All Forum Posts by: Robert Lorenz

@Chandler Smith the renovation financing is a great way to fund the purchase and rehab of your fixer-upper. If you have enough cash to fund the rehab yourself, you can either use it to make a bigger down payment, invest it elsewhere, or just hold on to it for future opportunities. If the property can get past a conventional appraisal but not an FHA health & safety inspection (not required or different requirements on reno loans), then maybe just buying the property with a standard conventional loan @ 20% down and doing the work yourself over time is the best option.... and if you are occupying the property, the whole conversation about mortgage fraud is moot. You can sell the property any time you want, including the day after closing - there's no law to prevent you from selling it regardless of any statements you signed (bank policy does not equal law). Check your state/local laws regarding prepayment penalties, though.

here's a quick link to one banks 203k products with descriptions of what they cover

@Jeff Onofrio I get it, and I do not doubt your credentials at all. It does seem like an ethical dilemma with the whole occupancy agreement thing... and I get that from your perspective originating such a loan while knowing the buyer has no intention of occupying the home is shady and not worth your license. There are also people that toss the f-word around when people talk about different ways to structure creative financing deals, and people who get antsy and cry foul when people talk about wholesaling or assigning contracts without a RE license. At the end of the day, if your buyer signs the paper that says they'll occupy it, and they don't give you any indication that that is not the case, and then you fund the loan.... and 6 months later when the renovation is complete and they say "I changed my mind, the house looks so much better than we thought and it looks like we could make $$,$$$ by just selling it now!" ...are you going to call FHA and tell them they've just been defrauded by your buyer? Are the good men and women at FHA going to launch an investigation as to why the buyer didn't move in? In all of your time as a loan officer and with all the thousands of loans you've funded, how many did what I'm talking about (selling without moving in) and of those that did how many were charged with fraud?

I posit that many of the things that investors do border on the unethical in at least a few peoples eyes (talking a seller into taking the smallest sliver of equity in exchange for their property so I can maximize my own gains sounds pretty unethical to me) and that the only person doing something actually illegal in this case might be the lender if they knew the intention of the buyer. If I buy it and when the renovation is done go meet the neighbor and they turn out to be jerks and now I don't want to live there, am I commiting mortgage fraud for calling my agent back and asking them to just list it?

Anyone else wanna chime in here? What do you think? Is this a case of opinion vs opinon or is there a serious legal concern here?

full disclosure: I have not used this strategy or this type of loan for this or any other purpose. The information I am passing on that you are saying is bad was given to me by the lender I was referring to at a group meeting where the topic was house hacking with renovation funding for owner occupants. When I asked him what the time constraints were on selling the property (have to occupy for 1 year, etc) his short answer was "There aren't any. You can just sell it, you don't even have to move in if you're not going to keep it. Even though the loans are supposed to be for occupants, there's nothing really stopping you from just selling the property once the renovation is done."  There was more but that's the short paraphrased version.

@Chandler Smith FHA requires certain amenities/features be fully functional before they'll fund the loan with a typical FHA loan, but the 203k allows buyer to get funding for a "fixer-upper". There are 2 different 203k loan products: one for basic "lipstick" rehabs - paint, flooring, fixtures; and one for more involved rehabs that will fund the renovation all the way down to building a new house on an existing foundation (full scrape or full gut rehabs).

And yes, you still cannot turn it into a rental unless you refi out of the FHA loan or occupy it until the 1 year mark passes.

Hey @Jeff Onofrio I wasn't suggesting he keep it as a rental with an in-place FHA loan.... I was suggesting he leverage the loan to buy and rehab the property and then sell it. And I did write that you are technically supposed to move in, however there is no penalty for immediately selling the property once the rehab is complete. If you feel it's an ethical issue, that's fine, but it's not breaking the law.... Also, reno financing was the whole point of the post, so nice to see you driving my point home with your 203k comment.

The person with whom I discussed these reno programs with (and who told me he funds people who use the strategy) is a lender who has done 400+ reno loans in the Phoenix area in the last 18 years. I'll take his word for it when he says there's little oversight, as long as the loan is paid (like, paid OFF through sale or refi).

