All Forum Posts by: Ralph Hunter

Question. Why would you need a LTV of 55% to eliminate PMI. Every mortgage that I have ever heard of allowed PMI to drop after 75% LTV (maybe 70% on a income property). If you are working with FHA, then in my opinion, I would refinance with a whole different lender. Their APRs are always higher than conventional financing.

I would personally not want to run a rehab remotely. If you are paying someone else to manage it, your profit margin is going to be quite low. That being said, that does not mean that you need to look into turn key new construction either. 

You can find a lot of reasonably priced rental properties in rentable condition that can be managed by a good PM. The key is to do you due diligence. Pick an area in Texas, I suggest Huston. Find a great real estate agent. They will help you get a qualified home inspector. I would also recommend paying for a contractor to inspect also (but not at the same time). The two opinions is a safety rope for you.

You can do it. Others have and so can you. It will hinge on your real estate agent and PM. They will help you to find an investment property to meet your guidelines. 

Just my two cents. Getting bank financing under a corporate entity can be much more difficult than an individual. I would take the time to meet with a tax adviser to see what is in your best interest.

 Lenders would require that a borrower's housing expenses take up no more than 35% of the gross pay. If your tenants could prove that they have funds in the bank (or investment dividends) which would allow them to meet this requirement, then why not rent to them. 

Having a tenant who has the cash in the bank seems a little less risky than a tenant that has a good job but no savings. What is the worst case scenario (besides it being the home of a drug lord/meth house), they don't pay the rent and you evict them. We are coming out of the winter season so a re-renting fear should be minimized. 

I would still run a credit report as an indicator that they know how to manage their money. A foreclosure victim with a large cash inheritance is almost as risky as a meth house, IMO.

I would agree that you have two options. 

The first was already mentioned, full 12 month payment in advance. 

Another option is that the full 12 months is placed in an escrow account. You withdraw the rent amount from the account each month. Then the money is secure but not spent in advance in case of emergency and the tenant must vacate - extended out of the area medical treatment, care of inlaws or locates employment. 

I am assuming that you used a licensed real estate agent when you purchased the property. Why not get a hold of them and explain your situation. Perhaps they would be willing to help you out since they already know of you because of the past transaction. 

Filing a claim or reporting a problem to a state agency isn't a bad idea, but do not expect any remedy to you. Best case scenario is that in 6 months to a year the state agency will look into it and penalize the PM if they can prove fraud. 

I agree with getting someone local to do some research and see what is going on. You could even look into another PM and have them look into it. Let us know what happens. 

I would recommend going over your contract with a fine tooth comb. Look for the section that handles repairs and costs. Though they may not have disclosed that the flat fee was $95, there is probably some line stating they will bill a trip fee. 

I personally would give them a call and find out what is going on. That does seem really high - especially if there was another professional fee on top of that (such as a licensed plumber.) Let us know what happens.

Here are my two cents as well. 

You will need to wait at least 6 months before a refinance or equity draw. Many lenders require a 12 month "seasoning."

You really need to talk to a qualified real estate agent to get an accurate idea of the market value of the property. If you personally pay for the appraiser, you cannot use that for financing. The lender will have to order their own (meaning that you will pay for it twice). They do that to prevent having your "appraiser friend" do you a high value favor. 

A HELOC or any other equity drain is going to only allow you to withdraw up to 80% of the equity. If you did not put any money down, you are going to need at least a 25% increase in value just to draw off a few thousands (not factoring the loan fees).

That being said, why not take what you would be paying on your HELOC and put it in a savings account each month. You will be surprised how quickly you will have a down payment and without debt to boot.

Great concept @Tim Watcke. Installing two smaller units is a great idea. Another one is to install a high quality on demand water heater. This way you are not paying to keep the water warm while everyone is at work and if it is powerful enough, none of your tenants will ever run out of hot water. 

My philosophy is that you cannot expect to get something that isn't being paid now. If the tenants are not currently paying their rent, I don't expect they will pay you their back rent either. Even a court judgement means very little in the long run.

Generally the only funds that transfer upon a sale of a rental is the security deposit. Going after back rent is the responsibility of the original owner. You do not have legal right to those funds as you were not the owner at the time.

The tenant risk is based on the eviction laws in your state. Generally you are looking at a maximum of 2 months from the original notice to process an eviction. 

Me, I would offer cash for keys. If you know you are going to close, go talk to the tenants and offer them $500 to move out before closing payable on the closing date. Might cost you a little out of pocket, but much less than inheriting deadbeat tenants and losing 3 months of rent during an eviction and releasing period.