All Forum Posts by: Tim M.

I actually live on this lake so am pretty familiar with it :)
Comps pretty much anywhere on the lake should be adequate, as long as they are waterfront. Most appraisers would even look to neighboring (smaller) lakes for comps if none existed on this lake (I don't agree with this practice)- but this lake has no shortage of waterfront homes for sale, so the 6 comps you have should be pretty representative, adjusting for finishes etc. I think 600k is certainly possible, but 75k rehab may be low. Also depends on what area of the lake and amount of waterfront. North side of lake will command higher selling prices than south. In this price range buyers are definitely looking for a 2 car garage, so I'd factor in that cost. My neighbor has a 4/3, 2 car garage - everything recently updated, North end - move-in ready. 900k - had a 800k cash offer within 1 month. Deal fell through but thats a different story... Also - I'd get a good septic inspection done. New septic system can run 20k+ easily. A common issue around here. Property on this lake is a finite resource, always in demand. Good luck! Sounds like you may be on to something here, if you can get in for the right price.

Jon Holdman is spot on as usual. I'd just add a point - FHA and Conventional financing are different in regards to including rental income. With FHA you are able to include rental income right off the bat PROVIDED you have at least 25-30% equity in that rental income producing property. So if you could refi your current 2 unit to conventional, buy a new 2-4 unit and OO using FHA financing, AND you had 25% equity in the 1st property = bingo, you will be able to include ALL that rental income(per Johns formula) in your dTi formula. In fact, you'd be able to include both sides rental income with signed leases.

As others have said - it will vary by lender. But if you shop around you should be able to find someone willing to work with you. Typically as long as your DTI is under 45% and you have 2 yrs returns showing rental income - I think you'll be fine. You'll be able to use projected rents as income, although each lender has their own equation - usually 75% of gross, although my local bank will do 100% minus PITI with a signed lease. Is your goal to get a mortgage/HELOC on your existing rental (now free n clear)? Or to get a mortgage on a new primary residence? Either way, remember you're looking at 20-25% down - since you already have an FHA loan on your primary.

Agreed with Jon Holdman - since you have the cash to buy mortgage free, just buy it. After your landlord seasoning (2 yrs) hits, you can start including rental income in your DtI (per Jons calculations). At that time you can refi or get an equity line and start to leverage the property.
Alternatively, if you didn't have cash to purchase outright, or maybe only enough for 25% down - you could get a cosigner. You'd essentially be 'borrowing' that persons good credit and DtI. Obviously this comes with inherent risk, and doesn't offer any advantage if you're able to do the first scenario.

Steve Babiak - makes sense. Agreed, not the banks fault - certainly a delay tactic by the borrower. Isn't the end result the same though? Just added a few more months and time/effort/fees in bankruptcy court. Makes one wonder why there is even something called 'foreclosure' or even 'short sale'. These processes don't work when there is no incentive for anyone to do them. I suppose a short sale should preserve the borrowers 'excellent' credit history - but even that is debateable. Anyway, I appreciate everyone's input. Not familiar with this scenario - so just trying to figure out if this deal still has potential. Seems like wait and see is the plan.

Mark H. - thanks for the great insight! So the trustee probably won't want it - I have an in there. The bank also still has incentive to make this happen - since I was the only offer they had in the last 8 months, they should realize if I bail they will likely get less (or nothing) at bk sale, and it all ends up costing them more. But that's common sense again... Regardless, I'm not going anywhere - this is a solid deal and I'll stick around to see how it plays out. I wouldn't ask for a discount unless there was actual damage. But good idea on fronting winterization costs - yes, a little risky, but really not that costly. Very safe area too, so I'm not too worried about vandalism. Still waiting to hear details from the listing agent.

Chris - yes, taxes are killer in my area as well... it prevents me from doing much investing here. But kudos brother! 12% CoC is pretty amazing in NJ. Fairly consistent appreciation is the other upside there. I'm getting 25%+ CoC out of state, but appreciation is nothing and exit strategy is a little slim - mostly 4 units, so harder to sell. But I'm buy and hold long term so cash is my king at the moment.

Joel Owens - not sure what chapter they filed, 7 I believe - no reorganization. Is a partnership involved with multiple properties- these 2 guys owned 10+ properties in that area (bad timing and over leveraged). I believe this prop was neutral equity but couldn't make up for the negative they had in the rest - kinda got sucked into the bk. So loan mods, etc. are out of the question I think. I'll be keeping my eye on this one for sure. I'll also investigate the other properties involved - I was aware of 1 other prop (also short sale), but wasn't interested. How/when can I find out what other properties are invloved? Will it be pulbic notice?

Chris Masons - I'm in NW Jersey (Morris/Sussex counties), but most of my investing is in PA where I'm originally from. This deal is also in PA. I went into this deal knowing it could take a while - was already a short sale, so I'm in no hurry. My only concern is the disrepair that will happen to a vacant prop through the winter. My new offer will reflect that though - so ultimately it could work out better.
Not all that familiar with those counties - how are taxes there? You must be buying at well under ARV to get decent cash flow with NJ taxes.

Mark H. - true, I see now that the seller has no incentive here. But wouldn't the bank have some? They are risking losing a very reasonable offer (that they liked). Or is it too late? - it's in the bk trustees hands now... It seems the only person who wins is the bk trustee, who of course will add their fees in the sale. I'm assuming a bk sale is very similar to a foreclosure auction? I'll have to keep my eye on this prop - I guess I'll just wait it out and make another offer at the bk sale. Maybe my patience will pay off and I'll get it at an even lower price then.