All Forum Posts by: Nyle Emerson

Hi guys,

I'm about to sign a contract for my first purchase as a homeowner. It's a two-family in Brooklyn with a furnished basement. It's a bit out of my price range at $667,000, so I'm using FHA with 3.5% down, and seller's concession to cover the closing costs, about 5% of the purchase price.

I had a couple of questions about the appraisal process, particularly about renegotiating the seller's concessions if the appraisal comes back low. At the advice of my agent, I don't have an appraisal contingency, which is common in NYC's hyper-competitive market. However, I do have a mortgage contingency.

As I understand it, there are three scenarios that could happen during the appraisal:

• Option A - The lender appraises the house for the full purchase price of $700,350 or more. I am able to use the full seller's concession, and I ride off into the sunset.
• Option B - The lender appraises the house for $667k or lower, and I have to come up with the full closing costs myself.
• Option C - The lender appraises the house for somewhere in between $667k and $700,350.

Here are my questions;

• (1) If Option C happens, will I be able to renegotiate the Seller's Concession? For instance, if the house appraises for $687k, will I be able to renegotiate the seller's concession from $33,350 down to $20,000, and pay the remaining $13,350 myself? Is this common/uncommon? 
• (2) In the case of Option B or C, is it a better idea to use an FHA 203k limited/streamline, so that the appraisal is based on ARV or "as-Complete" instead of the traditional process? Would this make it easier to write the seller's concession into the loan?

• (3) If Option B happens and I'm not able to come up with the full closing costs myself, would I be protected by the mortgage contingency, since I technically wasn't able to secure a loan for the full $703,500? Or will the seller be able to keep my deposit?

@Remington Lyamn, @robert Ellis, @michael P.

MY BAD GUYS! I will never speak ill of Columbus or the great state of Ohio ever again 😯

Go Buckeyes!

Thanks guys, this is my first real post and I appreciate all of the quick responses and advice. 

@Jonathan Rivera, when I say "house-hacking" I'm not referring to living rent-free, but merely being an owner occupant in MFH home, and using the tenants to subsidize my rent. Your advice about "putting on your mask first" hits home. I think I am trying to do two things at once, really appreciate that advice.

@Alex Uman, thanks, man! I've been looking at homes in Cobbs Creek, Mantua, Powelton, Belmont, in the $200-$300k range. Most of them I projected to cashflow $5k/year. I've heard that appreciation is less important than cashflow when looking at properties. There are a couple of triplexes/quads in University City for 500k -600k (turnkey), that cashflow around $11k/year. U City seems like a solid choice in case the bubble does burst, college kids and grad students will always have $$ and need a place to stay. That's what I've been telling myself, but I like your advice of taking less risk, and not biting off more than I can chew. 

@Steven Foster Wilson my goal is cash flow, and I know the Midwest and down south are my best bets for rent equity. However, since I'm looking to use owner-occupant loans, I'd like to stay on the coasts. Call me bougie, but I'm not living in Columbus for a year. Maybe a turn-key investment somewhere down the line.

@Joseph Gordon let's link bro,

@Jaron Walling, yes, thanks for saying it. I'm very new to real estate, but every day I get floods of articles and Youtubers saying the bubble is about to pop in 2021. The only thing is that they've been saying that since 2018 and it still hasn't happened. Your "what's the rush" comment brings me a lot of relief. I work remotely, so I could be chilling in Malibu or something rn, and still saving money. On the flips side, however, NYC prices have been dipping. But experts also say "don't try to time the market." So I'm trying to figure out if I should make a conservative move right now, or wait a while. Your comment is another tic in favor of "pump the brakes and see what happens."

@Brendan McAllister I'm definitely down to buy a MFH that can be fixed up with a streamline 203k or Fannie Mae Homestyle. Especially if I can find one on a nice block in an opportunity zone, so I can get 50k streamline/limited instead of the usual 35k. Would love to force the equity. Right now, I don't have enough cash to purchase a property unless I go to a sheriff sale and hope for the best. Thanks for the articles, will definitely check them out. 

