All Forum Posts by: Al D.

@Justin Sullivan Shoot! My decimal was off (even though I did it in my head.) I knew something was off. You are correct.

@Heath Watson (I was initially attracted to this post for its military reference. That aside:)

It appears that you are being asked to pay around 0.5 point in origination fees (one point is 1% of the loan amount.) Since your purchase price is $100k, and you are putting down 15%, your loan must be for $85k, and you said that $4,500 is in points, so I’m guessing you are paying ~0.5 points. What this does is essentially “pre-pay” some of the interest that you’d otherwise be expected to pay during the term (life) of the loan in smaller - monthly - increments, while majority of interest will still be paid in those monthly installments. But this way, the (originating) bank gets quite a bit of money upfront.

It sounds like you are working directly with a particular lender, rather than a broker. A direct lender is limited to whatever they happen to offer at a particular time for a particular purchase scenario/buyer qualifications.

You are already coming up with $15k (and other “customary” closing costs, besides any loan origination/discount points - that buyers don’t always have to pay.) Origination points go to the lender - you will never see that money again. But if you do have this $4.5k for the loan origination, putting that additional amount into the downpayment instead could bring your downpayment to 20%, which should change the whole scenario in your favor, like perhaps by “bringing in” other lenders - if you work with a broker/do your own loan shopping elsewhere - who do not deal with investment loans for under 20% down. Now they would suddenly be in the picture. Some of those lenders may not only not have origination points, but may also be offering a lower interest rate. In that scenario, this $4,500 becomes part of your property’s equity (it’s “dead equity,” but it’s better than having handed it to the lender - and it’s your dead equity.)

Is your agent (unofficially, since it’s off-marker) representing the seller, too? Perhaps you could negotiate for the seller to pay some customary closing costs (appraisal, title, pre-paid taxes, etc.) that should leave you with even more cash toward the downpayment. And, depending on the current market conditions in your location, you can also attempt to negotiate the purchase price down, along with any/all of the above. My approach to negotiating the purchase price down for your scenario would likely be from the perspective that the property is more likely to appraise for a lower value than $100k in its current condition. (Depending on market conditions, if your loan approval falls through for the $100k purchase contract due to a lower appraisal value, the sellers will have to look for another buyer, which takes time - higher holding costs for them, as well as risk of still-higher interest rates and lower values by that time.)

@Amar: Others may have given you good answers on your main questions, but I have different concerns:

You did not mention whether there is an HOA. (A Wesley Chapel townhouse I've owned since 2016 has gone from under $200/mo to $235/mo, and will undoubtedly go up more in January. Rent has gone up, too - much higher. But that's history now.)

Have you shopped for insurance? (Don’t just listen to what the builders may tell you it will cost.) My 2016 construction has seen its premium more than double now. And I’ve been with the same carrier. Was about to go with another one, but they pulled out of the zip code just after I got that quote. Florida insurance is in a messy situation. Certainly make sure that you are not buying in a flood zone (additional insurance required by your lender that would further eat your cash flow.)

My capex have been low - a window screen lost in a 2017 hurricane and a couple/three AC issues. (Third tenant now with fairly low turnover costs. And I self-manage, but pay a commission of one month's rent to place new tenants - consider PM costs/vacancy/utilities in your calculations.) And my insurance premium has benefited from up-to-code construction/new/HOA-covered roof. Yes, new-build is good.

I did not read prior comments with enough attention, but you may want to actually study Florida’s booms and busts of the past, because this may be your only investment property for some time: If history there should repeat, even if interest rates go down enough to make sense to refi in that possible scenario, can you still count on having enough equity at that time? If you can (really) count on positive cash flow when you evaluate your purchase, this consideration should not matter so much for a buy-and-hold investor, but it sounds like you may not have cash flow. And if this is your only RE investment, your W-2 may have to be keeping it afloat. But, in some income tax scenarios, this may still be a potential win.

