Low Income Properties Diary

11 Replies

So over the past 4 months I have been working on my first 3 low-income rental deals.  Here's how it's going so far. 

Deal 1-

33K 3Bed 1Bath 1300SqFt

I found this property through my realtor.  It had just popped up on the market and compared to the homes around it, it was a beauty.  There are a few problems with it... mainly that it is outdated - The home was built in 1930 and has no AC, windows are cracked and old, the light fixtures were barely there and the floors (hardwood and linoleum) were a mess.

Now it's essential that I mention that this is an out of state purchase. I live in Texas and the home is in Virginia. All my previous homes have been purchased in the state that I was living... So this I know will be a challenge.

Through a bit of shopping I found a contractor and got an estimate. I was looking at around 25K to rehab the home. This is money I did not have. So I went searching for a loan. Come to find out, most HML's don't want to do anything under 60K, so I went to the bank. There is only one loan that I could find that would suit my situation- the Fannie/Fred Homestyle Loan. This is very similar to the 203K loan, but it is for investors and has a lot less restrictions. I managed to find a bank that could get me the loan so long as it came to 46K total money lended. Perfect! I managed to get the seller to agree to 33K sell price, with 25K in rehab that puts me around 58K... I'm golden.

Closing took over 70 days. The underwriter we worked with was atrocious. I have never provided so much paperwork to a bank... ever. Ridiculous stuff too, like a letter from my squadron commander stating that I would be receiving my Basic Allowance for Housing for the next 3 years.... huh? We closed none the less. Now we're on to the rehab portion.

Rehab started last Friday and I must say, for rolling the dice on this contractor, he's impressed me so far. For me a big factor influencing my decision on who does my contract work is how well they communicate. This dude OVERcommunicates, and I love it! I've been informed of every item and he replies within an hour tops.  So far so good, we'll see how it goes as we progress further.

I have a lot more to write about this and the other properties but I'm being pulled away. I will continue later on!

Great job. I'm interested to hear more about the loan you received. For my duplex I'm renovating, I used a hml, I would like other options for my next project. Can you provide any details about your loan.

That's interesting - does the loan have stipulations on reselling the home after reno or are you keeping this as a rental?  I'm interested to see how this contractor works out for you as well.  Every time I've had a contractor OVER communicate it means that they are way UNDER educated and end up screwing up.  I HOPE this one is a shining excepting to my experience!! lol  Keep us posted!

I've done the Homestyle loan a few years ago and am currently looking again and I've got 4 HS quotes coming in from different lenders.  The rate difference is usually pretty reasonable, maybe around 0.5%.  You can also use the loan as an investor, but rates are higher and so is the down payment.  There are other fees as well, like draw inspection fees, additional appraisal at the end of construction, and construction fees or other fees a bank may charge, so you just shop around like you would a normal loan, but get familiar with all the different fees they charge; try to figure out how to compare apples to apples.

I know nothing about San Antonio, but it sounds like you've done a good job finding a contractor.  In my mind, that's the hardest part.

I'm in a low income market also in Louisiana. The way we do our loans is through an LLC but personally garuantee it and group together 3 or 4 houses on one note for 15 years

Mr. Dillon:
When you say you personally guarantee it, how is that?  Collateral or what?

Originally posted by @Paul Dillon:

I'm in a low income market also in Louisiana. The way we do our loans is through an LLC but personally garuantee it and group together 3 or 4 houses on one note for 15 years

Meaning that my name stands good for it in case we fail to make payments through the LLC if I'm not mistaken the loans don't show up on my personal credit report 

Originally posted by @Shani Linvelle :
Mr. Dillon:
When you say you personally guarantee it, how is that?  Collateral or what?

Originally posted by @Paul Dillon:

I'm in a low income market also in Louisiana. The way we do our loans is through an LLC but personally garuantee it and group together 3 or 4 houses on one note for 15 years

@Paul Dillon. I did the same thing when I grouped my properties and used commercial lending to refinance the package. I personally guaranteed the commercial loan that was made to my LLC so in the event I defaulted the lender will come after me personally. From my experience the loan doesn't show on my personal credit report since it is under my LLC.

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