All Forum Posts by: Mitchel Gendelman

Artem, 

Semi-new as well, but have gone through purchasing my first home/investment property as a house hack. 2 things: 

1) Are you dead-set on an FHA loan? If you have good enough credit and can use a traditional mortgage, you will be able to drop off the PMI once you hit a 20% equity position. There are traditional mortgages that allow for as little as 3% down. FHA loans have PMI for the life of the loan unless you refinance, which will cost you down the road.

2) Have you considered house hacking the property while you live in it? That would create some extra cash flow for that first year to help put you in a better position

In terms of the deal, I agree with James above on the property management front. If you are planning on managing yourself, which I assume you are, then you need to only factor that in once you will be outsourcing that cost. On paper, this deal will just about break even for you. Is the area seeing rapid development nearby? What kind of appreciation can you forecast? I would also highly recommend using rentometer.com as a tool to see other rent costs within a certain radius of prospective properties when analyzing deals to get a solid idea of real rent amounts close by. 

Good luck! 

Hi BP Community,

My mom wants to sell her house, and it is a pretty sought after town in my area (Blue Bell, PA). I am 23, live elsewhere and rent-free, and am looking to get started with REI, but by house hacking in Philadelphia (that's for another post another time!). However, I feel like there might be a way for me to create value for both me and my mom in this situation.

A little background: I don't have a ton of capital to put towards her house without deterring my goal to purchase a 2-3 unit property in Philly. For loan purposes, I have a full-time, salaried job with a solid income. My mom hasn't listed her house yet or signed with an agent. She would be interested in selling to me, though likely not via seller financing. She is looking to purchase another house that is slightly more expensive but in a townhouse community to benefit from lesser maintenance. She has a pretty solid chunk of equity in the house, somewhere around 250k. Her house is a single-family home, 5 bed 2.5 baths in a nice neighborhood. It would need minor tweaks to spruce it up, like landscaping, new appliances, and new carpet or flooring in some rooms. Roughly 15k worth of work to get it in top-notch shape.

Some numbers: Sale comps in her neighborhood are anywhere from 375-390k. Rental comps say 2500 per month would be pretty easy for this house, which is probably low relative to the cost of the house (1% rule).

I'm just looking for some general thoughts into this situation. Perhaps the answer might be to just help her sell the house as usual, but wondering if there are any other options that we could both benefit from. Maybe wholesaling? Putting together a deal and partnering on this as a long term investment with her or someone? As mentioned, I don't have much experience (yet!), but would love to hear some ideas from those that do! Thanks so much in advance!

Mitchel Gendelman

Hi BP Community, 

My mom wants to sell her house, and it is a pretty sought after town in my area (Blue Bell, PA). I am 23, live elsewhere and rent-free, and am looking to get started with REI, but by house hacking in Philadelphia (that's for another post another time!). However, I feel like there might be a way for me to create value for both me and my mom in this situation.

A little background: I don't have a ton of capital to put towards her house without deterring my goal to purchase a 2-3 unit property in Philly. For loan purposes, I have a full-time, salaried job with a solid income. My mom hasn't listed her house yet or signed with an agent. She would be interested in selling to me, though likely not via seller financing. She is looking to purchase another house that is slightly more expensive but in a townouse community to benefit from less maintenance. She has a pretty solid chunk of equity in the house, somewhere around 250k. Her house is a single-family home, 5 bed 2.5 baths in a nice neighborhood. It would need minor tweaks to spruce it up, like landscaping, new appliances, and new carpet or flooring in some rooms. Roughly 15k worth of work to get it in top-notch shape.

Some numbers: Sale comps in her neighborhood are anywhere from 375-390k. Rental comps say 2500 per month would be pretty easy for this house, which is probably low relative to the cost of the house (1% rule). 

I'm just looking for some general thoughts into this situation. Perhaps the answer might be to just help her sell the house as usual, but wondering if there are any other options that we could both benefit from. Maybe wholesaling? Putting together a deal and partnering on this as a long term investment with someone?  As mentioned, I don't have much experience (yet!), but would love to hear some ideas from those that do! Thanks so much in advance!

@Chris Mason and @Wayne Brooks Really appreciate the input! @Rob Massopust I will look into that program as well. Thanks so much!

@Brandon Sturgill Thanks for the response! I see what you mean by " the agent will run interference at every level." The kind of benefits I would try to negotiate outside of price would be something like seller financing, which I assume is not a possibility when the seller has an agent unless the agent's commission is paid as an upfront cost? 

Hi BiggerPockets Community! 

Apologies if this is a bit of a newbie-question, I am still in the learning phase of REI. In all of the reading and listening to the BP podcast, I hear people talk about all these great ways to negotiate with a seller. However, they talk about all these tactics and approaches (Being empathetic to the seller's needs, finding out the seller's true motivation to sell, presenting 2 offers) as if there is a direct dialogue occurring between the buyer and seller.

Generally speaking, are they referring to negotiating leads that come to them from a FSBO, their uncle Bob's neighbor who might want to sell, or any kind of lead without a realtor in the middle? (I am very aware that these kinds of leads are the best and often lead to the best deals) Or, can the majority of these tactics be used when they are realtor-represented homes?

Specific to my situation, I have been finding many great leads through the MLS and interact with the seller's realtor for the showing/information. Are there ways to interact with the seller from a negotiation standpoint even when they have a realtor representing them? Does a realtor create a significant extra barrier that makes negotiating a great deal more difficult? Obviously they are paid based on how much the home sells for an it is in their best interest to get the highest possible price, but what degree of influence is it possible to have on the seller when you are interacting with their realtor when looking at their property?

Any and all input is greatly appreciated. Thanks in advance!

@Wayne Brooks @Chris Mason @Tom S. Thank you for the insight. I see that a conventional 20% down mortgage is a better position, and will allow me to purchase a more distressed property and increase the forced appreciation amount, increasing the chances for a 75% LTV to cover the rehab. Much appreciated!

Hi BiggerPockets community, 

Does anyone have any experience with using an FHA First Time Buyer Loan to fund a multi-family property (up to 4 units), and leveraging private funding (not hard money) from a friend or relative to finance the rehab? I couldn't seem to find much out there relating to this tactic. I am aware of the FHA 203k loan option but would like to bypass all of the red tape and lengthy process if possible. Still open to the idea, but trying to come up with additional creative options to finance my first home.

Numbers aside, the idea would be to purchase a multi-family property using my own funds/FHA loan, receive private funding for the rehab, create instant equity in the property with the rehab, and re-finance after 12 months into a traditional mortgage and pay back the private lender plus interest. Am I missing anything here? Are there any limitations funding a property with an FHA loan and using private money for rehab? Can I pay back the private loan plus interest through a refinance? How can I best pose this idea to my private lender to show value for them as well? Any and all insight is extremely appreciated. Thanks!