Not clickbait. And I tried to see if there is another post on this already, but didn’t find one.

The link speaks for itself:

https://www.ktnv.com/13-investigates/las-vegas-landlord-who-made-section-8-tenant-sign-sex-contract-says-he-did-it-to-protect-himself

This is a property with a remote owner. The defendant was a licensed broker/PM. It appears that whatever lawsuit there initially was against the owner has been dropped. As an OOS owner, I don’t know how to (100%) prevent such things from happening.

The City of Hayward has made certain information public regarding the July 4, 2022, fireworks enforcement campaign. Highlights:

“… Over July 4 and the morning of July 5, the Hayward Police Department and Code Enforcement Division received 359 fireworks complaints… (tying) some of this illegal fireworks activity to 94 separate addresses in the City. Since then, the City’s Code Enforcement Division thus far has issued notifications of violation with penalties to owners of 59 different properties and counting—with fines of $1,200, $3,000 and $5,000 for a first, second and third offense…”

Did any of these cited property owners have a better chance of preventing - not to be confused with responding to a complaint of - someone (tenant, visitor or a trespasser) from using their property to illegally set off fireworks than the municipal government had in preventing a person from setting off illegal fireworks in a city park or any public right of way? I’d like to see the stats on those calls. Is the city bearing responsibility in the form of monetary fines in any of those cases? (Rhetorical.)

“Property owners who wish to appeal a fireworks related citation can do so by completing the Administrative Hearing Request Form and submitting the form to the appropriate City Division based on the hearing type.”

https://www.hayward-ca.gov/fire-department/office-fire-marshal/all-fireworks-are-illegal-city-hayward-and-fairview-fire-protection-districts?mc_cid=d93ededb41&mc_eid=19b64c5478

From the Request for Administrative Hearing form: “A deposit in the amount of the hearing fee is due when this form is submitted.” (Administrative citation fee is $761.)

https://www.hayward-ca.gov/sites/default/files/form/2017-08-09_COMBINED%20HEARING%20REQUEST.PDF

I understand that illegal fireworks cause problems. But I cannot see this approach as a (fair, to say the least) solution. Are property owners now to hire security guards for each July 4th - expecting that to cost less than $1,200? What about July 3rd?… Does having a security guard prevent all crimes?

I do not know what legal education - understanding of evidence, chain of evidence, constitutional/procedural rights - the hearing officer(s) may have. But by not making it a criminal matter, the city is more likely to prevail than not. If I were facing one of these citations, I’d have to consider the cost of an attorney over simply asking the city to lower the fine for a “no contest” - ahem - “plea.” However, with the understanding that this may just be the start of the city’s overreach, an attorney would be worth every penny, so is banding together.

@Jenna Joan Singleton Since you already have a lawyer, I have to trust that you got the best legal advice money can buy. I don’t know the specifics of your contract, besides “laws of California.” I don’t know what loan amount is in play.

I am not a lawyer, so from experience: (a) The parties come from/are in different states; (b) if the damages should be more than $75,000, you may have the option of going thru federal court under such circumstances. Whether there is a case-beneficial reason to do so depends on the specific case - your attorney should (hopefully) know. But if the amount in question is under $75,000, it’s not an option anyway.

@Mark W Twarog You may want to mention the state the subject property is in - there may be good regional lenders in certain locations.

While this is not the main concern of your post, but from your stated goals, I’d like to remind you of some changes in effect from a few years ago for a few more years that some people I come across are not aware of regarding HE interest tax deduction: using primary HE for improvements on the subject property may be tax-deductible for you, so may be using it to invest (absolutely speak with your tax professional - don’t count on my advice,) depending on nature of that investment. However, using it to pay off other debt is no longer a tax-deductible use of HE, while may still be a better option regardless of any tax benefit because the original debt may have higher interest rates.

