All Forum Posts by: Robert O'Keefe

Hello BP:

Can anyone recommend a company to insure a mobile home park in Delaware?

I have been trouble finding a company to insure. Some units on the park are built in the 80's & 90's.

Thank you very much in advance!

Originally posted by @Spence O.:

15% for single family and 25% for multifamily investment properties.

Great point!

What are HOA Fees? HOA Fees can seem mysterious or even intimidating to many.

Condo buyers typical ask:

1. - What are HOA fees?
2. - What do HOA fees go towards?
3. - Are HOA Fees Worth It?
4. - Why pay an extra fee in addition to taxes and insurance?

HOA stands for Homeowners Association. A Homeowners Association is in charge of running a condo building. An HOA is usually made up of volunteers who own condos in the building themselves.

The easiest way to understand HOA fees is that every HOA is a small business. The HOA fees are the revenue that funds that small business so it can operate.

This revenue provides all the benefits condo owners enjoy. Condo owners typically do not shovel snow, take out the garbage to the curb, sweep the halls, etc. Every HOA has a building maintenance budget which is funded by the HOA fees.

HOA fees are also allocated to the capital reserve. The capital reserve is "money set aside for a rainy day." These large repairs can be anything from a new roof, new mechanicals, contingency expenses, etc.

There are many more allocations for HOA revenue. These are just some examples.

When buying a condo, it is very important to analyze the HOA's budget and financials. You are buying into the building just as much as you are buying the condo.

Our customers are always covered through our HOA Evaluation Checklist. If you have further questions on this or would like us to review your HOA budget, please do not hesitate to book a consultation today.

I have one, I'll PM you

Great idea!

Investment and commercial properties have different loan requirements than residential properties.

A higher down-payment is required. The minimum is 25%. This is the first key difference.

The reason for this: banks want to see that the qualified buyer has skin in the game.

An investment property loan is a much riskier loan for banks. People usually prioritize their own home mortgages first. They do not want to be foreclosed on and be left on the street. This means the loans on their primary residences get paid off first. There is more risk for the bank, as the loan for the investment property is “second in line” to be paid. You will not see the 10% or even 20% down-payments that banks accept on primary residences.

The second key difference is you can expect a higher interest rate. Not everyone can make it as a landlord. It’s just like any small business. Small businesses and landlords fail often. If the venture fails, the bank does not get it’s money back. In short, higher risk for the bank = higher interest rate.

Overall, the qualified buyer can expect a higher interest rate and higher down payment. This is a general overview. It is recommended you go into more detail with a licensed and qualified lender.

If you have questions or would like to discuss further, do not hesitate to reach out.

The Biden Administration has extended the ban on foreclosures and mortgage forbearance through June 2021.

This is an extension of the CARES Act previously enacted by the prior administration. Close to 25% of forbearance programs were set to expire at the end of March, 2021.

A mortgage forbearance is a temporary suspension of your mortgage payments. You essentially put off paying your mortgage this month and add the payment on to the back of your loan.

Be aware if you are considering refinancing or making a new purchase. Taking advantage of a forbearance program could very well affect the status and your ability to obtain or refinance a loan.

Interestingly, the moratorium on evictions was not suspended. As it stands now, evictions are set to resume at the end of March.

If you have questions and how to take advantage of mortgage forbearance, feel free to reach out.

Investing in an Airbnb or VRBO vacation investment property just became more challenging.

Fannie Mae and Freddie Mac recently announced financing restrictions for condo buildings that have a concentration of units utilized for short term or vacation rentals.

We can assume the reason for this mandate is risk mitigation for banks.

Consider the Following Scenarios:

• Buyers purchase properties as Airbnb investments. The building later outlaws Airbnb. What do you do with the property and mortgage payments?
• Airbnb’s are deceively very management intensive. People buy them and then realize it’s not for them.
• COVID-19 has restricted travel and demand for these types of properties. If they can’t get rented, the buyer and bank are stuck with the investment.
  

From this mandate, we can expect the interest rate to be higher when buying condos in “condotel” buildings. Perhaps financing may not even be possible at all. Each situation will be different and dependent on the building and the individual situation of the qualified buyer.

Real estate professionals and hopeful Airbnb entrepreneurs have pushed back on these mandates.

They argue:

• How can you determine if a condo is used strictly for vacation property income? What if we use it and rent it out once in a while?
• Airbnb is great supplemental income for us. Will my condo board now restrict Airbnb in our building? It’s in a condo board's best interest to make the building as financing friendly as possible.

These are all great questions. There are no definitive answers yet and we will have to monitor as the situation unfolds.

The Fannie and Freddie mandate is obviously relevant to individuals looking to invest in the vacation rental model.

If you have no intention of doing this, the mandate may still affect the value of your property. A heavy concentration of Airbnbs will make financing difficult in your building.

Less Able Buyers → Less Demand → Less Value

Again, each individual situation will be different. Do not be alarmed by this, but be prepared and know your options. If you have further questions, feel free to contact and we can go through your individual situation and gameplan.

After much back and forth, Congress has approved the next round of stimulus relief for COVID-19.

The entire Coronavirus stimulus package for equates to $900 Billion.

$25 billion will be dedicated to rent relief. This equates to approximately 2.7% out of the $900 billion.

Many criticized the bill as being rushed into law. It is over 5,000 pages long and it was signed in the middle of the evening. Presumably without many lawmakers reading everything stipulated.

One could argue pending and looming housing issues was one of the points that initiated the sense of urgency.

According to the Wall Street Journal:

1. The Eviction moratorium was set to expire at the end of 2020
2. 2.4 - 5 million American Households were at risk of eviction.
3. It’s estimated that $70 Billion is owed in back rent

The future prospects do not look promising as well. According to the US Census estimates:

1. 18% of current renters are behind on rent. That represents approximately 19 million people.
2. 30% of renters said they had no confidence they would be able to pay next month’s rent.

How do you Leverage your piece of the $25 Billion?

The federal government will be channeling the relief monies through individual states.

1. New Jersey Waitlist - keep this link handy and check often.
2. New York Link - fill out application here/

If you are a landlord - you may consider passing these links on to your tenants before offering concessions.

If you are a tenant looking for assistance, click the links above.

We have to assume that the $25 Billion will dry up quickly. It will likely be a game of speed, much like the other PPP monies and other programs. Best to get in early as soon as you can.

Be well and Happy New Year!

Commercial and residential loans function in different ways for different purposes

Residential loans are used to purchase residential property (as you probably surmised). Residential properties are typically between 1 - 4 units.

The interest rate is fixed and the loan is amortized over longer periods of time. The most common being a 30 year amortization period.

Commercial loans, as you probably guessed again, are used to purchase commercial property. Generally speaking, you will need a commercial loan to purchase properties 5 units and up.

The interest rate on commercial mortgages will usually be higher than residential loans. Another key difference is the amortization schedule is usually shorter. Most of the time it is between 5 - 10 years and sometimes 20 years.

However, the payment schedule or amortization period can be spread out to a longer period of time. For example, the loan can be for 10 years but the amortization period can be set for 30 years.

Good luck and PM me if you have any questions!