All Forum Posts by: Oscar Beteta

Hi everyone!  I’m in a similar situation where I am planning to buy a triplex or fourplex as my primary residence.  I want to buy it with a conventional loan with 25% down and then take out a heloc that will allow me to go up to 90 cLTV.  

Has anyone found a bank or credit union that offers high HELOCS with high LTVS?

Thanks for the feedback guys.  I'm still trying to really understand how this works.

This is how I'm currently thinking of this:

If there are different valuation methods for 4-unit properties depending on the loan type, this creates an issue for the seller.  

From the seller's point of view for example, if his/her 4-unit property has an NOI of $1000/month and the cap rate in the area is 6%, then the property value would be calculated as $200K using the income. On the other hand, let's say the comps say it's only worth $130K? Or $300K? Now we have a big issue of valuation. Should the right approach be to average the two methods? Or add more weight to the comps valuation method?

Below is a more real example of where I'm running an valuation issue:

I am currently evaluating a 4-unit property where the bank I'm working with for an FHA loan valuates the property at $340K based on comps. The NOI for the property is $1600/month and using a cap rate of 6%, the estimate value based on income would be $320K. All good up to this point. However, the property rents are significantly under market value. After rehabbing a bit and getting new tenants (let's say it takes a year), the NOI is estimated to be $2100. Based on this new NOI, the property value based on income would be $420K. This would be a great way to add value to the property! However, if the banks will only use comps, then the value of the house would only stay at $340K no matter what the income is. That seems very limiting.

For 4-unit properties, will they forever be at the mercy of comps and never based on income?  When is it applicable to get a commercial loan on a 4-unit versus a residential loan?

@Mel Kite

Hi Mel, I live in Bluebell PA. I am in a similar situation as you in the head I am very excited to start investing in real estate but I haven’t yet bought my first deal. I too would like to start out nearby where I live. I have been diving into books and podcasts over the last six months or so. Therefore I feel quite armed with knowledge already. I am currently evaluating some properties in Montgomery county PA and I am getting closer and closer to making a purchase. I would be happy to chat to give you whatever advice I can give you.I would definitely recommend that you join DIG as a great platform for networking in this space.

Thanks for the feedback Bradley! For your refinancing right now, will the bank use local cap rate and GRM values to determine the value of the property?

For your case, does the income generation method results in a much different property value than if you were just using comps?

Hi BP!

Are there any experienced investors that are familiar with the Plymouth Meeting, PA area?  I'm looking to learn more about the area and determine if it's a good area to invest in.  I'm currently evaluating a 4-unit property there so I'd like to get more insight into the future of this area.

Please let me know if anyone can help :-)

Hello BP!

I'm currently evaluating a 4-unit property in Plymouth Meeting, PA. After speaking to my lender, he confirmed that their method for determining the property value would be solely based on comp sales and not income. Note that I am working to get an FHA loan.

I was under the impression that banks would use a combination of comps and income generation methods to determine the value of the property.

Can someone provide me with more insight into this?  Will all lenders around the Plymouth Meeting, PA area determine property values for 2-4 unit properties using only comps?  Are there other areas where banks would look at both the comps and income generation valuation methods?

Thanks in advance for the help!

Hello BP community,

Is there anyone out there who is very familiar with the Cheltenham, PA area?  I really like the area in that it's close to the city but it's still have a nice suburb vibe.  I know that the property taxes are some of the highest in montgomery county and that this is not a desired characteristic of a market that is supposed to be good to invest in.  However, I'd like to learn more about the history of Cheltenham, PA and where it's headed.

If you're familiar with this area, please let me know!  I would love to get hear your insight.

Thanks in advance!

Hi KK A.! Did you ever find the answer to this question you posted? I'm in a similar situation now and I'd like to know more about the rules for conventional financing and FHA financing regarding how soon the owner needs to move in to take advantage of the owner-occupied financing benefits.

Let me know!

@KK A.

Yes - MontCo would be great!