All Forum Posts by: William Anderson

Alex, 

I have written a couple of blog articles and a podcast on this topic. I decided to test what I knew about getting PMI removed. Lenders are not required nor will they automatically remove PMI at any time other than when the mortgage is paid off. Many people pay PMI well into their loan long after they have reached 80% LTV. This occurs even when the balance on the loan is 20% or lower than when they originated the loan.

Most mortgage companies will not remove PMI unless your loan to value is at least 75% if the loan is less than five years old. Further, if the loan is less than two years old they will not remove PMI even with a Brokers Price Opinion. My loan was about 2.5 years in and the company agreed to send an appraiser after I agreed to pay the cost.

Let me back up a bit. My lender has a department that manages PMI. That department does not want to speak to anyone. Their phone number is not listed anywhere. I called the main number and was put through a word salad. I told them I wanted to speak with someone in their PMI, of course, the call came back to the same answering service. I sent a letter to their PMI department. Two weeks later, no response. I sent another letter, but two weeks later no response. I sent a letter to their CEO, and someone called me and said the paperwork to request the appraisal was on the way. Two weeks later it arrived

It took another three weeks for the appraiser to arrive.  She seemed as if she knew her job.  I took a letter to the CEO again and six weeks to finally receive a copy of the appraisal.  Guess what.  The value was within five thousand dollars of the price I paid for it 2.5 years ago.

I called the original appraiser whom I have since met and he told me that in his opinion she used inaccurate comps. He told me that it was not possible after an 18-25% appreciation in this area (near the beach) over the past two years for the price not to have gone up.

Again, as a broker, I knew this all too well. My choice is to keep paying PMI or to order another appraisal. My investment partner and I decided to let it ride for about six months. The other appraiser suggested that the key information missing in the other appraiser's requirements was the target. When a house is offered for sale, the appraiser knows the target and the listing price. This helps the process. My appraiser was not told a target so she did not know how far she was from the mark (about $40k).

What are the takeaways here: 1. If you want PMI to go away, you have to initiate it. 2. Don't wait to initiate the request when your real estate agent confirms 75% LTV. 3. Keep up the pressure on the mortgage servicer. 4. Don't expect a positive outcome if when you make the request your property value is on the line.

Isaiah, 

I know your situation, I have been there. Years ago when I was starting, it was hard to buy property when I owned my own company in the early years.  There is a simple truth.  "When you need money the banks say no.  When you don't they want to give you money".  I am working with a person who is in your situation.  He has a great job working at the port (union) but he is an excellent AC guy so he has been laying off work to do his AC work.

I have worked with him for about a year now and he has an LLC, a real business, and a CPA and is recording all sales through his business. Unfortunately has only one year on the books. Lenders want to see two years with good records and possibly a business plan. Even with two years and a business plan the lenders will discount a new business by 25% meaning you get credit for 75% of the income.

You may be able to do both as he does now.  He watches his hours at the port to be sure he can show a good steady income (that's important, no ups and downs).  In the interim, he has obtained two business credit cards (not consumer) which permits him to finance his business without hits to credit.  

Something you can do if you want to buy property now is to partner with someone who has good credit. Both of you sign on the loan and flip it to an LLC. You will get credit for paying on a mortgage loan which will help. Be sure your score is good or you will drag the interest rate down.

When you get past year two you should be sold.  Be sure you have formed a company with the state and use a CPA, not an accountant.  You will get there.  

"Destroyed?"  You are correct, the market is reverting to a more normal market (balanced market) in my area.  We have two markets here.  One is locals who need housing ($100k-$250k) and the other market is people moving here to retire or buy a second home and investors.  The out-of-state people are usually (except for investors) buying homes in the $300k+ range and represent most of the new home construction buyers.  

There is a steady demand from out-of-state buyers which has been keeping builders very busy.  Only recently are a few new homes not sold before they were finished.  Custom home building on the beach is moving along at a brisk pace.  New restaurants and businesses are still opening.  

I would agree with you this on balance a fairly normal market. As a real estate broker on the Coast, I do my best to keep up with trends.  

