All Forum Posts by: Brian Sparr

Hey @Anthony Barbato -

Do you HAVE to pull permits?  No.  SHOULD you?  Yes.

Your clients can definitely try to get the space grandfathered in, but, if it was built in 2007, I doubt they'll have much luck.  All the success stories I hear related to this tend to involve much older properties.

As their agent, when you go into contract on the initial purchase, I'd put it in writing that they are aware the space is unpermitted and they should be prepared for the following:
- appraisers may not give full value for that space
- if a building inspector is at the property for any reason, they can red-tag the space and either force permits to be pulled or have the space returned to its original form
- if something happens to the property and an insurance claim needs to be filed, if there's any chance the problem could have been caused by unpermitted work, they will most likely lose that claim

And, last but definitely not least ... when you go to sell, both you and they should be putting it in your disclosures that you're aware the space is unpermitted and that all the work was done by a previous owner.

Good luck!

Hi @Lorenzo Norfolk -

I'd also recommend you check out Jonathan Sizemore or the team at Arnette Law ... both are fantastic at what they do. 

@Chris Mason - you're absolutely correct ... I got about half way through my response and realized that everything I was typing seemed way too familiar for it to have been an original thought - if then dawned on me that Jay had sent an email that morning about that very topic.

Who are these 2 wholesale lenders that you're referring to?

Hi @Jose H Alanis -

I don't think you know enough about the extent of the problem to really say.  If you have a moisture/mold problem that is visible, what's also going on behind those walls?

To give you a little idea, though ... I recently had a client buying a house that we suspected had a mold problem - there were no visible signs and no water damage, but it was something that the wife could smell.  So, we had the entire property tested (air samples and moisture readings) and it was determined that 4 of the rooms needed remediation (2 bedrooms, a living room and a bonus room) ... that remediation cost just shy of $4k - but, luckily, didn't require opening up any walls or fixing any pipes.

If I were your agent, I'd be recommending that you get the property inspected by a mold remediation company before you start negotiating for a lower price.  You don't know the full picture of your problem yet...

Good luck!

Hi @Erika Simpson -

Personally, I'd have zero concerns about doing a loan through a non big-box bank ... Caliber is considered a mortgage bank - all day, every day, the only thing they're doing is mortgages.

I can't speak directly to how either of these companies handle refi's, but I have clients that have used both for purchases.  One thing to understand is that your experience with either will greatly depend on the loan officer that you're working with.  There are good loan reps at Wells and there are bad ones ... there are good reps at Caliber and bad ones.  Regardless of what firm you use for any of your loan needs, do everything you can to make sure you're working with one of their top people.  While two reps from the same firm will quote you the same rate, their ability to execute the loan can be night and day different.

In regards to pros and cons ... think of the lending world as falling into 3 primary buckets: 1) traditional banks and credit unions (ie, Wells, BofA, Chase, etc), 2) mortgage banks (ie, Caliber, Quicken, Fairway, etc), and 3) mortgage brokers.

Traditional Banks: (they do loans and hold deposits)
Pros: because they tend to do such a large volume of loans, they are able to offer low rates ... they have the ability to do portfolio loans
Cons: very slow turn times - if you need to close quickly, they're generally unable to perform ... they tend to use national appraisal management companies and appraisal issues are common in competitive markets.

Mortgage Banks: (they only do loans - no deposits)
Pros: have the ability to close loans much faster - some of the local mortgage banks that we work with on purchases will routinely close loans in less than 14 days ... they often setup their own appraisal management companies and are able to improve the appraisal quality by ensuring the use of local appraisers.
Cons: while they should be very competitive with their rates, they're not going to be the absolute lowest ... portfolio loans are generally not an option - they need to sell their loans right away so they can get that money back to lend it out again.

Mortgage Brokers:
Pros: they will have access to a bunch of different lenders and loan products, so they can submit your info to whichever one is offering the best terms at that moment.
Cons: they have no control/influence over the underwriters or the timeframes ... they're generally forced to use national appraisal management companies, so appraisal issues are more common

Hope this is helpful and good luck with the refi!

