All Forum Posts by: Wilson Pun

Congrats on getting started! Just a couple of things to watch out for. At the $50,000 threshold, assuming that's the ARV, you won't be able to get conventional financing. The minimum loan amount on conventional loans is $50k. If the numbers work out and you're getting cash flow, it can still be fine, but just keep in mind that for the most part, given similar property types, the maintenance/CapEx costs on a $50,000 house vs a $500,000 house are the same (you won't get a discount on the roof on the $50k house), so there's some value scaling to also keep in mind.

Definitely seems like one of those situations where any sort of market impact won't be felt immediately.  We have a short term exodus to the suburbs driving up demand on the buy side, but really no immediate factors counterbalancing the sell side supply until much later.  With eviction moratoriums dragging out what is already a long eviction process in many states, paired with a long foreclosure timeline, the supply shock from foreclosures probably won't appear for at least a year or two.

Best case scenario is unemployment tapers off and tenants that were behind, catch-up on their rents.  But really, is that the best case we're all expecting?  It's a reality that with the unemployment increase, there will be tenants that fall behind and will not be able to pay their outstanding rents.  Those landlords in turn either have the ability to eat the loss or face foreclosure themselves.  

Definitely talk to an attorney that specialized in the specific state's law.  You don't even need a zoning attorney, a real estate attorney (ideally the one that represented you on the purchase) should know.  In NY for example, the tax classification is irrelevant because you'll get taxed based on whatever the observed occupancy is, even if the legal occupancy is contrary to existing use.  It's the Certificate of Occupancy that dictates the legal occupancy, not how it's assessed via tax classification.  

Furthermore, the representation on legal occupancy (at least in NY), should always be directly in the contract and title company won't be much help because they insure title, not legal occupancy, even though the title report will have a CO search, it's "info only".

Yes, transferring title from an individual borrower to an LLC controlled by original borrower is exempt from Due on Sale- D1-4.1-02 of the Fannie Mae servicing guide, allowable exemptions-

a limited liability company (LLC), provided that

• the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
• the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).

While the general understanding is that a higher owner-occupancy rate in a market or neighborhood indicates that owners take better care of their property resulting in higher property value, better neighborhoods and higher rent, I'm wondering if anyone's seen otherwise.  

Namely since the owner-occupancy range is so great (30%-80%) in many large markets, is this OOR to Rent always an absolute direct correlation regardless of range or, for example, if owner occupancy is 80+, is there a retracement in rent or any other factors that would cause these areas to be less desirable to an investor?

thanks @David M Trapani, definitely considering the out-of-state option. As an attorney also, I'm sure you can appreciate the struggles of being admitted in certain states and essentially choosing between your practice or your REI if moving out of state, that is unless retaking the BAR is an acceptable option

thanks @Nathan Gesner seems if the numbers work out better for other states, next step would be trying to find a good PM in my target markets and see how the PM cost would fit into my bottom line.  It's really the uncertainty and inaccessability factor that concerns me the most with OOSI.

@Wesley W. spot on- i've been hearing other people considering 1031ing out as well.  At this point, I'm not even sure if it's a numbers game, especially with prices so high making it harder to diversify via tenant count/property location.  1 bad tenant can really set a landlord behind.

@Joe Aiola thanks Joe.  Yea you're right, I don't think that tenants are trying to screw landlords over on purpose, just with the median rent prices as high as they are and the closure of the city until recently and the unemployment rates- the concern is the numbers have to give somewhere.  Also, it was always part of the plan to have a great screening process, but the new laws prohibit landlords from asking or screening based on past/ongoing litigation.  There's also- 

RPAPL 753: Instead of court having discretion to give only up to 6-month stay if pay use and occupancy, it is now one year and where it applied only to tenants, it now applies to occupants. Factors to consider include extreme hardship for the Tenant. Changes the time to cure defaults after trial from 10 to 30 days.

So essentially one bad tenant is enough to tank your cash flow to negative for a potentially long time.  I think my next step is consider other markets to be able to get a better numbers and procedural comparison.

Thanks for your input @Sean Toomey. That's the conclusion I've been coming to. I have a couple of out of state options in mind but it's really trading low cost acquisitions and positive cash flow, for potential uncertainty for investing in an out of state market without boots on the ground and relying on a PM. It might work for turnkey properties, but I was really hoping to jump into a BRRRR and just gain that initial experience after doing all the learning upfront.