@Harish Verma You make a fair point about interest rates of late for comparing one investment against another based on the sellers’ stated cap rates. Since any potential mortgage is not calculated into the cap rate, I rarely even care to count on the advertised cap rate. It’s more just for comparison to me. Tho, when one really stands out from a typical local norm at a given time in that market, it may help me to gauge the overall truthiness of the seller/syndicator when it comes to their other claims.

@Kate Jones Majority of my properties are professionally managed. I expect my PMs to have a 24-hour emergency line. They better check them, too.

But I still self-manage where there are no good PMs:

Especially if it comes to things like a water leak, I would want to be contacted immediately. My spouse (co-owner) does not deal with tenants, PMs, lenders, etc. I do it all (and keep her in the loop.) But I make sure that both our names are on the lease, with both cell numbers, landlines, emails - all in case of emergency. And I stipulate that my cell (text) is to be attempted first. In close to a decade (I’m thinking 12 tenants) since doing it together, my spouse is yet to get contacted once.

At times when both of us may go out of the country/enter prolonged dead zones, I notify each tenant by email that there may be delays in getting back to them, and to only use my email during those specified dates.

Whether you may want to set up a separate Google voice line is up to you. Just make sure you answer whichever means you provide your tenant to contact you if an emergency should strike, including your front door. I only use a Google voice line when I advertise for rent - once an applicant becomes my tenant, I make sure they become aware of my regular cell number.

My leases also stipulate that any non-emergency communication should be done via email first. I never house-hacked, but would hope that this type of language - along with stating clear expectations/directions - would also set official boundaries between the “neighbors.”

Good luck with your plans.

@Marvin Michel I don’t know the local market, and did not spend much time trying to find current rental comps. But here is what I did find:

You are asking $850/mo. When the duplex was listed for sale last October, it mentioned “Market rate $600+ per side.” (This may not be news to you.) That is still what Zillow shows today - there is nothing on Zillow to say that the property is currently for rent, btw. Ask your agent why.

When googling the address, I do see that it is listed for rent on a number of other sites, and appears to be in the MLS.

Looking at your agent’s Facebook profile, I did not find any rental listings (most importantly, yours) going back a few months - he appears to be looking for buyers and sellers with his posts. Perhaps rentals is not his bread and butter; perhaps he does not know that rental market well.

Besides the property not being listed on Zillow, you may want to open your own account with apartments.com - it’s free - where you can list it yourself, but with your agent’s contact info (or your own.) Let your agent know if you do that (and see my concern below.) I’ve had success with apartments.com in NE Ohio, where I self-manage. If applicants may already have a profile there - and paid for their credit and background check - they may be reluctant to pay more money for that to an agent who doesn’t have access to their apartments.com profile. (Ask your/any PM how much they charge to process rental applications - better not be a turn-off for applicants.) (Because applicant’s credit report would be accessible to you through the site, I would ask your agent to open his own account there, advertise your property, and deal with everything from A-Z - for liability purposes - like he would anywhere else. In my opinion, there is just no excuse not to use tools that are free to you and friendly to your applicants.)

Apartments.com does have this other listing two blocks away (I don't know the area, so it may be less desirable than yours) becoming available on June 10: https://www.apartments.com/2-br-1-bath-house-2024-hill-avenue-middletown-oh/0wj61x3/ Unfortunately, it is bad competition: it's a 2/1 SFR for $825/mo, allegedly "fully updated" inside.

Incidental to the above apartments.com listing, I would contact the management company behind it to see if they could opine on your property, as @Bill Brandt suggested. While I have not done any business with them - I invest elsewhere in Ohio - if this is the Dix I’m thinking about (I don’t know how many PM companies may be working in Butler County whose name starts with that word,) they’ve been recommended to me and are a large player in the area.

Assuming that free Internet is available in your area for free to customers below certain income level, that perk may not be a big deal - hopefully, it does not cost you much.

This is all to say that to me - from far away - it looks like you/your agent may be asking too much. But follow Bill’s advice.