All Forum Posts by: Triston Murray

@Sean Blanchard

This is possible! The payments on the loan you use for the down payment would have to be low enough to not mess up any of your credit ratios too much. I had this discussion with my local banker, and he says he will still have to underwrite and I will need to qualify, but he sees no issues with originating a mortgage on a property I am using a loan or line of credit as down payment on.

Consider loc's... maybe your family/ friends/ partner already has property that a sizeable loc can be placed on? I'd imagine this would be cheaper than a lending club.com loan or HML.... but both are surely options!

By partnering with my parents, I am leveraging their existing properties by placing loc's on them. The plan is to draw the down payment, the rehab, and holding costs from the loc and finance the property with a mortgage. We repay all the mortgage and as much or all of the loc down at refinance,.. If there is anything left over that's great but if not I'm still likely a happy camper.

:( my whole post got posted as a quote :( ......

Hey @Fernando Angelucci,, can you expand a bit on what you are offering here?

@David Rogers Hey ! I have been in a similar boat, and have decided to go with the strategy of buying a distressed home and adding value by rehab. However, my first property was a two flat was occupied when I purchased it. The reason behind searching for a habitable and occupied property was that at the time I had very little income, and the bank allowed a portion of the existing rent to be used to bolster my income on my loan application. But if you have the resources to buy and rehab, do that! imho, it will give you more exit options and control. Check out some good distressed owner occupied leads on hudhomestore.com (owner occupants get first bid on many of those listings.)

Also if you are going FHA, consider going up to a fourplex, and don't forget about leveraging basements... Most can be made livable on the cheap. I currently live in my 2flats basement.... its small, and far from glamorous, but it allows me to rent the 2 higher grossing units out.

Where does your concern of "messing up" the rehab stem from? Are you trying to avoid going over a budget? (determine a budget and get multiple bids) or medicore/ crappy work (screen your contractors and get referrals read reviews online ect)? longer than expected time frames (pay out in installments, and don't pay out until you see sufficient results)?

Also what areas are you looking at for multi fams?? I'm sure you know. Chicago has a few "war zones" that should be avoided.

@Jerry W. I would say the market has been on a slow and steady rise. so yeah, I'm thinking it would be a good move to rent for a few years as you say... 

@John Casmon and @Jerry W. Wow, it looks like I did end up leaving a bunch of key details out!

@John Casmon, Thanks for commenting! I'll address your questions first!

• The house is a Single Family Tri - Level w/ partial crawl space. It was a 3bed, 1bath, 1car attached garage w/ unfinished basement. It's now 3bed, 1.5bath, 1 car garage and w/ finished basement and separate laundry room.
• The mortgage is a commercial 20yr at 4.95%, The LoC is secured, and is 6% interest only, for 12 months.
• Similar places are listed for rent in the area anywhere between 14 and 16 hundred. My dad owns a similar place 10 minutes away that rents for $1511/month. So I'm thinking that range is fairly safe.
• Closing was on August 19th 2015.

@Jerry W., Thanks for chiming in! Here are some more details:

• Taxes are roughly 3200/year, insurance is roughly 750/year
• My current mortgage payment is $261.76/mo and the LoC is at 173.75/mo for a total of $435.51. If I decide to keep the place the lender will allow me to sit at this current payment for several months before placing permanent financing. I'm estimating perm financing on the $93K will be in the $800 - $1050 ballpark.
• As I mentioned up top, I should be able to rent for about $1500/mo... If I am clever and put aside money for vacancy and repairs (I've been stupid in the past regarding this!!) I should realize roughly $250 - 300/mo cash flow. Also, depending on any origination fees.. there should be a few thousand dollars left over (2 or 3k) from the refi to absorb any initial troubles.

Hey BPers. Triston Murray from Chicago! I wanted to share a little bit from a recent deal that just got appraised. I consider this my first pure investment, since the Chicago 2 flat I already own and rent is also my primary residence.

So, here are some numbers!

• Address: 17000 Locust Ave, Hazel Crest Illinois
• Total Purchase: $55,895 (Total amount on HUD-1)
• Total Rehab: $40,475 (inc'l village permits)
  
  • Mortgage Balance: $39,267
  • LoC Balance: $51,252
  • Current Out-of-Pocket: ~$7,290

Total Owed to Lender: $90,519

Total Out-of-Pocket: ~$7,290

To be completely honest I wasn't entirely sure what direction to take when first embarking on this project... Whether I would sell or hold. Because of uncertainty, I wanted to put myself in what I felt should be an "OK" position to do either, by not going super crazy with the rehab, but I also didn't want to get cheap. Unfortunately the rehab did end up going a bit over budget (or is it that the appraisal came in low?), but thankfully I think I'm "OK":

Here's some more numbers!

• Appraisal: $125,000
• 75% Cash Out Refi: $93,750

So while the place is on the market right now, and will probably update and run it again at a slight discount.... I am leaning towards keeping it. I figure I can at least pay off my lender the $90,519, take the $7k hit and use the remaining $3k or so to absorb any underwriting fees and to hedge against future vacancies etc.

Please let me know your thoughts, advice, just really anything! I'll post pics later. Thanks Everyone!

Thanks J and Carlos for weighing in on the issue! When presented with all of the scenarios that could arise it definitely makes more sense to pay him as a contractor, and possibly discuss a partnership when we both have skin to put in the game. Thanks for the quick replies!

Hello ALL BPrs. I'm here to brainstorm yet again and I need some advice as to how to structure a potential partnership between myself and a carpenter:

Here's the story:

My mom's ex husband is an extremely skilled carpenter, but he can also do pretty much everything related to electric, plumbing, drywall, painting; essentially if the roof and foundation are good, he can do 99% of the work.

He has done tons of high quality work for my mom, her family, and her neighbors, and he barley charges for the labor if he does at all.

The Question:

How would someone like me, who is business minded and has access to capital, partner with a carpenter willing to put in a ton of "sweat equity"? Both of our goals are to hold property for long term rental income. But I believe, in addition to acquiring property and rehabbing at a discount, we can also create additional income by establishing a small handy-man/ rehab/ contracting business with the money we save from him doing the work.

Specifically:

1. Is there a common or "boilerplate" agreement/ legal structure that would best fit the situation?

2. What's the best way to position the partnership for growth on both fronts; "in house" acquisitions and offering light to medium duty rehab services to the public?

3. Has anyone had experience in balancing capital contributions with sweat equity (in any RE transaction or partnership)? How did this work for you/ and what pitfalls that may come along?

Richard is spot on with his description. STAY AWAY from Lett's PM. Everything he said is literally their entire business model: nickle, dime, lie, cheat, steal and no delivery. ever.. They WILL ruin your portfolio. Please tell me you have had a good experience with someone in the Chicago area because I need my first property to be properly managed, and my contract from hell with Lett's is almost over.