All Forum Posts by: Chan K.

@Cameron Norfleet

Hi Cameron,

I am not following your response. Which of my message are you responding to?

@Joel Owens

Hi Joel,

The house is seller finance. The seller is willing to give me 50% of the 25% down payment. The mortgage brokers I work with only accept a 75% LTV. The 25% down payment needs to be my money (from my saving) according to him. I called Bank of America and Well Fargo, and they work the same way.

Later, the seller and buyer agent recommended that we do the second mortgage outside of closing. I have the 25% down payment in my saying, but I want the seller money for future reserve. So, I told them that would be fine, and I get the money outside of closing.

FYI: I called a few places, and no body is willing to do a 20% down payment for me with a conventional loan. If you know any lender that would do 20% down payment, please give me a few references. I would like to use them in the future.

Later, my wife found a lender who is willing to accept seller finance (50% of the 25% down payment), but the term is 25 years with 5 year fixed rate only. By this time, it is a bit too late and we only have 20 days until March 7 closing. Also, the loan is going to be commercial and not residential.

Joel, I did enjoy the PodCast interview you had with Brandon and Josh!!

@Shaun Reilly

HELOC - is not possible because my single house has no equity, because I bought when it was peak. The quad only has about 10k of equity so far based on lender appraisal by comp.

What are the possible "separate renovation loan outside of mortgage" out there besides "hard money" given that I have good job, income, credit score, and cash flow from my quad? Caution: not owner occupied.

Can I used commercial mortgage on a 2,3,4 units?

I think the commercial mortgage has higher interest rate and shorter term, but I don't mind because the mortgage is only about 100k or less. I can always refinance it out once the property is renovated and tenants are in place.

What is the usually required down payment for commercial loan?

Who determine if the property is uninhabitable? I guess the lender - maybe it is different from lender to lender. While touring the distress home, what are some of the key turn on in determine the house is uninhabitable or not?

Thanks, Shaun

I would like to discuss about a distress 2,3,4 residential unit. As I stated earlier that my first deal does not have meat on the bone. The cashflow is decent, but there is a big set back accumulating portfolio due to no equity.

Let try distress 2,3,4 units

Here is a scenario:

Let say I found a property that vacant and it is not rented ready.

The property costs 100k and I have a 25% down. I don't have money for renovation. Will the bank lend me the 75% conventional loan? Will the bank give me loan for renovation at the same time? This property will not be an owner occupied. How do I determine an after renovation value? In term of timeline, how does the actual process work? Can someone help me clarify my process below

1. Get pre-approve for mortgage

2. Get pre-approve for renovation money from the bank

3. Go find a distress property

4. Find a contractor to assess how much it will cost to renovate

5. Find someone to predict the property value at this point?? Appraiser???

6. Submit an offer to buy the house

7. Go back to the bank and get the mortgage and renovate money

8. Contractor completed the renovation

9. The bank appraises the house

10. Find tenants to fill the units and start paying the mortgage and renovation loan monthly

11. Pull out the 80% home equity based on the ARV

@Raymond B. undefined

Thanks Raymond for the helpful tip.

I sort of mentioned that with my attorney. He said the first lender might ask me to pay the balance in full if he dislike or found out. If this is the case, I might have to pay back the note and remove it from the deed, then refinance to another lender. This is why the attorney said that in theory I should not do it. He also said in practice, people are doing this all the time. The attorney also said that as long as I keep paying my build, no body would care.

The message I got from my mortgage broker is that as long as I doing this outside of closing, then he would not have any problem.

Hi @ Shaun,

You recommend that I become real estate agent myself. I never thought of it, but it is not a bad idea if I could get my hand on that market analysis stuff.

You are also saying that I will need to take class, find a broker to work for and paying annual fee of some sort.

I will research on how to become a real estate agent and determine if it is feasible. I have to weight the value.

@ Shaun, you are scaring me regarding the mortgage fraud. I will have to review the first documents with my wife carefully this weekend. The first mortgage documents are very generic. Does a generic mortgage documents usually contains something like this in the small print? If I missed finding it, what is the penalty? Can I go to jail for this? That would be BAD.