Anyone have an answer to this? I'm in a similar situation and need to know how to proceed with this..... can I take the property sub2 so I can pay her out her equity and get started on the rehab? I read in another thread that the mortgage balance needs to be paid in full within 1 year of the decedents passing.... does that mean I have whatever time remains of that 1 year period before I need to make any payment? 

@Chandler Smith FHA won't fund a home in need of rehab unless you're using a 203k loan, in which case you cannot do the work yourself. If you want your dad to act as the GC and get paid through FHA, so long as he meets their requirements you're good to go.... just make sure you find a savvy MLO with experience doing reno loans. Also, neither FHA nor FNMA (HomeStyle) have holding requirements for their reno's, so if you wanted to you could sell the property as soon as the rehab was complete without having to move into it and without penalty. FHA just won't fund another loan for you for a year, but that doesn't stop you from bouncing back and forth between FHA/FNMA reno loans. Much better interest rates than hard $$ and with FNMA you can finance 6 months worth of payments into the loan so you don't have to make payments during the rehab.... and yes, technically you are supposed to use these loans for primary residence but there isn't really any enforcement as long as the loan is paid.

The award-winning Arizona Real Estate Investors Association is pleased to announce our guest speaker for Septembers Taking Aim! subgroup, @Ben Leybovich! As a follow-up to last months "House Hacking, Part One" where we dove into renovation financing for owner occupants, Ben will be discussing his own recent experience with house hacking and offer actionable and practical information and advice for anyone interested in having someone else pay for your primary residence (sounds sweet, right?) 

FREE for AZREIA Plus members, $10 for regular members, $20 for non-members (if you're in Phoenix and are or want to be a real estate investor, AZREIA is where you need to be.... so why aren't you a member yet?!?)

Full description of the subgroup can be found here

If you're "on the fence" about joining AZREIA, please check out this video to hear a few testimonials and then have a look around our website at azreia.org

Children welcome, snacks provided :)

See you there!

Phone prospecting & door-to-door. Check out these guys on Youtube:

Colton Lindsey

Loida Velasquez

Derek Lipsky

Kevin Ward

Brian Casella

I do not call buyer leads, sellers only. We capture buyer leads from open houses and sign calls. The KW team I'm on is a Zillow Premier agent, but I don't involve myself with that side of the business.

Economical? Pulling the numbers by hand from Zillow/other sources (FSBO's, don't forget "Make Me Move"), or pulling the data with Spokeo/Intellius/Google unless your MLS gives you seller contact info for expireds (AZ does sometimes, or you can hunt it down in tax or county records).

We use Mojo, and download our Expired data from Zapier every morning. Pretty sure we pay for a monthly subscription, not sure what it costs, though.

AZ Real Estate Investors Association subgroup meeting, this months topic is:

RENOVATION FINANCING for owner-occupied properties!

Since "house-hacking" is a hot topic these days, we're doing a two-part series to try to cover this topic in a practical and actionable manner. This month, I'll talk about different property types that are being used for this strategy; we'll analyze a deal (or two) straight off ARMLS, and I'll have a guest speaker in to talk about FHA 203k home loans and their conventional equivalent (Fannie Mae HomeStyle).

THIS EVENT IS FREE FOR ALL AZREIA PLUS MEMBERS, $10 FOR STANDARD AZREIA MEMBERS, $20 FOR NON-MEMBERS.

ANY MONEY PAID FOR THE MEETING IS APPLIED TO YOUR ANNUAL MEMBERSHIP FEE IF YOU CHOOSE TO JOIN (very worth it!)

https://azreia.org/start-here/

oh ya, kids are welcome and there's free pizza :)

tag: Phoenix, Glendale, Mesa, Chandler, Gilbert, Avondale, Tolleson, Litchfield Park, Buckeye, Waddell, Scottsdale, Tempe, Surprise, Goodyear, Peoria, El Mirage