All Forum Posts by: Erin A.

What @Ned Carey said!

And, also:

1. The private lenders I have worked with and spoken to will only lend to LLCs or other entities (with a personal guarantee, of course). 

2. LLCs help you cluster and organize your risk. You may wish to establish various LLCs for different types of property (apartments, offices, etc.), different cities/regions, or to separate different groups of investors. 

3. Not sure what the LLC tax climate is like in MN, but here in CA each LLC must pay a *minimum* annual tax of $800. For example, it doesn't really make sense (in my opinion) to put a small multifamily property cash flowing at $3,000/year into a California LLC.

Hi @Mike Perrotti , sounds like you've got a dilemma! Sorry to hear that. 

There are a thousand ways to make money in real estate, so don't despair yet. I'm a huge fan of FHA for new (and experienced) investors, but if that doesn't make sense in your market there are other options.

1. What's the condo market like in your area? Could you buy a 2- or 3-bedroom and rent out the other room(s)? Could you put the extra rooms on Airbnb?

2. Same as #1, but for single family homes.

3. Any friends or family want to invest with you?

Regarding the 203k loan... I have not done one of these yet but really want to. From what I've learned here on the BP forums, there are stacks and stacks of paperwork involved, tons of bureaucracy, and likely a very long closing period. I'd recommend doing a keyword search on the forums and seeing what you can learn about 203k's. 

Note that FHA loans require you to live within a "reasonable commute" of your job. This could limit your markets if you go the FHA route. The 203k is part of FHA.

Hope these suggestions help!

Erin

@Jerry Padilla is correct. I bought a triplex last year using FHA and put 3.5% down. There are a few other fees for using FHA. There's an up-front mortgage insurance premium (I think it's around 1.75% of purchase price) which can be rolled into the loan if needed. There is also a monthly insurance premium (MIP) which adds to the cost of the loan. For 3- and 4- unit owner-occupied properties purchased through FHA, you need to have 3-6 months of reserves at closing (reserves = principal, interest, taxes & insurance).

For example, my mortgage is about $150k and my monthly payment (principal & interest) is about $740/mo. My MIP is about $168/mo and the monthly portion of my property taxes are about $160/mo. My property insurance is about $70/mo. I had to have $3,000 in reserves at closing, or 3 months at roughly $1,000/mo. (I was allowed to use gifted funds for this).

I say you're absolutely on the right path with respect to finding a property where you can rent out the other units and have your expenses covered. This is a great first step and I'm a huge advocate of new investors looking into FHA for multifamilies.

I've written a bit about my experience with FHA and being a first-time, on-site landlord on my blog. I will send you a link to my website via the private message feature.

Best of luck to you! Feel free to write with any questions. 

Erin

Regarding the lack of backlit keypad on the mechanical version: Most people would use their cell phone screens for impromptu lighting, no?

I'm coming to this thread quite late. Just read through all the posts. I learned A LOT and am deeply touched by the support —both virtual and on the ground—that was rallied for Bill. I'm so proud to be a part of the BP community! Yay!

Ditto what everyone else has said. Those shows are great entertainment & good for inspiration but far from reality. My biggest pet peeve is that they never present an accurate financial picture of what the true costs and expenses of doing flips really are. For example, I watched a show (can't remember which) in which the "net profit" the hosts displayed at the end didn't include any sales commission for the selling agent, no closing costs, no holding & interest costs, etc. etc. Booooo!

Good for you Anthony! I'm not involved in the San Antonio market, so this is just a post of encouragement. I made a similar first-investment move last year by using FHA to buy a triplex (only 3.5% down). Also great to meet another "young" person dipping their toe into real estate investment (I'm 26). Feel free to message me if you have other questions about RE, etc.; I'd be happy to help in whatever way I can. Good luck!

Jimmy,

I spent the summer in Montréal to essentially take a break from life and absolutely loved the city. Are you thinking of investing in Montréal? If so, are you thinking of single family or multifamily? I'd be a bit concerned if you're going the multifamily route... from the research I did I believe property prices outpace rents and thus you are likely to have a hard time getting positive cash flow. This is definitely the case in the more trendy neighborhoods (Plateau, Mile End, etc.) This may not be true in the suburbs, or possibly even in Côte des Neiges, but I'd definitely caution you to dig deeper. 

I'd be happy to Skype with you about the Montréal market if you want. I'm looking to acquire some buy-and-hold properties in Canada and was intending to thoroughly research the Montréal market (despite what I said above, under the right conditions investment in Montréal might be good). Send me a private message if you're interested and we'll set something up. Bonne chance!

This is a difficult question to answer without knowing how savvy you already are with real estate finance, but there are certainly some basics I can offer up to get you started:

1. How many points? Meaning, how many percentage points of the total amount you're borrowing do you have to pay to the lender as an origination fee? Hard money lenders are notorious for high points, like in the 3-10 range. 

2. What are the borrower qualifications? Some hard money lenders are willing to be pretty lenient with respect to previous foreclosures, bankruptcies, poor credit, etc. Ask them for an open, honest answer so you don't waste each others' time if you're a "nontraditional" borrower and fall outside their comfort zone.

3. How long does it take before they can fund your deal? Hard money lenders can usually move much more quickly than a bank, but they all vary. 

4. Do they require you to personally guarantee the loan even if you're buying through an LLC or corporation?

5. If you're a new investor, how willing are they to be patient with you? Is there any mentoring aspect to this or are they a silent partner?

Hopefully others will chime in! Best of luck to you.

A big "huzzah!" to you! Way to go! Like others have mentioned above, I also feel like once you've got the first property under your belt, you can't wait to get into the next one. Keep your enthusiasm and momentum going. Learn all you can, integrate your new knowledge into how you handle your real estate growth, and keep on adding to that portfolio!

I have sworn up and down that I will never buy a condo due to HOA hassles and the fact that even when the mortgage is paid off you still have to pay the HOA fees. But, it sounds like you know your market well and made the best decision available to you. I'm trying to open my mind to the idea of a condo as a vacation rental somewhere... we'll see. ;-)

@Nathan Emmert  suggested property taxes at/below 1 month of (gross?) rent. It hadn't occurred to me to think of it that way, but I like that suggestion a lot. I just did the calculation and the taxes on my triplex in Stockton, CA are a tad higher than 1 month of gross rents. For being in California, I suppose that's pretty good, though my property is in a C neighborhood.