Hi guys, 

About myself; I'm a Philly native who's been living in Brooklyn for about 12 years. 33 y/o, single, no kids, and employed full-time working remotely. I'm looking to House Hack a multi-family in Philly or East Brooklyn where I currently live. I have an excellent credit score, and make mid-six figures, with cash reserves, a 401k, and a stock portfolio. I'd like to put about half of my cash savings towards my first investment. My long-term goal is to Buy and Hold or BRRR, to create a portfolio of rental units that will help support my mom with retirement. My short-term goal is to find a place to live, as I'm currently on a month-to-month lease.

There are two things that I recently discovered that threw me for a loop.

1)Wait, I qualify for how much???
The past five months I've been looking at homes in Philly's C/D areas for $200-$300k, to reno with a 203k and some sweat equity. Recently, I reached out to my broker at Cross Country and became aware that I qualify for over 700k mortgage through FHA. Which would allow me to purchase in Brooklyn. However, I could only afford a property this expensive if I can wrap the closing costs into the mortgage via seller's assist.

I'd love to purchase a home here, maybe in East New York or Flatbush. On the flip side, it would also allow me to cop a really nice turn-key triplex or quadplex on the University of Pennsylvania campus in West Philly for that amount. However, I'm wondering is it financially irresponsible to take out such a large mortgage for my first time purchase?

2) Bank of America will give me free money??

The second thing I recently discovered is the BOFA Affordable Solutions program. When I learned that I could get a $17k towards closing and downpayment costs, I was instantly interested. The downsides are that (1) The rate is a little higher at 3.2%, and (2) I make too much money for Philly or NYC. To use this loan I'd have to look in Newark, East Orange, Long Island, Hudson Valley, or even in Oakland where my job's headquarters are based. I'm open to living in any of these places for the next year if it makes more sense to go this way instead of an FHA.

So that's the gist. Right now I feel like I've got a case of "analysis paralysis" and information overload. I'd love to get your advice to put things in perspective.

@Neil Narayan do you know if it's going through Colony Park?

Hi Daniel, I'm living in NYC and am gearing up to purchase a property with a similar strategy to yours. We've been looking for a Multi-Family to either Buy and Hold or BRRR depending on how the economy progresses next year. I'm a newbie to investing and this will be my first property, however, I grew up in Philly. Googling will only take you so far, my advice is to talk to as many people in the area as you can. Talk to neighbors, go to the local bar and buy someone a beer. 

Locals will tell you that "everything is changing so fast," but I find the opposite to be true. There's lots of new construction and developments in Mantua, Brewerytown, and Point Breeze. However, most of the city is moving at a snail's pace. Also, you need to identify what type of property being built near you, whether it be affordable housing, commercial, or flippers. 

Also, knowing the history of the neighborhood will help a lot. There are some great walking tours of different neighborhoods that I can recommend. Germantown has great architecture because of it's Quaker/Shaker heritage but also has some of the worst hoods in the city. Kensington/Fishtown has amazing ROI's, but it also has a legacy of deeply embedded extreme racism. It also has stretches that look like a post-apocalyptic junkie-ridden wasteland (i.e. Frankford Ave). The Northeast used to be a working-class suburb that was annexed into the city, and it's remained relatively the same.

The war on drugs hit our city extremely hard, and many neighborhoods still haven't recovered. Do your due diligence, and take Google with a grain of salt. Hmu if you want to connect, I'm always down to talk Philly RE.

Thanks @Adam Garner! 

Thanks so much @Nancy L.! That totally  answers the question.

Hi Philly investors, 

I'm looking to buy a multi-family home in Philly, and have seen a plethora of MFH's on the MLS zoned as R3AS. Is this commonplace in Philly?

I actually saw a few dream Triplexes in Germantown and West Philly that would cashflow over $5k a year but held off on making an offer because the zoning was R3AS instead of RM1. However, now I'm starting to think that this is a normal practice in the city of brotherly love. Any insights?

Thanks, 

Nyle

Thanks Moises! I'd never try and pull off something like this for my first deal. I'm looking for a small duplex.

I'm just very new and wondering if there are any advantages from an investor's perspective. Perhaps someone could establish a Community Land Trust?