All Forum Posts by: Satha Palani

My wife and I own a 3 family in Newark NJ that we bought using an FHA loan (3.5% down) 3 years ago. We currently live in one unit and rent the other units out. I have a loan balance of approximately $410K and pay $270/Mth in PMI. My mortgage rate is 3.75%.

Similar houses in the neighborhood are selling in the 650 to 700K range. We did extensive renovation to all 3 units. Taking what we spent into account, we still have a good bit of equity built up already.    

We are now expecting a child and would like to move to a larger place. I want to refinance this house and pull some of the equity out to finance the new house.

I have been doing some research on bigger pockets on this and see a lot of folks talk about switching ownership to an LLC for added, tax benefits as well as mitigating risk.

How would one go about refinancing and changing ownership simultaneously? 

Would my wife and I establish an LLC and take the new loan out in the name of the LLC?

Would there be tax implications? 

Would the rates I can get financing it through an LLC be very different from what i already have?

I am assuming that any financing through the LLC would have to conventional, would I be able to get a 80% LTV or would it have to be higher?

Are there any specialized lenders i should consider?

As always all inputs are greatly appreciated.

thanks,

satha

@Jason G.

You don’t need 1500 / year for water. I own a 3 family in Newark and pay about 60/ month for water.

You are right about the area being rough. For the price point (350k) , I think North Newark offers better value. Proximity to light rail, Broad street NJ transit plus most of the city center development is moving that way. Lower Broadway or Roseville would be my top picks.

You will want to check with your mortgage company about borrowing the down payment. Most mortgages have clauses that require you the attest to the origin of the DP funds.

I am currently rehabbing a SFH that I will occupy myself. The house was in poor condition when I bought it and I have gutted it down to the studs.

House details :

18 x 50 brick Victorian built in the late 1800’s

Corner lot / attached on one side. I have windows on 3 sides .

Living space distributed over 3 floors. The first 2 floor are approximately 800 sq/ft and the 3rd floor is 650 sq/ft.

Located in Newark NJ.

I am trying to figure out the best HVAC system to use. We currently rent an apartment that has steam radiators and my wife loves them. I am considering keeping the steam system and installing multi head spilt unit A/C for cooling .

Does anyone have recommendation that are different ? Is there something I should be considering that I have not .

All inputs are appreciated

Thanks

@Cameron Dye

Lots of great ideas here that are RE specific so I won't pile on. The one thing I wish someone had told me when I was younger was to think holistically about investing. Look into IRA's both traditional and ROTH as a means of diversifying investments in the long term. Roth's even allow withdrawals of principal without penalty. A great way to let your rainy day fund grow tax free with the upside of having what you put in handy if and when you need it.

The younger you start and larger the growth and the sooner you can hit that sweet spot of knowing you can get up any random morning, decide to call it quits and not have to worry about money 😄

@Nadine Delille Which part of New Jersey are you looking to invest in? I live and invest in Newark. House hacked my first and have my second under contract. DId not start out with much, just lIke you👍 Here are the steps I took prior to buying my first house hack: 1. Research neighborhoods you potentially want to buy in. Familiarize yourself with the area. Drive by, street by street to get a good feel. City-data.com has some nice census data breakdowns by zip. The maps are broken down by census tract . I look at % change in median income between 2000 and 2010. If you are in northern NJ . being close to an nj transit statIon Is a plus. 2 . Once you narrow it down look at pricing , taxes , rental rates etc. get a good return calculator to figure out what you will cash flow . 3. Start talking to mortgage brokers. Look at all the homeownership programs out there. Fannie Mae , Freddie Mac , etc. know your credit score and own it . Figure out what you need to get it to a good place (if it is not already) 4. Look into home ownership programs offered by the city and state. Down payment assistance etc.. special terms for certaIn employment types. HUD homes IncludIng FannIe have 30 day owner only perIods so keep an eye on theIr listIngs Once you have your ground work layed out go look for a house. Multi-family is your best bet . The most difficult thing to do is to get off the sidelines. The best lessons you learn in RE investing are the ones you teach your self . Hope this helps and best of luck

@Fabio Busatto If the lease term is fixed for 4 years, perhaps you don’t need a 4% a year vacancy reserve. Also the taxes sound very high, 2k on 10k gross income. Are you sure you have accounted for all deductions, if so is there a way to mitigate taxes by changing up ownership structure? Owning in a trust / limited liability company for example .

A small portion of by basement which is unfinished is about a foot lower then the rest of the basement. After the spat of recent rain i noticed that there is about 4 inches of water standing on the bare earth floor. I suspect it is ground water. Any suggestion on what i can do to abate the situation? I gather that a installing a sub pump would be the only option for getting the water out, if so would it be legal for me the pump the water out into the street? Has anyone done this before? i saw some youtube videos and it looks straight forward but i an thinking i might be better using someone who knows what they are doing.

Any recommendation of a good basement contractor would be much appreciated.

Thanks

Its been awhile and i thought i will give you the folks on here an update.

The seller and I went back and forth on pricing, he wanted me to forgo the mortgage contingency and wanted to limit the amount of money he was willing to spend on the work needed to get the CCC.

We finally settled on on an "as -is" price where i would assume responsibility for the repairs; close with a temp CCC and use a home style mortgage to get all the repairs done post closing.

I kept the inspection clause and have had the house inspected; primarily to determine that the structure is ok. The inspection was fine. :)

@Ben Sosa We are on 4th ave close to Broadway

@Ro Maga i should have been more clear. The house is being taxed as a 3 family and is zoned R3. The current owners, who have owned it for over 30 years have been using it as a single family (sort of). Technically, we would not be converting but rather returning it to its original status.

If any of you have contractor recommendation, preferably those who have worked with the Home-style loan  please let me.

thanks again for all the inputs

Thank you all for the replies. I am not looking to flip the property ; rather to buy it, fix it up and hold it as a rental. My wife and I bought a fixer upper some years ago so not a total stranger to construction / renovation though there is a ton for me to learn. 

Does anyone have the name of a inspector they would recommend.

Thanks ,

Thanks Jeff ,

 You raise some good points.  I am going to go ahead and have the house inspected.