All Forum Posts by: Robert Walden

How did this deal turn out, @Colton Aurich? I'm looking at a similar deal, but am unsure how to structure the offer? The seller used to live there and is currently renting the home to a family member. Now, they want to liquidate the asset and get the property out of their pockets as quickly as possible so they can buy a new home. All they want for their equity is the current mortgage paid off so they're free-and-clear to qualify for a mortgage on their next home. And, they're willing to carry the current note while I do the renovations, until I'm able to refinance or sell the property. I even have a potential renter/buyer lined up who's interested in the property once repairs are completed. Any suggestions how to make this a win-win for us both?

Good point, @Sergey A. Petrov! I just don't want to give them more of an excuse to eat wherever every day, based on a lack of designated eating space, should they want to keep a neat house and eat in the kitchen/DR. I also plan to provide a 6" folding table (stored in the basement) for them to use for dinner parties, along with their other furnished furniture.
 

Yes, I assumed that's what they would do in this instance as well, @John Teachout. But, I plan for this to be a partially-furnished student rental. And, I sure don't want to encourage them to eat in the LR and ruin the hardwood floors and furniture; hence, the bar stools under the K counter design idea. Thanks for your input!

I'm looking at a nice 1,200 sqft 3-Bdrm SFH in the Scott park area; decent street, newly-renovated, walking distance to the university. However, it doesn't have a DR. It essentially has just a decent-sized "working" kitchen; room for plenty of counter space and cabinets, plus stove and refrigerator, but not a kitchen table and chairs. The owner grew up in the house and says they ate at a small 4-person table in the K. (They either didn't have much cabinet/counter space, or they had to get up from the table every time somebody walked to the refrigerator or sink.) Even a small bistro table would be a tight squeeze with full lower cabinets and counters. Obviously, its not ideal. But, I think it can be resolved using bar stools and few lower cabinets. The question is, how much would you deduct from the ARV for lack of eating space (i.e., no DR or sufficiently large eat-in K)? I don't see an option on any of the real estate web sites where I can deselect "DR" as a Search option to get similar comps, as you can with Bdr and Bath.

Thanks for your input!    :-)

I questioned that also. But, after numerous inquiries with landlords, rental offices and students themselves, the rent paid for off-campus housing seems to be all over the board, with no particular rationale for why they're charging one price over another. You'd think they all paid roughly one-third the single family lease for a 3 Bdrm SFH. But, that's not the case. They're paying anywhere from $350. per bedroom, up to $850 per bedroom in a 3 Bdrm suite (i.e., large condo complexes); and, everything in between. We based our numbers on similar amenities offered at the upper end of the scale which this house provides.

[Note:  this inquiry was originally posted under the "Creative Real Estate Financing - Toledo, Ohio" Forum category (under a related title), but without any response.]

I'm exploring a creative financing technique for a Fix-and-Hold where:

a. The Seller is paid his reduced asking price of $60,000. for a partially-renovated SFH, plus an additional $15,000. (the remaining renovation costs) for a total of $75,000.;

b. From the $75,000, he puts $15,000. (the reno budget) in an escrow account from which I alone can draw as needed to finish the renovation and add furnishings;

c. The ARV of the property (if rented to a single family) is $85,000. However, the income potential for a 3 Bdrm student rental with three independent leases is $2,550. per month (gross);

d. the $75,000. sales price, plus the increased ARV from student rent income is $120,000., which qualifies me for a bridge loan for the entire project. [Note: the minimum loan amount is $75,000.]

On paper, Kiavi (formerly Lending Home) indicates that the numbers qualify for a loan. And, my real estate attorney says its legal, as long as everything is clearly stipulated in the purchase agreement as to what's happening and where the money goes. He thinks the only sticking point might be that the lender may want me to have even more skin in the game than my $15,000. of "pre-paid" equity!?! Has anyone ever done a deal similar to this? My cash is in short supply and I don't have access to reliable PML at present. Otherwise, I'd simply buy the house outright, fix it and rent it. Any suggestions?