My six-month idea is because the market is cooling now.  Price increases in my market have slowed to a stop.  Rates have come down a bit but I believe that prices in six months will be lower than they are now in my area.  They are not going to take a big dip.  I see the market going from a seller's market to more of a balanced market with concessions on the part of sellers.  Also, the DOM has increased and that makes some sellers nervous which leads to negotiating prices.  Thus, my six months means simply, if you are planning to pay $200k now for a house but think it may go to $185k then offer that price now and see where it goes.

Susan, nice to see a fellow MS investor on the forum.  When I tell people out of state about our housing prices in MS they don't believe me at first.  

Here are some things you can do:

1. Check the zoning ordinances for STR, they are generally online. If there are none, call and ask if there will be rules.

2. Ask the business license department if one is required.

3. Check with your state about registering to collect sales tax if there is any.  ABB&VRBO collects and pays it but if you collect any from direct bookings, you will have to pay it as required.  If a permit is required in your community they will usually ask for your tax permit.

3. When you know that STR is acceptable in specific zones, look at the map online

4. If you are looking for a property in a specifically permitted zone, visit the planning department and talk to someone.  Short of that visit, call and speak to someone.

4. Speak to an owner who has an STR in your selected zone, and get the "real" story.

Keep this in mind. Even if an STR is permitted for example in a zone, this does not mean it's ok. Many communities have or are writing ordinances to specifically regulate SRTs. They want specific parking requirements, safety e.g. exits marked, ramps, and more. I know one community that wants your permit (yes you must have a license) to be posted on the inside of the entrance door or close by. The fire department must come out for an annual inspection.

Sometimes a community does not want STRs. They may allow them but make it challenging to own and operate. Consider when you want to sell the property as an STR. Some communities require the new owner to obtain a new permit which they can reject. The new owner can not apply for a permit until they own the property. Imagine if you are trying to sell a property and the potential buyer tells you they can't take the risk that the city will grant a permit. This is the case with one city in the area where I work.

I recently told a councilman from this city that real estate agents are telling prospective buyers to avoid their city for STR because of the onerous rules. He was surprised. I explained that the paper says one thing but under the table rules are different.

Oh, by the way, the code enforcement people in this city look at ABB and VRBO, they find owners who don't have permits and the fine is $500 per day.  Never risk buying a property where you are not sure not only are the rules permitting you but the policy as well.

My property managers make it crystal clear that either the lawn service is included in the rent or they are responsible.  I generally include it in the rent, sometimes as a separate line item.  As most of us who have rented landscaped property know, renters don't usually have the skills or the equipment or they don't care.  

You can offer them the opportunity to care for the property for a reduction in the rent.  I have run into this watering thing before in California where there is no water.  If the tenant is paying the water bill they won't want to water.  As everyone says, check the regulations.  Where I lived in CA, you could only turn on a sprinkler for a specified period.  Hand watering was always ok.  It's a problem in those areas.  Best to install a drip system for plants.

 I am a partner in Gulf Coast Property Management,  they own ChristiesGulfBeachRentals.com and manage for clients.  Their rate is only 15% no hidden charges.

Be careful buying beds from Amazon.  I purchased several that were made of wood.  They all broke within a few months.  Kids jumping on the beds and adults, well you know.  Buy metal frames that are well made.  Buy separate headboards and screw them onto the walls.  Fasten your beds to the headboards so they do not move.

Buy all of your appliances with credit cards that double the warranty.  Your guests will find a way to mess them up and that extra warranty from the credit card will replace them.  Dining room tables are challenging.  Try to find something that is indestructible.   

Christopher, 

The Mississippi Gulf Coast is a great market for STR. I just sold one to a young couple starting their investing career. The closing price was $197,000 for three bedrooms, two baths a long walk to the beach. This property was completely rehabbed. COC and ROIs on my properties are excellent.

Here is an example https://loganandersonllc.com/l...

The Mississippi Gulf Coast is a vacation destination.  We have 12 casinos which bring people in all year.  Major events draw lots of people as well.  The beaches here are not full of highrise buildings, you can actually drive along the highway and have an unobstructed view of the Gulf.