All Forum Posts by: Ro Maga

If you're doing a 203k, ask your lender/mortgage broker for a list of contractors they've worked with. The red tape that comes with this loans makes it virtually impossible to work with any but a select group of GCs who specialize in these kind of projects.

@Jeff Dulla, 

Don't get me wrong, student debt sucks. The one thing I dislike about this kind of thinking -- using a second mortgage to pay off student debt -- is that most people tend to present it and think of it as if they were actually paying down anything when in reality they're just trading debt.  It's pretty much like people who keep on moving credit card debt between credit cards thinking introductory rates will do much for them.  While no one can deny that  saving even a a few fractions of a percentage in interest rates is a good thing, what most people end up doing is prolonging the time they carry such debt, and thus paying more interests in the long term, which I guess is a good thing for people in the lending industry.

I wouldn't increase my RE debt to pay off student loans.  Yes, the interest is a little higher, but how many years are talking about here -- ~10 of student debt in exchange for 30 years of student debt rolled into your home?  

There are also some advantages to keeping your student loans as they are.  If you were to become permanently disabled, they'd be forgiven; but that's not the case of your 2nd mortgage.  If you were to lose your job, you can defer student loan payments; can you imagine calling your bank asking for a mortgage deferment???

If you're student loans are getting in the way of your goals, I'd either double up on payments and try to get out of them as soon as humanly possible, or invest on a property that cashflowed in a way that would allow me to pay them them sooner.  There is no easy way out, and a second mortgage to pay student debt is FAR from a smart move in my opinion. 

With rents so high in the areas you mention ($2,000-3,000 for a two bedroom/month), you won't be dealing with deadbeat tenants. If I were you, I'd focus on the bigger problem: finding something in those areas where the numbers work.

I noticed you mentioned in a previous post that you were considering using an FHA Streamline or 203k loan to purchase a small multifamily where you/your father could house hack. In our experience with such a loan (203k), you can only do the rehab work yourself if a) you're qualified and it sounds like you/your dad would pass the test, and b) if you buy a single family home. For a small multi-family, our lender gave us no choice but to go with a contractor for any and all repairs that were included into the renovation loan.

I might be wrong here, but I believe that legally in NJ you can only do the work yourself on a duplex in which you yourself live.  Anything above that (3-family+) requires a contractor to pull permits.   

The 203K loan has many pros and cons.  The amount of red tape can be overwhelming enough to keep most contractors away. I don't know anybody who works that far south in Jersey, but I can tell you what we did and what we wish we had done with our 203k loan.

To find a contractor we ask our mortgage guy what contractors in our area had worked with him in these kind of loans.  He provided a short list. When then asked them to provide estimates and walk the property with us. One offered references, others did not.One didn't even call back.  One guy didn't even follow through with this formal estimate.  In the end, we worked with a contractor that survived the initial paperwork trial, and we got lucky. We ended up liking the guy, trusting his judgement, and respecting his opinion and advice.  That's not to say that it all went smoothly or that we loved, loved, loved everything done. There were hiccups, but the work got done -- much of it much better that we expected -- and we were able to roll 50k in much needed repairs into the mortgage from the get go. 

This is what we didn't do:  While we ask the lender to recommend contractors, we didn't ask our contractor about his experience working with our lender and how they fared in comparison to other 203K lenders.  If we had, we might have gone with some other bank (had we had the luxury of time to change lenders). That could have potentially saved us some $4K-5K in holding costs.  Hiccups in the processes and inspections required for each draw with our lender took forever.  I believe our contractor received his final draw almost 2 months after the work had been finished.  These issues (and flooring problems) added almost a month-and-a-half in delays.   And as you know, delays in RE are indeed quite expensive. 

If you (or others) are interested, our 203K contractor had very high praise for the folks at AnnieMac. Look them up, they're also in BiggerPockets. 

I'm not sure if there's a form or not, but if you go through NJ's Truth in Renting booklet (which you were/are required to provide to your tenants), you can read all about notice procedures, requirements, and tenant protections in the state.

Jimmy Martz , you should be on the podcast! I'd love to listen to your story in more detail.

Yup, that's standard procedure.

I'm with Edgar Sulca here, the taxes seem suspiciously low for a fourplex in Irvington. Does the home have an abatement? If so, check the expiration date.