All Forum Posts by: Scott Hollister

@Trace LeDogge, Yes. Always disclose, no need to hide stuff. 

@Mo Muigai good question, not sure if this has been answered but this is what I do in CT for loans. 

For 1-4 unit:

• I always start with a Fannie/freddie loan as its an owner occupant loan. That will be the least out of pocket cost and best debt. Right now 3.75% for a 30 year fixed. You can use a 3% or 5% down conventional with MI (mortgage insurance), or FHA loan 3.5% down with PMI, or USDA 100% loan (Rural single family purchase), or 203k Rehab loan(Like the FHA but you can finance in construction costs).

If it is a straight finance property here is how I underwrite:

• Assuming it is a 1-4 unit property, I try to stick with value add so I can force appreciation and create the equity. Otherwise you will have to put down 25% in most cases, and you will run out of money real fast. 
• So I ask myself, do I have the debt to income ratio to qualify for Fannie Freddie debt, long term, fixed rate, 30 year, as an investor. 75% LTV, limit to 10 in your personal name. Gets harder as you go plus the paperwork is a "pain" IMO.
• If the first bucket can't work, then I look at local credit unions for portfolio loans, meaning they don't sell the note and can underwrite on their terms, but still want to see income in most cases. Im hearing 4.25% for interest, 30 year term, and 10 year adjustable. 
• Then I look at the commercial side, now the property will have to debt service, and terms are 20-25 year term, 4.25-5% interest over a 5 year adjustable. No balloon which is nice, but you take on the interest rate risk as a borrower. Something you always want to shift back to the bank:)
• The next bucket I do IF I plan on keeping the property long term, want to move fast, need short seasoning, and don't have the debt to income to qualify. Rates are 6.3% now, can purchase the rate down to high 4% range, 90 day seasoning cash out refi, unlimited amount of loans, 2-3 week closing time and low doc. 

So every deal is unique, your goal is to have relationships in each of these buckets, stay in contact, and underwrite each deal individually. You also have to understand your end goal, they you just put the best debt you can at the time and plan for the worst. 

This is how I think on rate/terms:

1. I never want a balloon mortgage. Banks will say they can refi you then, but Ive heard horror stories about banks calling notes due, even though they never missed a payment. 
2. I want fixed debt at all times, BUT this gets very hard once you step into commercial properties that are unique, or aren't playing in the 1M range loan balance. 
3. interest rate really isn't something I stress over, if I have long term debt and the property cash flows day 1. Again try to get fixed, if not get as long of an adjustable as you can. Rates are SO cheap historically speaking. 
4. Fees and points vary across the above, ranging in from cheapest to most expensive. I look at the opportunity cost and don't care too much about points, especially if Im pulling equity out, my tenants are now paying them:) 
5. Worry about getting more deals, putting good debt on them, purchasing for cash flow day one. And the rest is just management to have a good asset. 

Welcome to the site

@Nick Pedrolini

I just want to complement you on a perfect intro post for BiggerPockets. You will always get a great response when you have been specific as you are. Great background you're building with construction experience, you have chosen the best way to get started in real estate (house hacking), you are focusing on education (Best place is BP, hands down), and you have clear, attainable, goals for now and next 5-10 years.

Nice work! 

I think you're on the right track and there are some great recommendations above. I'd see keep going on this path, only adding to identify a market that you want to invest in, become an expert by looking at past sales of multis and seeing what's on the market, get pre-approved, find an agent, and start looking. As well as going to local meetups, they were and still are key for my real estate success. 

Other ideas: You can house hack a 203k loan, hard to pull off and comes with risk, but if you do it right, it's the holy grail I think for a first time investor.

Let me know if you are looking to be connected with any local construction companies in the commercial world. I am on the board for the CT Commerical real estate alliance. 

Best of luck! And love the off road/hiking part, we bought our dream land last year in CT and have been hiking daily and quading on the weekends!  

If you like to read, @J Scott has 2 of the best books on estimating rehab costs and flipping houses:) 

Hello @Kim Handelman,

Love the post because its unique and has some land. We just completed a 64 acre subdivision in CT last year, with one house on the lot, septic and well, etc. 

Numbers wise it cost us 11k or so for survey, maps, perc tests, etc. Took 7 months or so, a couple of wetland meetings. This will be more based on 5 lots (2-3 holes per lot to determine perc rate). So count on fees with town, excavator cost, and soil scientist for one whole day would be my best guess. 

My biggest concern is the huge cash outlay for the total project with no approvals in place. I love the rental idea, that will help with the burn during subdivision. The other big one is wetlands, Im assuming with the pond that there will be wet areas and possibly streams. Wetlands is the only committee that can wreck your project and from what I understand if you fight it and win, you just get another chance to go in front of the committee. 

Financing wise will also be tough, will have to go commercial based on the non-conforming use. Might be able to go Fannie/freddie if you have 4 houses on one lot, which will be the best financing. But total loan amount might exceed limit for County? Otherwise they would have to debt service, which you may get away with but it sounds tight on purchase, rehab, and rent above. 

Financing wise you can take it down with developer, I used hard money and private to finance at first. Then sold the house to my wife, and kept the acreage in our name for now before we build. It would make sense to rehab all the houses at once, financing is typically 12-18 months, so the freedom to do one at a time isn't there. 

