A newbie during COVID19

45 Replies

Hey BP! Im in the stage of

Investing in my education. I always hear how if you wait for the perfect time to invest, you will never make it happen, which makes perfect sense. However, given that I am a newbie do you think it would be wise to purchase a property with the whole COVID-19 situation going on? My niche is house hacking via multi-family properties. I am making sure that I am moving forward daily; ie. attending webinars, Podcast, Asking questions, and doing research on hard money lenders and investor friendly agents but I know the time needs to come to take action...Is it wise to make that time now? Or should I wait for this to blow over and just keep going hard on my education? I appreciate you guys. Thanks! 

I don't think the market is reflecting the situation yet.  I think it will be 3-6mo or more until prices have adjusted.  Right now people are still hopeful their properties will sell at full price, I don't see any deals yet.

Originally posted by @Steve Smithy :

I don't think the market is reflecting the situation yet.  I think it will be 3-6mo or more until prices have adjusted.  Right now people are still hopeful their properties will sell at full price, I don't see any deals yet.

 Thank you! 

Hi Evelyn,

I just got under contract my first house hack duplex, I made sure to run my numbers assuming the worst would happen. It still made sense and I am now waiting for the appraisal and hopefully close on time. It won't be a big deal if market values drop since house hacking is more for the cashflow and gettin started on investing. On the mean time I am still reading and preparing myself for the future. I would love to connect with you if you have more questions. I am based in Tampa, FL. 

I'd wait a bit to see how the housing market reacts to the high rate of unemployment. It's unfortunate but I believe people will have trouble paying off their mortgage and go into foreclosure. 

Hello @Evelyn Castillo , from what I have seen during this time as both an agent and investor is that lending rates have gone down but lending seems to be a bit harder to obtain. If your lending is squared away GO FOR IT! I submitted two offers this weekend, take advantage of this volatile time, there's going to be some good deals out there right now. 

Hey @Coty Dolan , thank you for your response. Yes,I've heard that Rates have decreased which is great news, but I don't plan on funding my deals through conventional or FHA loan. I am actually in search of a hard money lender at the moment because of my job/credit situation; I simply wouldn't meet the requirements of an FHA/conventional loan now, and I really want to start this thing young. My guess is that a hard money lender will have higher rates? I recall reading that somewhere, though this may not be correct.

@Evelyn Castillo hard money lenders will definitely have higher rates. I would recommend as a first step to work on your credit and saving up some cash to get started. Based on my understanding, they often like you to have some skin in the game, which would require at least as much as you would be putting down for an FHA loan. But there are lots of creative ways to get started. Best of luck to you!

I agree with Kelsey, hard money can be hard.  We bought our current primary residence through a hard money loan of $240k @ 11% for 9 months. We were paying $2k a month as interest only. We refinanced after 6 months to a conventional 30yr and haven’t looked back. We bought very low with the plan to live-and-flip over the next two years.

There are a lot of creative and good lenders out there who can help find the right loan product for you. Hard money is expensive, very short term and only a good idea if you have a quick and reliable exit strategy.

@Evelyn Castillo

I'm a new investor too!

I love house hacking as a jumping in point. I don't pay for housing so it wouldn't make sense for me.

I also understand why you are using hard money. Some hard money lenders are really great for us newbies. They serve as mentors where there aren't any.

Speaking of, if you do have contacts that could and would partner up during a time like this, it would make more sense due to more favorable interest rates.

Fha loan requirements are changing and banks are getting a little crazy. The comfort a bank used to provide has evaporated in this crisis.

You said it best in your initial post- if you wait, you'll never get started. So jump in! Good luck! And make sure you vet your hard $ lender, and have reserves to cover the mortgage for longer than you would have a month ago.

Are any offices even open?  Agents showing properties?  Inspectors working?  And if so, you'd have to meet people to show the property, and are many people getting out and looking and applying, etc.? - I don't see any of that happening right now.  It's more about social distancing issues and business closures right now than whether or not you can make the deal, is what I'm thinking.  

I don't know where you are living.  Maybe it's not an issue there yet, but check out the news.  This is real and very scary, and I was one of the people not worried about it at first.  I am now.

@Evelyn Castillo

I saw your comment about your credit. Is there a reason why it is bad ( I mean I know there is a reason) But what are you doing to fix that? Credit in this business equals money. 

Now please don't let this Coronavirus scare you off, or let it. Like it is scaring everyone else off and I'm still buying properties. It is just a flu, not a world war. 

