All Forum Posts by: Ronald Allen Barney

The drug testing and remediation industry is more than a little crooked itself.  They set thresholds ridiculously low so as to recommend their remediation (just like a shady mechanic "just having a look under the hood to see if you need anything.")  

Whatever cleaning you normally do for rent readiness will be fine.  However.  I would lean away from areas that tend to get occupied by the criminal element.  Even if they do pay rent the property is as likely as not to get shot up in a "street beef".  But if they are addicts they won't pay rent.  Avoid, but only for that reason.

 When it comes time to sell, contact the county and let them know of the discrepancy between the tax record SQFT and appraisal SQFT.  The county will update their record.

Appraisals will only count climate controlled space as housing SQFT.  Some people will add porches and decks, and sometimes even garages.  Tax records probably just believed whoever told them.

It's really a matter of whether you think this property will cash flow, at 2006 SQFT or 1908 SQFT.

If they have good positive cash flow I'd refi or HELOC to deploy the equity into more doors. If it's not good cash flow I'd sell and deploy the equity into more doors.

Looking at my FHA cheat sheet my mortgage guy had laminated for me:

1.  Minimum credit score 580.  In some cases under 580 but work closely with the loan officer.

2.  Minimum down payment 3.5% (except first time home buyer--haven't bought in past 3 years--then 3%)

3. DTI: no max if approved through AUS.

4.  Gift funds:  allowed.

5.  Seller concessions:  up t 6%

6.  Mortgage Insurance:  required

7.  Maximum loan amount:  varies (see your loan officer)

8.  Occupancy type:  Primary only.

Advantages:

1.  Lower interest rates than other loan types.

2.  Lower credit score requirements.

3. Higher DTI ratios than conventional.

4.  Renovation loans (203K) are available.

5.  Monthly MI is typically lower than conventional.

6.  WDOs, water tests & sewer inspections not required.

Disadvantages:

1.  Upfront MI fee of 1.75% (rolled into the loan).

2.  Unless 10% is put down, MI will last for the life of the loan.

3.  Any repairs noted on the appraisal are required to be fixed.

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So what I see is that as long as the occupancy of the FHA-financed property is primary, the existence of other investment properties should not be a deal-breaker.

Calculate the interest as part of the expenses for the rental and see what that does to cash flow. Typically if you're so close to the bone that HELOC interest will evaporate the cash flow it wasn't a good deal to begin with.

Some options:

1)  Sell out or rent out your Hawaii house hack and get into a lower cost of living area where you can save more aggressively.  Here in the Jacksonville/St. Augustine area that certainly qualifies if you can get or keep your W-2 job.  Other parts of Florida are also very low cost of living.

2)  In smaller increments than a typical down payment you can get RE syndication shares with a pretty decent cash flow.

3) You can use the Nomad strategy to buy as owner-occupier serially with lower down payment (FTHB, 3.5% FHA, or 5% conventional OO). If possible Nomad combines best with 4-3-2-1 (start with a quad, then tri, then duplex, then SFH's as a workaround to certain FHA restrictions).

The only downside I see is extra paperwork the IRS will require due to the foreign seller, and a portion of the seller's proceeds will have to be temporarily held in a special escrow.  Your mortgage lender can give more specific details.  If it's a cash deal see if the title company can help with the paperwork.

You'll need private/hard money financing to cover the cash shortfall. On a commercial loan income can be based on projected cash flow but for a first time loan they'll be picky and might only go 70% LTV (more hard money).

 A typical owner-occupier buyer, once they buy, you won't hear from them for at least five years.  An investment buyer not only has the potential to buy again sooner than that but he will probably know other investors and recommend an agent that provided good service.

With that being said, it's a common doctrine among realtors to "chase the sellers and let the buyers chase you".  That's because on average it takes about 8 hours of realtor work to take a seller to close, and about 40 hours of work to do the same with a buyer.  If you did get good service and lots of hours labor out of an agent, let him know it's not going to waste, you'll be back for more when ready, and if anyone you know asks you'll recommend him or her.  That'll keep the agent engaged.

The situation where an agent will start to let go of a buyer is if they're on like the 10th property and still no offer yet.  They start to see it as diminishing returns.  If you're running the agent all over town, offering nothing on anything after several showings, that's where a bonus commission might be wise.  "I'm not just a tire-kicker, honest!"