All Forum Posts by: Oscar Cardenas

Inventory has been low for a long time now. James Hamling said it correct, I too am disappointing no one said this earlier lol.

These buyers are not buying above market value. If buyers are buying at a certain amount then that is pull toward market value. Market value changes all the time based on seasons and appreciation. Gotta keep that in mind, I see this "Market value" conversation pop up a lot in small "gut decision" based flippers in my realty business. appreciation just simply outpaces their base knowledge of price.

Also, listed price does not equate to market value. If buyers offer above listed price then that just means it was priced below market. The market comes and pulls the price closer to "market value".

Don't mean for any of this to sound aggressive, but the idea of market value causes a lot of analysis paralysis for newer investors that don't understand it. It will always feels like there is a mini frenzy going on and prices will go back down to your normal. They almost never do lol. Now this COVID thing is very strange and no one knows where things are going to go, but just buy right based on recent comps and you should be fine. 

This is not meant to be a self advertisement but rather an observation and a tip for those that want to grab an off market easier.

In Oregon you cannot evict for non payment of rent purposes due to COVID. The looming heroes act threatens to extend that for a long time.  Landlords generally do not get the forbearance/automated option of payment deferral to the end of the loan that Fannie Mae holders have. If we Oregonians want to start the eviction process that doesn't involve rent as the basis then its a 90 day notice for those tenants that have lived there for over a year and there needs to be a specific reason. Those reasons can be :

-Demolish or convert property.

-rehab causing unsafe/uninhabitable environment.

-landlord/close relative moving in.

-Buyer under contract and buyer wishes to move in.

It would be best to speak with a lawyer to make sure that the 90 day notice + eviction are still possible but I think this might be house hacker heaven to a point.

HouseHackers opportunity

-Start marketing to landlords with material hitting hard on the current emotion of nonpaying tenants. 

-Negotiate and make sure to remind them that the tenant can potentially be there a long time.

-When under contract have a contingency that tenants need to be out before close and state in the contingency or an addendum that you plan to move into the unit. That gives the ammunition needed for the 90 day notice.

-Purchase using a Fannie Mae loan. 

-Get new tenants

-If new tenants don't pay, you have all the protection that regular homeowners have. Get forbearance and make sure to choose Deferral when its time to choose your option. Deferral is now a required option to give per Fannie Mae. Here is a link.

https://www.fanniemae.com/portal/media/corporate-news/2020/covid-payment-deferral-7018.html

This way you prevented the seller from completely losing everything and you just got a good deal on the property while being protected. I know this will offend some landlords but taking advantage of an opportunity due to motivation is the same whether its a regular person or a landlord. 

I hope the eviction bans do not get extended. Just giving ideas to the hungry ones if this does pass the way it is. 

it having 80 days on the market already means its overpriced, but have your agent do a CMA to figure out where your offer should be.

Offering 20k under listing price for a property that is 30k overpriced means you are still overpaying. Once you do a CMA then figure out negotiation tactic. my #5 tip is assuming the CMA comes at or close to the listing price.

A few mistakes/ suggestions. Speak to a lender, it doesn't hurt to ask a knowledgeable one.

1.) Conventional financing down payment goes up if it is a small multifamily property. 15% I believe.

2.) FHA limits go up depending on the amount of units so it might still qualify.

3.) the tax bill reduction could be temporary. Perhaps for a veteran credit or something. Ask seller.

4.) I would personally be careful of an agent with two jobs that require a lot of time and practice to do well.

5.) Such a high number of days on market EASILY calls for negotiation of price. In my market depending on the seller and listing agent, I wouldve called for a 18k price redux and have seller pay 7k or so in Buyer's Closing costs. I would try an oral offer first with good reasoning behind the reduction. (below market rents, corona, economy, etc)

6.) There was no mention of who pays what utilities. Since the cash flow potential initially is so low, this could make or break the deal.

7.) You are correct on thinking about current market rent. The current rents play a role in your decision, but market rents should also play a large role. Of course depending on the condition of all the units.

8.) Ask listing agent for seller reasoning. It could be anything. retirement, tired of being a landlord, inheritance, just wants cash, etc. you never know but it can be used for negotiations.

9.) Depending on your area, buying a property that doesn't cash flow while you live in it is completely fine. Especially if the negative cash flow is temporary due to lower than market rents. The purpose of a house hack is to have other people pay all or a portion of your mortgage. Since you did the math and figured you would live in an $800+ unit for a bit over $200, all while controlling a $400k asset with tax benefits means it still accomplishes the house hacking goal.

I personally would recommend going to local REIA meetups and try to help an investor/wholesaler out to learn the ropes. If you plan to join wholesaling with not much knowledge, know you are joining a world that is in the legal gray area and requires disclosures. It might not be good long term plan since I believe that the state real estate boards generally see wholesaling as work that imitates real estate agents so some states are starting to get harsh.

As I mentioned, would be best to look for a mentor at a REIA meeting that wholesales well.

I would like to add one thing to my comment above though. Please make sure the permits were actually completed and not just "in progress" or "expired" to make sure it was done to code. Have seen too many investors try to hide the fact that their finished basements are uninhabitable by not having final permit inspection and not saying anything to the buyer.

Also, make sure it is clear to you that the current taxes on that property might not be what you pay. Depending on the state, you could be budgeting for the current tax amount only to find out your property taxes doubled because there is now 3 beds and 1 bath that they didn't know about till now. Depending on the state the tax man changes their numbers after a sale, not after construction.

Yeah, from what I understand, the different loan programs can have vastly different rules on categorizing above and below grade living areas. I would try to directly speak to an appraiser or the lender as there may be a miscommunication somewhere from there being too many parties.

For the most part, all loan programs still do include the finished basement in the appraisal if the basement adds a large amount of value.

This being from the strictest about below grade inclusion.

"Rooms that are not included in the above-grade room count may add substantially to the value of a property—particularly when the quality of the finish is high. The appraiser must report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the “basement and finished areas below-grade” line in the “sales comparison analysis” grid."

Found this for you to have some ammunition to fight as some agents give up easily.

http://nationalappraiserroster.com/Resources/Appraising101/UnderstandingMeasurementsRoomCounts/tabid/223/Default.aspx

Since I am self managing I tell my tenants up front. Would imagine it would be hard to keep up a lie like that. The reason people tend to lie is to avoid tenants asking for freebies and to have some else to blame for you saying "no".

Both, Appreciation tends to be where the big long term money is but that does not mean ignore cash flow. Cash flow will save you when times are tough. In other words, do a combination of the two. 

Oh dang, lots of questions.

1.) Personal opinion is that when you are starting out you should start investing in House hacks for the area you live in. Then you can start looking into other areas as you learn more through BiggerPockets. Slow owner occupied flips might work too. Best option would be a combination of BRRRR with House Hacking.

2.) Yes, there are a ton of ways to finance. If you have direct contact with the seller than those options tend to possibly open up easier but for most newbie investors some kind of traditional financing is what will happen. Since I recommended house hacks then I would say FHA for small multifamily and Conventional for Single Family due to down payment changes but it would be best to speak to a good lender first.

3.) I recommend starting to look for a team through the Bigger Pockets Network menu. Those professionals have a higher likely-hood of knowing the investor tactics since they are here and paying.

4.) Waiting or not is up to your risk tolerance. I would research if non payment is actually happening. Some things I have found say that year over year tenants that are not paying rent are much lower than you would think.

Hope this helped.