All Forum Posts by: Ryan Gillette

In 99.99% of cases, a seller won't take $70K on a $114K listing unless it's (a) seriously overpriced to market comps (b) there's something seriously deficient discovered (foundation issues). From the seller and the listing agent's view, 1-4 unit properties are valued with a market approach. So if other 4 units are selling in the $100-120K ballpark, that's your range of market value. I'm not saying you should buy it or not buy it, but that's what the listing agent knows market value to be. If they're willing to negotiate, they'll negotiate in that price range. I don't know what that range is, but I'm guessing around Geneva it's not $70K. I would look more at what market value actually is, whether your numbers work - and then make a fair offer. If the numbers don't work, make your best offer and be prepared for a "no".

If you do make a $70K offer and expect them to seriously negotiate with you after that, they won't in most cases. When a low-ball like that is lobbed, sellers may turn combative and not want to deal with your future offers period. Again I'm not saying not to, but be prepared to hear a very, very likely "no" or a more combative response.

What's the unit count in the building? If you're willing to live there, there are 10% down jumbo lenders out there. For a long term thing, if you go that route, I would highly suggest finding a jumbo lender willing to do a fixed rate. Adjustable rates are pretty common in the jumbo market- even if the rate is attractive in the 3's, you don't want to get stuck in the 5-7's on a 600K loan. 

Short of that, you're looking at a commercial loan or hard money. Both are going to require a significant down payment- just from my experience they might want to see a 25-30% equity position coming from you on a multi-unit.

I get up to date vet paperwork and meet the dogs. With that I don't add to the security, but I do add $25/month/pet with a 2 pet max. Both parts are important. Dogs do depreciate it faster so it has to be accounted for since you have refinish the floors more often, replace vent filters, etc; the vet paperwork is more to ensure they're well cared for, than the liability of it.

She's not pre-approving you because of the purchase price? The two things that might be going on are that she may not be able to do a loan amount less than $50K. Or genuinely in your market, properties in the 50-60K range typically are deficient for financing. That is, there's something wrong with them you may not care about (like chipping/peeling paint), but that a lender would care about. But typically that's not our area as loan officers to comment on.

That said, stick to your guns. Keeping an affordable payment in case either of you lose your job deserves a round of applause. If she's not willing to pre-approve you on because you don't want to go over your budget, shop around to another lender or two. You might have better luck in an small credit union or local bank if your loan amount is under $50K (like you buy a $50K house and borrow $40K).

There was a podcast a few weeks ago about a guy who made that his niche. He has some insights into the turnover (I think he said about 75-80%/year) and how he had to start marketing a property every fall. If it's something you see yourself getting out of in 3-4 years though, I would just make sure to run numbers on everything, specifically your upfront costs and then your selling costs. So if upfront you pay $3K in costs (between the attorney, the mortgage, etc) and then at closing you lose another 8-10% (6% realtor fee, attorney fee, any concessions, any repairs, etc), it might negate any profit made (or saved) from your time owning it. There's also the risk that after 3-4 years of college students, it's in worse condition. Just as an example of how it can go wrong: Say you pay $100K to acquire it + $3K closing costs, make no improvements, and sell it for $95K in 3 years. You net $86K from the sale after paying the realtor, attorney, etc. So you bought for $103 and walked with $86, or a $17K loss.  Which is ok if it's built into the rent you're charging (say you profited $40K over that period). Not to discourage you- just something to think about.

Just a tip - you might consider financing it with your son through Freddie Mac and capture owner-occupied financing terms. So instead of putting 25% down at a investor rate, you put 3.5%-5% down (or at least have the option to if you want) and capture the OO rate.

How it works from a mortgage standpoint is that he's the occupant borrower with no income. You're the non-occupant co-signer with income. Freddie Mac allows the ratios to merge. 

I've done a few deals like this in the last year or so with parents and children. It's a good financial deal usually, and it's a great opportunity for the child to learn about real estate if that's something they're interested in. The one thing to consider long term is what you'll do with the property after they graduate.

My first book was the WSJ book on Real Estate. Solid, straightforward researched info on the real estate process.

Maybe areas closer to you then. I have one client who picks up 250-300K condos in Stamford. She's on her fifth now. Basically every year she takes her annual bonus and puts a down payment, then rehabs it. From the cash-flow she gets from the five units, it's put her in a good position. I'm not a huge fan of condo investments myself (your investment is at the health and whim of an HOA) but maybe that's a more scalable option for you. One thing, if you want to get into buy-and-hold, is to think about what you want to buy (single family, condo or multi-family). Also a good program to look into is Fannie Multiple Financed Properties - you can build a portfolio of up to 10 properties with 20-30% down, with loan amounts up to 400K+ depending on what town/city.

A lot of things. Depends how involved you want to get. One way is to partner up with someone - you finance it, they flip it or manage it on the ground. One group I know is a person with $$, a realtor and a mortgage person. Say you buy a $300,000 house - you'd put the 25% down payment up. The mortgage broker gets the best rate on the other 75% and contributes his commission. The realtor finds the best house in the best market and contributes his commission (plus when/if you sell it). It might be a good way to ease yourself because between the real estate agent and broker, you'd have the local RE knowledge and learn through the process.  They're also on the ground to manage and screen tenants. The key is finding the right people to do it with. 

For my money, personally, I would go on my own and buy two properties in West Hartford for ~$400K each. So you buy $800K total. There's an affluent professional market (big health insurance market and hospitals) here between Avon, Farmington, West Hartford and Simsbury and the rents are going up - especially in certain areas of WH. So you put $100K into each and finance the other 75% with $300K each. Say you get gross rent of $8K, the mortgages are $5K, and after maintenance, repairs, cap-x you clear, conservatively $2K/month. About a 12% ROI. Plus you pay down, what, $10K in principle each year. I mean that's just me.

Either $1070 or $1150. They have the escrow as $213 in one place and $293 in another. I would have them clarify why, but know the insurance is something you shop for (and can shop for for the life of the loan) and taxes vary property to property.