All Forum Posts by: Ryan Tongue

@Ryan Tongue what part of Michigan are you looking in?

The most important protection is to get a professional home inspection with sewer camera. But even these will only find 90% of the potential problems. Many are hidden unless you have x-ray vision!

The inspection should give you an idea of the condition of all the main systems. You can also check permits at the city building department.

Not mentioned so far, is functional obsolescence: rooms with low ceilings, pass-thru bedrooms, too steep stairs, no place for appliances, etc.

The challenge will be finding balance between an agent telling you any inspection issues are no big deal and freaking out about little things.

I consider buying houses with bad roofs, no HVAC or heating only, no central air, old or no appliances, poor paint.  They can all easily be costed out and you adjust the price to address these needs.

What is harder for me is the hidden damage.  Sometimes that comes with foundation repairs, but it is a biggie for me when there is termite damage.  It can be a whole wall or floor that needs to be rebuilt or just a few boards that can easily be sistered.  But you won't know until you take off the plaster or drywall.  I just finished a house that is a Victorian that is over a hundred years old.  Its a beautiful house now, but I had to replace a wall in the kitchen that was gone and the 12 inch by 12 inch foundation beams were gone from termite damage in areas.

Electrical systems that are 50+ years old is also harder to estimate the cost to fix.  Some parts of the house may be grounded, but not others.  Often there are not enough outlets for today's electrical needs.  Any major electrical work can again result in redrywalling parts of the house and that adds up. 

Metal water pipes start filling in as they get older, check the water pressure to see the condition of the pipes and for leaks and don't forget to check for leaks in the drains.  If its pipes that are not accessible by their location that cost can add up fast too.  A leak under a cabinet is not so bad to deal with, even if there is some wood rot, but the pipes going to that interior bathroom or upstairs bathroom or the pipe through a cement foundation can get pricy to fix.  there may be a lot of flooring and drywall to redo to access the areas.

You also have to think about the safety changes that have been developed since the house was built.  Stairway railings, especially bannisters around the tops access area of the staircase, wrapping of the house to help waterproof it may never have happened, window sizes for fire exit, etc.. may all be off so if you plan to rent the house, consider the cost to make it safe for the tenants.  

To fix these types of things in some geographic areas may require fixing a lot of other less important things -- know the local building inspector's expectations.

I have learned by buying many HVAC units and replacing multiple roofs :)

Call a few HVAC contractors and ask - they will be reluctant to give an estimate without seeing the property, try explaining that you are an investor and are simply trying to model some deals. You will find someone willing to do it based on SF, BR/bath count.

Call a few local roofing companies for roof replacement estimates. This can vary depending on roof line but you should be able to get a cost per SF for simple homes.

Those are really the two big ones that every single house deals with. The rest are pretty minor, most folks use something like 1% of the purchase price per year for maintenance. I feel this too high, my experience over the past 20 years has been much lower.

A few others that I account for:

1. Stoves (electric) tend to last about 5 years so I allow about $100/year for a stove.

2. Refrigerators tend to last 5-10 years, allow about $150/year for that.

3. Painting - this can be very expensive and depends a lot on the specific interior. Learn to paint the interior and you will save major $$. I have paid as much as $7000 for interior paint with minor drywall repair on a 1500sf house.

Many of my houses were built in the 1950s.

An old roof is definitely not a red flag for me. I look at things like roof and hvac as amortized expenses. For example, I assume that I need $800/year or HVAC, every year for the life of the property (adjusting for inflation over time). I also amortize roof replacement over time. These kind of expenses are just part of carrying a property. Whether I replace a roof in year 1 or year 5 - it's all the same to me.

There are very few red flags, I simply include repair costs as part of the cost model I put together to evaluate the deal. A few things that will cause me pause are:

1. Location related problems. I can't change things off my property easily.

2. Serious foundation issues.

3. Pervasive mold in living areas. Minor mold in crawlspace is not an issue.

 Hey Ryan, 

To keep gaining knowledge and momentum, decide on your target market, which I believe you already have. Then begin running the numbers on potential properties in the area. Running numbers on local properties will help you to quickly determine whether a property has the potential to cash flow or not. That will help you to decide what properties to consider when you are ready to buy. 

Go Lions!!

 Everything you said on utilization is correct!  Should be paid in full on due date, 9% utilization on closing date, and other than that it doesn’t matter for your score.  

How many authorized user account are you on currently?  And how many other accounts do you have?

Fannie Mae has a guideline that if the Authorized user account has a significant impact on the credit profile (i.e that is where your score is coming from) then it requires Lender to either make the case that it isnt or proceed with non traditional credit (4 utilities paid over 12 months).

In terms of building  your credit score,  I would be strategic about building out a more complete profile.

Installment credit- Self Lender, experian boost or a secured loan are great for this. Credit unions and Huntington bank will do a small no credit loan if you have deposit history that you can use for this.

Revolving- you already seem to have this but you can boost it Tomoboost or Stellarfi since they use your bills to build you a revolving credit line up to $30k. Larger personal limits create stronger profiles

Auto- Technically this is also installment but i usually suggest my clients have a car loan or lease for 1-2 years before paying it off so this can build your profile.

Other than mortgage, these are the categories your credit history get divided into when we pull a credit report

Hope this helps. Everyone above is giving solid tips as well

Back in the day when I was a loan officer, an "authorized user" on an account didn't carry as much weight, because there was no legal liability for them to pay the loan. It's better than nothing, but it meant that someone else had responsibility. What the lender is likely looking for are things that if the "co signer" isn't involved, will the payments still be paid.

Most of the lenders wanted 3 lines of credit that had been open at least 6 months and were used monthly and always paid on time.

Since I worked for a mortgage broker, we had access to over 300 lenders and there was a lot of variation on what lenders would accept. I'd try using a mortgage broker and see what their various lenders offer.