Hi @Paul Sassin -

Well, if you're going purely off the numbers (and assuming your estimates are correct), you'd go with the first one listed at $134k.  However, the shortcoming to that approach is that you're basing your decision off of a 1 year snapshot - which will never tell you the whole story.  There are a number of other factors that need to be accounted for:

- what's the outlook for the "average" neighborhood over the next 5, 10, 15 years?  Any reason to believe it could turn into a "good" neighborhood?  Same question goes for the $250k property currently in the "good" neighborhood - any reason to believe it might improve or degrade during your holding period?

- one property is nearly 100 years old - the other sounds to be about 35 ... I would not expect repairs and capex to be similar between these two ... I'm not sure you've accounted for that yet.

- what kind of growth are you projecting for both rental prices as well as property values?  Different neighborhoods will appreciate differently - but, assuming they increase at the same rate, I'd much rather have x% of $250k than x% of $134k.

- how much time/effort are you wanting to put into this?  A significantly older property in an inferior neighborhood would lead me to expect a lot more work.

- what are your goals - expectations - risk tolerance levels for this investment?  Would buying either of these keep you up at night worried about what you've done?

There are way too many unanswered questions for me to try and make an informed selection...

Hi @Nate Ginsberg -

My hunch is that Redfin is no different than any other brokerage around - they will have a very small group of fantastic agents and a much larger pool of mediocre ones.

One thing I've noticed in my market, though, is that the majority of the Redfin agents I see have all started with other brokerages and failed to generate enough business to support themselves ... Redfin pays them a salary and they're able to stay in the industry.  I'm sure there are exceptions to this, but it's been an obvious trend in my area.  Which then poses the question as a buyer or seller, "is the rebate big enough for me to overlook the fact that I'm not working with the best?"

Keep in mind, you can continue to use the Redfin tools that you like while working with an agent from another brokerage :)

My suggestion is to ignore the name of the brokerage and judge the person based on their knowledge, experience and how well you connect with them. 

Good luck!

Hi @Cirilo Villar -

There's no right or wrong answer to this - it's personal.  For many, there's a comfort in sticking to the neighborhoods and streets that they are familiar with ... the idea of being able to drive by their property at any time of day gives them peace-of-mind ... the drawback to that, as you're experiencing, is that many local markets don't provide the returns or the number of opportunities that you're looking for.

With how easy it's become to research different markets and connect with locals in each of those areas, the challenges that investors faced 10 or 15 years ago when considering going out-of-state just don't exist anymore (assuming you're willing to put in the work to do that research and make those connections).

For me, personally, I try to be opportunistic ... I watch my local market and I watch a number of out of state markets - whichever one presents an attractive opportunity first is the one that I make a run at - if I don't get it, no big deal - I wait for the next one.

My recommendation would be for you to start by deciding how much money you're willing to invest and what type of returns you're wanting to achieve.  Once you have that, look to see if you can find those types of deals in your local market.  If you can, great - consider investing locally.  If you can't, well, you've got three choices: 1) do nothing and keep your money on the sidelines, 2) change your expectations or 3) find a different market.  My choice would be #3.

Wish you all the best!

Hi @Devlin Melvin - let me break it down like this...

At the time of purchase:
- $100k value
- $80k loan balance
- $20k down payment (which is your equity on day 1)

A few years later:
- $200k value
- $60k loan balance (because you've paid down $20k of it)
- $140k equity (your $20k down payment + $20k loan paydown + $100k appreciation)

After the refi:
- $200k value
- $150k loan balance
- $50k equity still in the property
- $90k cash out

Hi @Filipp Laptev -

In my opinion, a good financial advisor can be invaluable - especially if you have a significant other or dependents that rely on you.  

That said, just understand that very few financial advisors do anything significant with real estate.  The majority of advisors out there get paid based on the amount of investable assets under their management.  Any money that their client sticks into real estate is money that they no longer manage.  If you're wanting someone that's going to play an active role in guiding your real estate investing, you might be looking for awhile...

If you don't already have an advisor in mind, I'd suggest you start by looking for a fee-only advisor with a CFP designation ... you can search for one in your area here.  If you're in the SF Bay Area or Raleigh metro, PM me and I'd be happy to provide some suggestions.