All Forum Posts by: Eric La Pratt

Good point - There are a few of these out there and I think Prosper has decent terms, relatively speaking. I'll look into them. Thanks!

I might be in a unique predicament and thought to reach out here:

I am wrapping up a co-owned 203k project that had some large surprises during construction and, now, is over budget and we need more money to finish the job. We have some options that we are working but I am curious to know what the BP community has to say about this. Here is the scenario:

• The project has gone on twice as long as expected, therefore holding costs have been twice as much.
• The project is maxed out for 203k limit for a 3 unit - meaning nothing more could be borrowed on it at the time, regardless of DTI
• To close out the 203k, the property has to go through final inspection with the city
• To go through final inspection with the city, we need about $40k of additional work (including new 1.5" water service)
• The property is not performing, so the banks see my DTI at the moment as very, very high - too high to get traditional financing, almost any way you cut it (HELOC, etc.). I literally cannot get anything traditional
• With a $40k cash infusion, the property would be wrapped up in 30 days and could be filled and cash flowing.

I am aware of cash advancing credit cards or asking family/friends - but beside that, what are the options to getting this cash infusion on a project and owned that's maxed out? Are there private lenders who help do bridge/construction financing? Is there crowd-sourced funding for this type of thing?

Welcome to BP, @Diego Ortega. Good for you and your dad for partnering and taking action.

What are the details of your flip?

@Kenneth Garrett I feel like I owe you lunch... Super insightful! Thank you!

Thanks @Jeff B. I appreciate that perspective.

@Danny F. that is the code for Chicago Heights, not Chicago which are not one in the same.

@Michael Rossier This is a small multi-family property. Not everything is always being done at the same time so one unit can be complete before another. Why would I wait until all of the units are complete to start leasing? So the contractor may be done with the work for one unit but the permit is for ALL of the units because it is A (as in a single) multi-family home. 

@Jim Gramata This is interesting. I am curious to know what @Kenneth Garrett (who has been SUPER HELPFUL!!!) has to say about that. Kenneth?

We were discussing the situation where there is a building permit. And it was a general discussion that did not necessarily apply to our situations but *possibly* could.

In my situation specifically, it would be occupying a unit I intend to live in because my unit will be done first, before the other units are complete. It's not that my unit would not be up to code but that I would not have the upgraded water service line called for in a previous inspection complete yet. The upgrade was called because of the amount of points in the building require a wider service line due to water pressure concerns. With only 1 of 4 floors occupied, there won't be a water pressure issue. So for me, I am currently paying rent to live in the apartment with my family while the work is being complete - why keep doing that if my unit is complete and up to code but the others are not? What if (and this is not the case) I ran out of money in the project and couldn't finish the other units? Would I still not be allowed to move into my own unit?

In the other scenario, we were talking about letting tenants move in as units became ready. It's a way to get cash flowing in while work is still being complete on other, more complicated units. Can one get a CO on one unit when the permit itself is for the entire building?

I was talking with an fellow Chicago based investor today and the topic came up about moving in without a CO. We were curious: Is there anyone who has (or has directly heard of) experience with this and is willing to share, whether good or bad? As an owner occupant, is this possible? As a landlord, is it possible to let tenants move in prior? What happens if the city inspector sees furniture and signs of living during a final inspection?

I've heard GC's say "it's Chicago, of course it's okay!" however others (myself and this other investor included) are not so confident. It was an interesting conversation but I am curious to hear what others with experience report.

Thanks @Jeff Rabinowitz, @Mark Yuschak & @Nahshun Nevils!

I will PM you in a minute, Nahshun.

Mark - as a GC yourself, might you be able to recommend someone?

Hi all,

My wife is the sole legal owner of a duplex in Ferndale, MI (48220) that we consider "ours" (it was purchased on her own after we got married because it didn't need 2 people to qualify for) and we are considering a cash-out refi to pull equity out without losing the property. If you are aware of property taxes in Ferndale, they are not cheap: $4400 annually for something with a taxable value of $57k and SEV of 77k. I understand that there is a law in Michigan that prevents the powers that be (Oakland county?) from raising the taxable value more than a few percent annually, regardless of the actual value of the property. Furthermore, I understand that taxes typically change when there has been a change in the title or sale of the property and they usually "reset" to the value that the property was sold at (given that is typically fair market value).

The cash out refi we are considering will require that I be added to mortgage and that my name is also added to the property in a quit claim deed. My big question is this: Will this change my taxable value? It's not a sale, per se, but a refinance that does shift the title. It's also not just a refinance as I would then take an ownership interest in the property. Lastly, my wife's maiden name is on the current title. She only changed her name late last year and never got around to updating the title/tax info. So it might appear as if the title changed from 1 person to 2 with a different last name.

The concern is if my property has doubled in value and we follow this through to fruition, will the taxable and SEV then reset to the new mortgage amount (or something else much higher than it currently is) because the fair market value has increased? If the taxable value of the property doubled, then the taxes would double. Triple value = triple the amount taxes. As you can imagine, going from 4400 to 8800 or 13200 would be a financial wreck for any property in the Ferndale market.

Thanks for any help on this!

Hi @Sean Graham,

Welcome to BP! I, too, am from metro Detroit and am living in Chicago. I have rentals in both markets (Ferndale & Chicago). You are in the right place... keep plugging away!

Mound Rd in Warren & Sterling Heights, for me, is the pulse of the metro Detroit economic activity. I have vivid memories about just how absent of traffic Mound was during the Great Recession. There were little, if any, semi-truck's transporting anything. And I have an equally vivid memory of the day I recognized when things might be turning around. For the first time of a long time, the front of the M&K Truck Center on Mound had brand new, shiny Mack trucks out front. I told my then fiance (now wife) that it was a great sign of a rebound... and rebound Detroit certainly did!

We could all bounce our opinions are various facts about each city here (I have plenty of them, believe me), but a successful real estate investor can make money in (most) economic climates. There's no right answer except the one that you choose and then those that make you money. Study, learn, analyze and keep your eye on the Mack Truck dealer. Go where you know, what you can stomach and what fits your overall life strategy. When the bubble does pop, it will everywhere, albeit less in some places versus other, it does still pop. All that means is that there may be far more opportunity! Be ready to jump in!