All Forum Posts by: Michael Facchini

I am a lender in the city and do a ton of investment and multi-unit financing for my clients and referral partners.  Not sure if I can help, but feel free to PM me the gist of what you're thinking and will see if I have outlets under our roof with our money, or wholesale/broker channels to broker to...

Thanks!

FHA is likely not the best option long-term, and it is true PMI does not fall off in most cases. If you're looking to use the funds for rehab/improvements, then you should definitely look at a renovation loan, namely the Homestyle program.

Welcome to BiggerPockets and the world of real estate investing! In order to help you narrow down your focus on your first purchase, you might want to start by considering how much down payment you're comfortable putting forth, and then from there get pre-qualified to determine what you can afford. That will shed a lot of light, and from that point you can more easily determine what areas to focus on. In general, 3 to 4 units are what I recommend you start looking at; there are plenty of those good investments in the city. 

You'll also need to consider whether you want something that is stabilized and ready to go, or perhaps something that needs work....some more than others. Those are two different routes with differing levels of effort and capital, let alone financing options. About 1/3rd of my business is 2-4 units, and we're also one of the largest renovation lenders in the country. Having worked many of these deals of all shapes and sizes, I recommend you give the above points thought first so you can uncover how intensive of an investment you want this first deal to be. Happy to held guide along the way!

That is pretty much a myth, however let me qualify.  A private lender will focus more on cash-flow and look past personal income, but they will offer higher rates/fees.  For any bank, mortgage company, or conventional type lender (even if they offer "portfolio financing" that is slightly outside the box), your income will play a role.  That said, the net rental income (per your Schedule E) is income....and often can be what is needed to satisfy the debt ratios.  Same is the case for the subject property.  The aggregated income across these properties and your job income can be used, and if the net income from the properties alone is strong enough, your personal income plays less of a factor.  Problem is, most investors don't show a ton of net income on their Schedule E so as to avoid greater taxation (but we can add back in depreciation).

Let me ask you if you don't mind (and feel free to private message me), how many properties do you own and how many have financing?  Have you purchased this 3flat yet or in process now?  Safe to assume it will be a non-owner occupied investment?

You'll want to find a local lender, especially for unique property types such as multi-units and commercial. 

And yes, agents are state licensed as Neil noted. Not only that, you want someone who really knows the sub-market. That local knowledge and influence are key. If you're focusing on 3 to 6 units in the city, I have a top agent I can recommend.

Hi Kenneth! Coincidentally, I am very well versed in 2-4 units...they make up about 1/3rd of my business. I also grew up out west in DuPage, and Fairway (my company) is one of the largest FHA lenders in the country. So, happy to nominate myself for that conversation if you'd like to discuss!

Correct, you can have two people on the loan and deed.  Of course, if one's debts or credit scores is much worse than the others, it could impact qualifying, the rates, etc.  But in general both can be on the deed/title.

We are a direct lender and one of the largest residential lenders in the country.  We also have dozens of wholesale/broker channels.  I'd be happy to take a look, but to your comment in a previous point we would need to see sufficient income to satisfy the Debt-to-Income ratio requirements.  We can include income from your job(s) and/or from the rental income on the subject property (perhaps looking better once the property is rehabbed and stabilized) and other properties.  That help?  If  you'd like to fill me in more on your scenario privately, feel free to email me.  I can't post my email but you can find me by searching Michael Facchini Fairway.  Thanks!

Hi Dennis!  So, it really depends on the project size....both in terms of the acquisition/purchase price as well as the rehab necessary.  In general though, if you're able to buy cash, do the rehab with cash (and avoid a "back seat driver" - IE the lender - during your rehab), that is ideal.  Then you cash-out and bring those funds over to the next project.  You'll have equity/capital remaining in each of these projects, but you'll still be able to leverage yourself in a good way and parlay into more deals. 

As for the LLC, if you're seeking residential financing (which is easier to procure, and cheaper), you will not be able to have the LLC be the borrower or holder of the deed/title. It is best to keep in your personal names, and yes you'd still be able to split ownership percentages as you see fit. That help?

Hi Kevin!  Lots to touch upon here and don't want to leave a novel in this thread, so will be brief for now :-)  First off, I have a variety of thoughts on the neighborhoods you mentioned as well as the pros/cons of suburbs vs the city.  There are considerations from an investment aspect, but also lifestyle aspect since this initial investment will start as a primary residence (as it sounds).  Starting as a primary is a great way to ease your way into real estate investing.  A few of my investment properties now started as a primary for a few year.....and such is the case for many of my clients....and thus the utility of that purchase can serve several purposes.  If this will be a place for you to live in for a bit, you want to enjoy it...and often if you enjoy it, a renter down the road would presumably enjoy it as well (generally speaking). But of course the numbers need to make sense too.

I think purchasing a condo as your first investment isn't a bad idea at all. It's certainly an easier path, more manageable (not just in terms of the first purchase and mortgage process, but also in terms of owning it whether you live there or it eventually becomes a rental), and is a great place to call home for a few years, then becomes a great investment once you decide to move out.

Regarding financing, conventional/conforming limits on a 1unit are now $424,100 in Illinois, whereas FHA is $365,700. While FHA has its benefits, most often conventional is the better route to go. My primary occupation is lending, and we offer low down payment options that meet or beat FHA in most cases....and often we can do low down payment on multi-units too (non-FHA) if that's a route you end up looking at. Thus, lower down payment financing should be available for multi-units and 1-unit condos....and you therefore won't be restricted necessarily in that regard. However, a condo might be a easier bite to chew on this first deal as you get your feet wet. Having said that, I work with a ton of first time buyers that purchase multi-units. Just depends on your preferences, tolerances, etc. Happy to dive into any/all areas above whenever you like. Whether with me or another professional, the discussion is often more productive live as it becomes more three dimensional and easier to breakdown a lot of the smaller details and considerations.

Congrats on graduating college and looking into purchasing!  As has been stated, the sooner you start the better in the long-run!

Welcome Josh! Have you started to think about where you might want to invest, what kind of property type, down payment, or any of those general topic matters as you start to get acclimated?