  

The bank I had these mortgages in forbearance with have already cleared me of it but have unfortunately put their FHA 203K program on hold due to CoVID. That's what drove me to go to other lenders.

As a result, I'm looking at other options outside of the FHA 203K. Can I get preapproved for a conventional loan and then do hard money for the renovations? What about doing the whole thing (purchase and renovations) with hard money? Can I do a cash out refinance on the hard money loan with a conventional loan afterwards? Does that even make sense?

Sorry if that’s a basic question.  I feel like it is.  Just trying to understand the mechanics on this before I pull the trigger.  I want to make sure I have the financing squared away before I approach them and try to make an offer!  Thanks in advance!

Thanks for the insight @Sherief Elbassuoni! My overall investment strategy is for cash flow. I’m lucky to be living in a hot real estate market, but I’m not opposed to investing out of state either.   I’m active duty military and manage two properties out of state as it is.  I want to get smart on the analysis and follow where the numbers take me.  As for Tacoma, if I chose to stay invested here primarily, what analysis do you do to choose the specific neighborhood in the area?  Aside from location, what am I looking for?  Thanks in advance!

Hello! So, I'm new to REI and trying to do analysis to better target the area I want to invest in. As a noob, I naturally feel comfortable investing in the area I currently live (Tacoma, Washington) simply because I live here and can build a good network and team - but I am not opposed to expanding my search further!

Listening to various podcasts and news, I hear so many tidbits of data like - CoVID creating trends for people to move out of the city and to the suburbs. I’ve also read that current migration patterns in the US show people moving to the South and West.

Gathering all this information is great to help target different areas to invest, but it’s also maddening. If I’m going to embark on this journey and invest money, time and effort, I want to get the most bang for my buck and challenge myself - even if that means getting uncomfortable and investing out of state.  

I want to be able to build and refine a system to analyze the best places to invest in real estate regardless of where I choose to invest.  If I choose to invest in Texas, Kentucky or even California, I want to be able to use a system of analysis to narrow down certain areas to invest in aside from word of mouth.  At that point, it’s too late anyway, because everyone else listening is also trying to follow whoever is successful.  My point is, that guy did the analysis to identify these areas - but what is his method to the madness?!

My question to all of you REI veterans is this - what is your methodology for target analysis to best identify your areas of investment? Where are you pulling data? Just because I live in an area or like an area shouldn't be the only data points I use to determine where best to invest.

@Karen F. god, I know.  I can’t even with this.  In the end, I want to be cool, but this simply isn’t fair.  I’m trying to do right by them, but now I feel like they’re being unreasonable.  

@Josh Vlach, thanks! I feel like I'm drinking from a fire hose. I just found BP about 2 months ago and there's so much information, I feel overwhelmed! I'm listening to podcast after podcast, watched a webinar today and trying to make sense of everything and write everything down step by step - Barney style. I was searching for homes with an ADU or basement and noticed they all get scooped up quick. Anyway, I'm super eager to learn from everybody and happy to be here! Hopefully when CoVID does down, we can do meetups again!

Following!  I’m just moving to the area again after being stationed elsewhere for a couple of years - but looking at it with a completely different set of eyes.  Just found BP about 2 months ago.  It’s basically an addiction and obsession right now.  Anyway, good luck to you.  I‘m right there with you, just trying to take all this education and build a proper plan.  

@Adam Martin, thanks for your support.  When we first moved on island, I was obviously having a hard time renting with two large dogs.  The Army unfortunately gives the Service Member 10 days to find a house on their dime before you have to pay out of pocket and figure it out.  As a result, the Servicemember is on this mad dash to be as streamlined as possible in their search and are sometimes under the gun to buy a residence or sign a contract sight unseen from their previous duty station.  

Anyway, when we came on island - here I am with two large dogs and it’s difficult to find a home that accepts horses like mine.  I get it, I’m a landlord also.  Being that The landlord is in the service also, he saw the predicament I was in (we all know it well) and took a chance.  Although they’ve had dogs in their property before, they’re still relatively new to allowing pets, so there’s going to be a learning curve.  

In the Army, anytime you borrow something, or stay somewhere, the mantra is to leave it better than you found it.  In the world of real estate, that doesn’t equate too well.  He’s old school and so am I, but that standard is unreasonable when renting out your properties.  

The LL took a chance with me, so of course our family was grateful and we treated the home accordingly.  At least I believed we did.  We were very proud of the level of cleanliness at the end of our 4 years.  Then again, I’m biased.  

Did we damage the carpet with feces and dog urine all over it, ripping out the carpet and leaving holes? No way.  
They’ve inspected the property twice 3 times during our rental period and we’ve pointed out all the issues with the carpet each time.  

Anyway, this is why I don’t want to go down this route and make things ugly.  We’re two old Soldiers at the end of it all who are in disagreement over this situation.  Life isn’t fair, I got that.  I expect to eat some of the cost just to make this decent, but trying to figure out the less painful way to go about it.  

I think we’re going to just pay to remove the carpet at this point.  

@Ying B. Agreed.  I’m not trying to screw the LL.  At this point, I don’t expect to receive 100% of my deposit, but I also don’t expect to lose all of it either.  I think it’s fair to possibly remove carpet, but to be held completely liable for its full replacement after living with this carpet for a portion of its lifespan isn’t fair, especially if other dogs have lived there prior to my family’s.  If I take it to court, I believe the law and technicalities are on my side, but we both don’t have the time for all of that right now.  In the end, I want us to be cool and to finish this business transaction amicably, but FAIRLY.  

@Loren Clive, it’s not about simply landlord versus tenant.  I wish it was that black and white, but it’s not.  I too am a landlord and manage three properties out of state.  We took great pride in this home on our way out and wasnt expecting any of this.  

My point is, I’m trying to let the landlord know that we are NOT trying to get away with anything, we are trying to do right by him but within reason.  I have no intent on doing him wrong, and we put in the same amount of work into cleaning the place that I would hope our tenants would do for us - actually, probably more than was needed.  

Did we have dogs, absolutely.  Did he accept that?  Yes. There should be a reasonable expectation of what he thinks he will receive on the backend.  Normal wear and tear with dogs, but no damage.  There’s a big difference between damage and normal wear and tear.  He has gone as far as to say that when you step on the carpet, there should not be any trace of dog hair on your socks whatsoever.  I honestly don’t think that’s possible.

At the time they accepted us as tenants, they were not expecting to return back to the home.  Their situation has changed over the years and they’re returning.  The wife has allergies apparently.  If that’s the case and they are returning, I believe the reasonable thing to do is scrap the carpet altogether.

Now should I be liable for full carpet replacement?  What about the other tenants before me? 

As a landlord, I set aside 10% in capital expenditures for large updates  to my home such as this.  I don’t believe he’s doing the same and banking on using my deposit. 

I’m obviously biased in this situation, but I don’t see this as fair.  Life is not black and white, it’s grey.