Ive survived the last crash, i’ve learned a lot since... but this is a totally different scenario that no one has ever experienced. Not even the most experienced of us  

In my opinion, there’s no telling where this market will really go.  Im sure you’ve heard it all by now.   The key to investing success in such volatile market is to make sure you really know your numbers in and out.... and that includes your liquidity should things turn for the worse.  Not saying not to invest.  But make sure you revisit and tighten your criteria.   Nothing wrong with not jumping in right away right now... i believe this merits a special circumstance... so no need to pressure yourself. 

A lot of people will say "Time in Market beats Timing the Market". I agree with this to some degree, but we are in very volatile market these days - depending on your location. If you are in any of the metro locations (NYC, Chicago, etc.), I would probably wait until the market stabilize.  Especially considering your situation (no credit).  Market will stabilize around 6-months to 1-year from now.  Buy at that time, through better financing terms and you'll make more money overall.

When you say "Hard-money lender", what kind of interest rates can you get through them ?? I got a 3.0% FHA 30-year fixed loan (so effectively 3.85% conventional, due to PMI) with a 3.5% downpayment for a triplex that I intend to owner-occupy. Compare that to a hard-money lender - even at 5%, you're still losing over 1%. Amortize this amount and see how much is the difference. Factor in the price volatility at this time (and the very likely possibility that it house prices will go down). I closed in late Feb 2020, and the Covid-19 situation got worse in early March so I'm SoL, but I would've much preferred waiting 6-months to 1-year from now to buy. I already saw a neighbor's price go down by about $5k... While this doesn't really affect me, it still hurts to think that I could've scored a better deal had I waited another 6 months.

@Evelyn Castillo

With no credit or experience with little money in the bank you will have a hard time getting hard money. If you don't have anything negative on your credit report go to your bank ask for a secure credit card. I started this way with no credit after being debt free for 4 years. I got denied for a Target card had to pay $500 for a secured credit card (you get the money back after 12 months) put it to use paid it off and in a month I was approved for a 150k fha loan and bought my first house with 7k out of pocket. Some hard money will cost more than that in fees.

I have used 3 HM loans this year to buy good deals and this is what I had to bring to closing

115 purchase 18k to closing

117 purchase 22k to closing

60 purchase 9k to closing

It cost money to play this game doesn't have to be your money but people who say get in for free are full of it !

I think a downturn in the market always brings out investors looking for a deal. Many will start looking to liquidate which might be a positive for you. I'd continue to study the market, so when a deal comes up, you will KNOW and have the confidence that it's a deal.

Currently, due to the virus, the lending company I'm with is asking for 680+ credit. Another option is to get a credit partner with a good score...that might be a friend or family member. 

Wish you the best, Evelyn.

@Evelyn Castillo

I'm not sure what your exact situation, ultimate goal, or timeline is; but I essentially bought credit. I did it two ways:

1) I got a 6 month personal loan from my credit union and calculated the interest. I took the loan money plus the money for the interest and threw it into a checking account to be automatically deducted. One the loan was paid I closed the account.

2) I got a secured credit card where you take like $300 and send it to the CC company. You then use the card for gas.

You want to have these accounts open for 6 months to build credit. Hope this helps!

In California today, the government added realtors to the list of essential workers.  The article I read said the realtors were also worried about working, but, they can work if they want to now.

@Evelyn Castillo I’m personally waiting it out a bit. However, by house hacking you are in a different situation. If you can find a property, say a duplex for example, in which the current market rent for the other unit covers most or all of your total monthly cost, and you can secure long term financing for it, it would be a win in my opinion. Even if that duplex dropped in value in the short term, someone else is still paying your own housing expenses, allowing you to save that money each month for your next deal. Obviously this would depend a lot on what market you’re in (coastal markets are a bit more risky in a recession, for example, but will appreciate more in the long term). Good luck!

I have a suspicion these posts saying to go for it and this will blow over are going to age like milk. We are about to see unemployment numbers of astounding proportions. Virginia just extended stay at home orders til June. 

Where is there any data showing the linear curve going anywhere but up on new cases and deaths. This does not seem to be taken seriously, but this country has a knack for ignoring science and data. 

@Randall Justus Thank you! wow, never thought of that. This is great because I've tried to apply for a credit card at clothing stores like GAP and Macy's for example and they denied me both times. I too have a credit union so I'm definitely getting this done. Do you mind elaborating on how the second option you mentioned would work? Never heard of that before.

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