Thanks in advance for your input!    :-)

@Kevin Woodard

What about a portfolio loan for doing several projects like this, or crowd funding? There's got to be a way to renovate these types of neighborhoods that have the potential to be great first-time homes or rental properties, but so often get neglected in favor of big suburban homes!?!

I'm exploring a creative financing technique where the Seller raises the agreed-upon $60,000. sales price of the property by my $15,000. estimate of repairs. That will qualify me for a bridge loan with a 75,000. minimum threshold and an estimated $110,000. ARV (based on rental income of $2,550. gross per month, and an $85,000. owner-occupied ARV). The additional $15,000. is to be placed in an escrow account by the Seller at close, from which I will draw as needed until expended for repairs and furnishings. My real estate attorney says its legal, as long as its clearly stipulated in the purchase agreement. However, he thinks some lenders will balk at the idea. I plan to apply for a Kiavi bridge loan. Has anyone ever done a transaction like this? Any suggestions? (Cash is in short supply, so I can't buy it outright.)

Thanks for your help!   :-)

Thanks to everyone for your interest and support! Sorry its taken me so long to reply. I'll respond to each of your comments in order.....

@Chris Seveney
"$7,000. each month" was a typo. (That's more than the property produces in revenue each month. LoL ) I meant to say $7,000. each year, or is that the total amount due for the loan. Thanks for clarifying that its $7,000. per year, for as long as the loan is outstanding!

@Dave Spector
Thanks for your reply as well! You're right. Thus far, the best I've been able to find is 75% LTV for hard money or a bridge loans as a "new" investor. However, I have a private money lender who wants to move some retirement savings into an SDIRA to use for real estate investing and who's willing to finance the entire amount of this project. (In fact, I plan to do the same thing with my Social Security money.)

@Frank Greg
Yes, I've been having a great deal of trouble financing small first-time-home-buyer properties. Many of them are under $100,000., or in the $100,000. to $125,000. price range. However, I've found few lenders willing to finance anything below $150,000., much less under $100,000.  There must be a way to finance these properties!?! I just don't quite have the model worked out yet. (Any experience or recommendations on seeking hedge funds or foreign investments? I have a friend who got a big boost in their real estate career from a foreign hedge fund.)

@Kevin Woodard
I'm actually not a "new" investor. I've done several rehabs and wholesales in my career. I've just never used commercial loans or PML. (I self-financed, and used no-interest family loans.) This deal doesn't work as a SFH for this price, and doesn't pass the 50% rule. The owner knows the market is strong for student rentals and won't budge on price. But, he nearly completely remodeled it already. And, the increased rental income from multiple student leases makes the property a long-term cash cow! My exit strategy is to, a.) fix-and-hold (refinance), b.) fix-and-sell (turn-key), or c.) wholesale to an investor who wants to do the same thing as me. One thing I don't understand, however, is how ARV is determined for rental income?

@Alex Breshears
Wow! I feel like I should pay you for your time after writing such a lengthy and detailed response! And you're welcome for me providing a topic for discussion in your group. LoL As I told @Kevin Woodard, I'm not a "new" investor. But, I'm new to financing. (So, I guess it means the same thing.) I appreciate your explanation of how financing works, and what some investors expect when making PMLs. I also wasn't aware of "DSCR" financing. I'm investigating it now. That may be a good possibility for doing these smaller rental deals, as well as "portfolio loans". Any additional explanation you can provide on either of these financing options would be greatly appreciated.

[Hint: it would be great if Bigger Pockets did a series of training videos on real estate "investment financing" (incl. the ins-and-outs of HMLs, commercial loans, PMLs, DSCRs and other real world funding opportunities). Its far more complicated than what the seminars teach; i.e., "Use OPM. You just go out and have someone loan you the money". LoL What's expected of a borrower, and the lack of loans available for smaller projects that a "new" investor might tackle can be quite daunting, especially for someone who doesn't have a private money contact or the expertise that's expected by lenders.]


Thanks again to all of you for your valuable feedback!    :-)