I think a partnership with an experienced developer would make the most sense, someone with really deep pockets:) 

Or you could structure a syndication/crowd funding on the total project, but hold time would be tough to estimate. Especially since you will be out 18 months for the new construction homes, so market will be hard to predict in CT. 

Construction costs seem spot on at $150 a sq ft (Not including land or site cost) When you have scale that is the rate I've been hearing for developers of residential. 185-200 seems the norm (not luxury).

We are at $100 a sq ft for our new construction with me as the GC, very very cheap and will most likely increase as surprises pop up. 

Would love to jump on a call, love creative real estate! 

@Alexander Reda great question and good to meet another Eastern CT investor. 

You are in a very hot multifamily market, and I'm assuming your primary is a single family right now? With the CHFA loan? When did you buy and how much equity would you have if you sold in todays market?

My advice would be to hit the reset button if you want, you can sell your house with a Hubbard clause and try to house hack a 4 unit. Good news is that you can do this at the same time, but it will be very tough. You will need to pay list price for a 4 unit (they are going for a premium now) and you will also need a buyer who will want to hang around to buy your house. You will also need some post closing liquidity on the 3 and 4 unit properties. (Duplex not needed). And you may be tight for cash due to low money down on the single, so look into CHFA again? 

As far as raising money, do not do it if this is your first true investment. Especially if you're buying anywhere in our market, and I'm generally speaking because there are still deals to be had but they require expertise in certain niches. Which only come from years of experience or partners that have them. 

I hope this post doesn't come off as negative but I was born and raised here, have been buying in Eastern CT since 2012, and know of every single multifamily complex and owner in Tolland and Windham counties. There is no longer "stealing" these deals away, everyone who was selling has sold, and the people that are holding want top dollar or are really happy to keep them because they bought prior to 2004. 

Which leads me to my best advice I ever heard from one of those owners. He said that you must see what others don't see so you look like a genius in 10 years. He bought a bridge that saw thousands of cars per day, was on market for years and no one wanted it. What he did was put advertisements on it to collect passive income, and he said it was his best investment ever. 

I'm saying don't invest, but just be careful with other peoples money, especially in the market we are in. Best of luck and hope to see you at our meetup tomorrow!

@William Collins let me know if you can see it at the top of the page? 

• 02/12/20 06:00PM - 08:00PM 
• Parking in rear , 110 Main Street Manchester, Connecticut 06040

Our special guest speaker is Marlene Jung. She’s a CPA who’s been in practice for over 27-years. Marlene is also an active real estate investor with multiple properties in her portfolio. Come listen to a tax pro share her expertise and tax-savings tips on a variety of topics. Marlene will educate all of us on optimizing your tax situation for 2020 and beyond. Bring your notebooks and your questions so that Marlene can help you make the most of your investments in real estate. This is sure to be an information-packed meetup!

@Michael Spindler,

@Michael Doherty mentioned the good programs for first time home buyers. The best thing to do is save as much money as you can, with two incomes you should be able to get there within 6 months. 

• With the FHA loan, 3.5% down, you can purchase a 1-4 unit property. Just note for the 3 & 4 unit owner occupied ones, you will need post closing reserves. Where as the 1-2 unit you won't need as much. My advice is to max out the program in one of your names, then you girlfriend can buy another once you satisfy the minimum length required to stay in your first property.
• You can also use a 3% or a 5% conventional mortgage. Main difference is you pay MI (Mortgage insurance) instead of PMI (private mortgage insurance). Slightly less per month. Last quote I saw was around $80 a month for MI and $135 for PMI. This will change based on the borrower and property I believe, check with a good lender. (A good broker or local direct credit union.)
• You can also use the CHFA loan, and I believe there is assistance for the down payment as a loan. I think it's called DAP. I haven't worked with this before so don't know much about it, worth checking into for sure. 
• Another good loan is the USDA rural loan, but I believe this is only for single family homes. 

You can take out a 2nd mortgage (HELOC) for a down payment. BUT there are a few key things that you want to know first. The bank will factor the payment (payment as if the total loan is fully drawn on, even if it's not) into your monthly debt to income ratio. And also it's not wise to use debt as a down payment, for the most part. HELOC's are an amazing tool, but I like to use them as a credit card only, quick in and out. Fix and flip or anything with a value add component.

Another option you may want to think about is borrowing or getting a gift from a family member for the down payment. The golden goose for you is to find a 4 unit house hack, ask for a closing cost credit on the contract, and getting a gift as the equity/down payment. If you can't or someone won't, then just save up until you have enough. 

@Juana DeLao welcome to the site!

I would recommend picking up a copy of the BRRRR book and searching on the forums for success stories. And not so successful ones so you can try to avoid common pitfalls.

The biggest things to understand: Buying right, getting the rehab amount correct, having a rehab contingency, completing the rehab on time, getting the ARV right, and being able to refinance out into good debt.

And here is a quick reference to my first BRRRR property that helped me tremendously: https://www.biggerpockets.com/...

Best of luck! 

Hello @Tyler Matthews, great to see another New England real estate investor! 

Maine is a great state, and love to see that you specialize in lake home properties. That is a very nice niche for people who vacation there. And it sounds like you have some great knowledge in real estate already, keep up the good work! BP is the best place to continue to learn about real estate investing. 

Have you gone to a local meetup in your area? That was one of the best decisions I've ever made; learned a ton, networked a bunch, and grew my business. If you don't see one, I would recommend starting one. 

Best of luck!