All Forum Posts by: Sterling Fields

@Freddie Williams Google maps. I wasn't getting the results I wanted by just typing in "banks Jackson, MS." I went on Google maps and started searching the area. Many of the smaller banks will not show up on a broad area view, so the closer you are zoomed in the more likely you are to see them. Look for the $ symbol, it may not even have the banks name next to the symbol. I just picked up the phone and called whenever I found one, it took over 20. 

However, we closed on our property exactly two weeks from the day I talked to the bank. I will be using this bank for many transactions in the future, and probably will not even look at bigger banks until I grow to where it is a necessity.

Hope this helps.

@Bobby Nilsen The property looks great! This is definitely an inspiring flip!

@Anthony To Have you thought about a smaller community bank (I'm talking like 3 branches) in the are you want to invest? Many of these banks are dying for the chance to work with someone who is financially strong. The key is to get an "in-house" loan from one of these banks. They very well might let you go 15% down without any PMI, and at a good interest rate.

@CJ Witmer My strategy is buy and hold. Our plan is to live here for a year or two, for very cheap, and use all of our extra cash to acquire rental properties (obviously setting aside reserves for each property).

Purchase price: $150,000

Down payment: $10,000 (one advantage of using a local bank, they make exceptions for LTV, etc.)

Interest rate: 5.16% (little high, but worth it for non-fha house-hack)

P&I, property taxes, and insurance: $986.12 (also, since it is an in-house bank loan there is no Mortgage Insurance, sweeeet!)

Other side currently rented: $900

We owe $86.12 per month!

We have sufficient cash reserves to cover maintenance and repairs, so while we are living there we won't be setting that aside. When we move out however, the numbers still work. That side is currently under rented for the area and needs some desperate TLC. This is definitely a value add property.

When we move out it should rent for $1,000 per side, cash flow around $412 (5% vacancy, capex, and maintenance), and yield a yearly cash-on-cash return of over 40%!

Does anyone see anything that I may be missing in these numbers?

My wife and I were absolutely determined to buy an owner-occupied 2-4 multifamily so we can save money and work towards financial freedom. However, we were having a problem getting banks to lend on duplexes (standing behind the appraisal) due to the low volume of duplex sales in our are, e.g. freaking zero.. literally.. Well at least the ones that were sold through a realtor and reported as sold on the MLS.

My solution: I called over 20 banks and talked to a loan officer/vice president, or both, at every single one until I convinced one to give us the loan. The 21st bank agreed to do the loan and decided to do an in-house evaluation and forgo the appraisal.

We are closing on the 6th of July and will be the proud owners of an owner occupied duplex paying a whopping $90.23 per month after taxes, insurance, P&I.

Moral of the story: Persistence is key!!

@Megan Greathouse  Congrats on your purchase! It's inspiring to see others take the plunge. I see that you budgeted for property management, smartly so, but are you going to manage yourself or outsource?

@Account Closed that is exactly what I was trying to explain to the seller. I offered fairly good terms for them to seller finance, but they refused and the house is back on the market. As far as the lease option, it doesn't fit well with our strategy to house-hack and save money. We would essentially be renting at that point. It seems to me that an investor will need to offer all cash or someone will need to use an in-house bank and put 15-20% down. Thank you again for your insight!

 Thank you for your post Ken. I actually thought about that but the problem was that the sellers owned the house free and clear. It seems to me the only way around this is to use a portfolio lender who will allow a low down payment, and who will waive the fact that there weren't enough sold comparables within the last 12 months.

First and foremost I am not saying that going FHA is a bad idea. In truth, the ability that a FHA loan provides to leverage properties for first time homebuyers is pretty incredible. However, this a warning for people trying to jump in their first deal using this vehicle.

 I found BiggerPockets not long ago and it became so clear to me that rental properties and real estate were the way for my wife and I to achieve financial freedom. We decided to house-hack for our first deal and this is the story of how that deal did not work out.

Numerous podcasts and books later we were actually looking for our first house-hack (btw, the idea is genius and I don't understand why everyone just starting on their financial freedom journey doesn't take this path, but that is another discussion for another day).  After hours, days, and weeks of looking through deals and walking houses with realtors, we finally found a duplex that was in our price range and also in a great area of town.

It was built in 1951 and had never been updated so it needed a fair amount of work. I am a contractor and grew up working construction so this property looked like GOLD to me. Not only were we going to house-hack with only 3.5% down, we were going to get some of that awesome "forced appreciation" and raise rents in the process. Win-Win

After some heavy negotiation our offer was accepted at $15k below list price with the sellers splitting the closing costs. During the due diligence we discovered there was more work than originally anticipated.  We came back and asked for another $3k towards closing and they accepted! My analysis projected that once we moved out, the property was going to cash flow over $400 a month and have a decent equity position. Man were we excited ..... and then everything fell through.. 

As many of you know getting a loan from a bank, especially FHA, is like pulling teeth. We jumped through a hundred hoops throughout the process. After due diligence the bank kept postponing the closing due to the appraiser, underwriting, etc. (four weeks in fact). A few days before the 4th closing date we get a call from the lender, short and not so sweet. "We are denying the loan, and we still need you to pay for the appraisal ($950)." Between the appraisal, elevation certificate (it was in a flood zone), and inspections we are out over $1,600 and three months of our time.

According to the bank, FHA would not back the loan because there were not enough comparable sales of "duplexes" in that area within the last 12 months to justify the appraisal. I called 10 other banks/mortgage brokers and they all said the same thing, "We need comparable sales."

Warning for people looking to house-hack through FHA! Verify with your realtor that there will be enough comparable sales of "similar" properties  in that area within the last twelve months before you spend the money and time going through this whole process!

Needless to say our goal remains the same and we will persist to be successful in real estate. This is just a lesson learned.

Does anyone have any suggestions on what to do in this situation or any other ways to avoid it? -The owners would not do seller financing with such a low down-payment.                                          

-My agent provided other duplex sales, but they were sold in packages and could not be used.

-Conventional requires 15% for 2-4 units 

p.s. go easy fellow BP members, this is my first post and I am not a writer.

Sincerely,

Sterling Fields