The seller and seller agent know about it. I told my mortgage broker, and he told me that he does not want to hear or know about it. The attorney that I reviewed the second mortgage, note and rider with did not mention it (the fraud). To me, I got an impression that everybody thinks that it is a norm (seller finance) unwritten rule sort of thing.

The rate is good 15 years maturity @ 4.5%. It is a better term and rate than peer-to-peer lending.

@ Shaun, you are a rehabber with a lot of experience. I have more interesting questions to follow. Please stat tune. So from this purchase, I realized that my current method of acquiring the property does not allow me to build the portfolio as quickly as possible. At the same time, there is no meat on the bone. By the time, I have my hand on the property; the sale price usually is at the market value and has no equity or very little (like 10k-15k if I am lucky). Most properties of this kind (3-4 Fam) also have very low cash flow.

I am thinking about a distress multifamily. I would like to understand the process from start to end until the house is fully renovated. This is including a loan process. I definitely don't want to have anything to do with hard money.

Hi @Shaun, thank you

Shaun, if I heard this right, you are saying I should find a more competent agent.

I did consult an attorney regarding the second. He told me that in theory I could not do that, but in practice it might be OK as long as I keep paying the mortgages (both first and second) and no one will give me a hard time. The second will close outside the first a week apart (close on first, then second). I guess I can use my reserve $$ if the first lender demands me to remove the note (seller finance) from the deed.

In conclusion, it sounds like there is no better way of assessing home value or equity of a house on your own beside the realtor agent. I am with you on the websites evaluation; some of them don’t evaluate the value correctly.

I am a newbie. The actual cash flow will unfold itself once I took over in next month.

Hi Joseph,

My average rents is about $762 for 2/1 unit. The rent is definitely below the market. I could do better. The units are still in decent shape. The cash flow does not include maintenance. I guess I will find out as time goes on how much it will cost me – at the moment; my margin is not bad. Initially, I will manage myself, and will eventually hand it over to a good property management as I don’t want to get burn out while working full time. At the occupancy rate of 50-70%, I would still break even or make very small profit. Tenants will pay for their own utilities, except the standard water and trash. I would consider the area as a C given that an A is luxury apartment.

Currently, I am leaving in a single house. The quad will be exclusively for investment purpose.

I would not want to depend on buyer agent. I don’t think she is that useful. Usually, I pick a list of houses myself, and her only job was the showing and setting up appointment for me. Over the period of 5-6 months, I have looked through about 100-200 hours online on my own, and about 50 showing on site, and submitted about 10-15 offers.

At the end of the day, I really want to know how to learn how to research and educational assess house value myself. I need somebody help to show me the rope. I felt that agent is not always looking for my interest and it is like pulling hair when request information from them. I really don’t mind putting the time to research and assess the house value myself.

Hi BiggerPockets,

I am new here. I randomly have read a few forums. I briefly read BiggerPocket "Free Beginner Guide". I also listen to a few PodCasts, while on the road. They are fun and awesome.

I just acquired a Quad Multifamily recently. My closing is on March 7, 2014. It took me about 5-6 months to find it. I picked this property through an MLS. While going through realtor.com, I found this property. I have an agent who sent me the MLS update daily, but it was not fast enough. I don’t think she really knows much.

She does not know the concept of cash flow, cap rate and never helped evaluate a property worth for me.

I am a cash flow guy. It is my priority and equity is secondary. Looking back, it was easy for me to determine cash flow, but I have a hard time determine the value of the house. For example, I don’t know if the house is selling at the market rate or has any equity. I looked over the lender appraisal report, and see how the appraiser evaluated the house worth. It is complicated. He could not find much 4-Fam in my town, so he went to towns close by the used those houses for comparison. He picked 4-Fam with similar living space and number of bed rooms.

Some information regarding the house I just recently acquired:

1)4-Family

2)My wife and I are taking out 30 fixed rate (first mortgage - conventional) at 25% down payment

3)Seller finance (second mortgage)

4)Cash flow after mortgage payment (first and second mortgage), home insurance and tax is about $1000-$1150.

5)Tenants are at will and all four units are staying. I will keep the monthly payment the same for them.

My question is:

How do you evaluate the house worth? How do you determine if the house has any equity? Is there any reliable website that I can use to determine if the house has any equity at the given sale price? I need help – step by step how to perform research and good reference websites.