All Forum Posts by: Sean Pincus

If you're referring to the pipe by the screens, that looks like a rough-in for toilet and the 2" coming from the 2x6 wall with the black cap on it appears to be a rough-in for a vanity/lav. 

From the looks of it, I assume your sewer lateral is under the slab. If you in fact have a hung sewer you would have an ejector pit in the basement somewhere indicating that it is a rough-in for a bath. 

Hopefully that helps.

The tax code is a bit vague when in comes to this. IRS looks for INTENT when defining real estate inventory (flip house) or real estate investment (rental). If you bought the property with the intention of holding it but for some reason flipped it to sell, it could be considered a like exchange into a rental property because the intention was to hold it for rental at the onset. I would consult with a tax accountant.

You need to check with local zoning ordinances. If the zoning for multi-family does not comply with what the property is currently zoned you will need to obtain a variance to have it rezoned.

Typically, venting for a dryer cannot exceed 30-35 feet. If you go beyond that you will need a booster fan/exhaust.

I pay $7 to hang and $7 to finish. That is for labor only.

You need to send them a Change Order form that shows a deduct of their contract amount and scope down to zero or whatever was paid to them at that time for what was completed. They will need to sign off on the Change Order form and also a Lien Waiver Release Form stating they were paid for whatever services they did complete for you. 

It's HML specific or bank specific.

- Usually they will finance 100% of the construction and 70%-80% of the purchase price as long as the entire deal is not less than 75% LTV on a multi-family or 70% on a SFH.
- If you have enough meat on the bone as you're claiming, you could increase your budget to include the downpayment as a "contingency" or "GC" line item. I do this often, but I'm also not getting HML (more so from banks). This allows you to keep your cash for multiple deals at once (keep in mind you will pay interest on it). I always tend to look at it like this... If I can leverage money at 8%-10%, but use that money to buy more properties that yield 20% it makes sense all day long.
- In your case, you might have to put $37,500 down, could be less maybe $25,000.

Note:
- You should try a regional or local bank. I am getting 100% construction financing and 70% of acquisition costs for 5.25% on the construction loan as long as the deal is 70% of ARV / LTV. You can't beat it.

Ask for as much as you possibly can. The worst thing they can say is "no". 

I never use what a landlord provides when analyzing a deal, because most of the time the rent is inflated and the expenses are downplayed. Do your own due diligence and assumption of rent roll / expenses

The one thing I would definitely suggest you ask for is a copy of the current leases. The reason you want this is because sometimes there are "back-handed" deals that you can't see by looking at expenses and income statements. For example: 'if tenant shovels driveway, rent is reduce by "x"', or "utilities are paid by Landlord". You'll want to know what obligations you'll be taking on. 

Good luck

- Sean

On investment properties your DTI shouldn't be a problem or even looked at. If you're buying the property with a commercial loan they don't look at DTI. You will have to personally guarantee the loan though. Typically the deals I am doing are the following: Purchase: LLC and LP Entity Bank loan: 75% of purchase Debt Service Coverage Ratio of 1.25x Down-payment Interest Reserves held in escrow (not always necessary). The debt service coverage ratio is the most important. The bank will need to know if your lease(s) will cover the PITI + other associated costs (vacancy, maintenance, etc) Thanks, Sean

@Andy Jerez

Approach a small community bank that does construction to permanent loans. Typically the process looks like this as far as funding is concerned:

- Loan amount: 70% of ARV (in your case $210,000)
- 31 year loan (12 month of interest only and 30 years fixed)
- Interest rates are competitive because it's owner occupied.

Your $30,000 can get you far. 

- Purchase: $115,000
- Renovation Money from Bank: $95,000
- Equity / Additional Capital In Project: $30,000 (the bank may ask that you have at least 15% of the overall project in the deal). 

This can be done, just call around to local / community banks that understand that market.

Good luck,

Sean