All Forum Posts by: Annchen Knodt

Hi @Chris L., there are other people on here who will know more than I do, but from generally paying attention to conversations about the raleigh/durham area on here and analyzing some investment opportunities myself, I can say that you'd be hard pressed to find anyone who's not very optimistic about growth in the area for the foreseeable future.  There's lots of continued growth, including but not limited to lots of activity in RTP, and people are steadily moving to the area from more expensive and crowded places like NY.  And as in many other areas, my understanding is that the primary affect that COVID has had is a reduction in inventory (especially early on, potential sellers held off rather than having strangers constantly in their home!), which in turn led to an even more competitive market, since the reticence from the buyer side of the equation was not quite at the same level.  

I was actually in a somewhat similar situation, where I was renting a house in Hope Valley Farms, and the owner decided to sell and gave me the first chance to make an offer.  The house was worth ~$300k, and I did a thorough rental analysis and decided that the most I could offer and still get returns I was happy with was $230k (and it was still somewhat tight).  Needless to say I didn't hear back from him :-)   That was around a year ago and now I see the value estimate has gone up ~$50k, go figure.

My guess is that down the road you probably wouldn't end up being too upset for having bought this house, and there are probably quite a few investors who wouldn't think twice about buying it.  But nonetheless you are likely able to get better returns with potentially less risk elsewhere - it all depends on your situation and investing philosophy.  Again, just 2 cents from a new-ish investor!

Re financing, I've worked with Coastal Credit Union and been very happy with them.  They have lots of different rate/points options, and could help you with a delayed financing or cash out refi loan if you wanted to go that route.  

Hi @Chris L., definitely start with reading up more on this site on how to calculate expenses and determine whether the property will cash flow at a level that works for you.  Also e.g. this video by Brandon Turner might be a good place to start!  If it still looks promising to you after that then follow-up on your other questions.  Based on the numbers you've given, it would likely be very tight and you could probably get better returns on your money elsewhere, but it of course depends mainly on what your situation and goals are and whether it works for you!

@Patricia Smith @Justin Russell I recently shopped for LVP and put together a fairly extensive comparison chart for different brands.. in case it's helpful to you as you consider options, I posted it in this thread and also here

Hi @Darren Mesibov, I've run into this exact same problem myself.  I didn't realize it going in, but after the fact I understand how it makes sense that the parties that sourced the cash used for purchase need to line up exactly with the parties on the DF loan, since in many ways DF is just like getting a loan for the purchase, but having the loan come after the purchase rather than vice versa (how it's usually done).  I really like this blog post as a reference for some of the nuances of DF, and in the first few comments there's a discussion relevant to this issue.

I'm guessing that your concern with having all partners on the loan are that it will add 1 to the count of each of your Fannie loans, resulting in hitting the limit collectively sooner than you would if only one of you was on each loan? I've wondered this myself and would love for a lender to weigh in. Another factor is perhaps how it affects each of your DTI ratios - I've always thought that if you're on the loan with other people, then the debt liability will be distributed between you for the purposes of underwriting future loan applications but I'm not sure.

But now that you've gone through the process, doesn't it work to in the future move the funds for purchasing the property into the account of the partner who will then apply for the DF loan, as you allude to?

Following this since I've come across similar situations and had similar questions.  Would love to hear someone with lots of experience weigh in!

Hi @Jordan Murrell, you've gotten lots of great responses here so I'll just add one thing from my experience - make sure the source of the cash you are using for the purchase can be traced to the same person who will be obtaining the DF loan.  I noticed you are saying "we" so thought this might be relevant to your situation… i had a DF application fall through at the last minute since I had purchased the house with funds from my partnership's bank account but was applying for financing in MY name.  There's lots of great info in this blog post (and the comments).  Good luck, and congrats on finding the deal!

@Justin Pumpr I can very much relate to how you are feeling - lately it's hard not to feel like we have to choose between compromising on our criteria and just not buying anything.  I agree with what everyone's said on this thread, and so far have not regretted going through with the purchases I've had second thoughts about myself (but I'm still new to this, so we'll see!).  A couple things to add:

• Depending on the market, rents will most likely grow over time, so your numbers should get better after the first year
• What about the qualitative aspects of the property? If it's in a good neighborhood, will cater to lower-headache tenants, etc, it might be easier to accept the less-than-ideal cash flow
• You say you'll be leaving your rehab expenses "in the deal" so wanted to check if you've considered the strategy of putting those costs on the HUD statement so that they'll increase your DF limit based on initial amount invested (though it sounds like you may hit the 75% of ARV limit first)

Good luck with your decision and of course remember that experience is invaluable!  I find that having gone through purchases that seem less-than-ideal (while having learned a TON) is extra motivation for me to keep going so that the true value from these first experiences, the education, is not wasted.

Hi @Chris Grenzig, I am in the process of installing LVP in the living room/kitchen of my 2nd floor condo, 1985 woodframe construction, plywood subfloor. The HOA told me they require a sound dampening rating of 67% for upstairs units, and I ended up getting CoreTec ProPlus which has a 57 STC (sound transmission control) rating (I had to call the manufacturer to get that info). The HOA told me that though that's a bit low, they will allow it as long as I use area rugs so that 80% of the unit is covered by rugs or carpet (I have carpet in the bedrooms). I seem to remember that some LVP brands boast better acoustic properties (especially with special underlayments), but didn't take notes of which. Just mentioning this in case it gives you some reference for specs / thresholds to consider. I plan on asking the tenant below soon if she notices large differences from the full carpet that was installed before.

The other thing I'll mention is that LVP is of course more sensitive to imperfections in the subfloor than carpet, which has by far been my largest issue to this point, and you may have some of the same things going on with your plywood subfloors.  We ended up having to do quite a bit of grinding and leveling and are still outside the flooring manufacturer's specs for flatness - would have been a huge investment to get there, so we just ended up getting it good enough so that we don't notice any obvious dips or bumps and praying that the flooring will be robust to the remaining issues.

I'm getting around $200-$300 / mo for ~12% CoC returns in the first year. My PM tells me that rent growth is pretty good, so that should hopefully go up over time. Also, he was able to find tenants very quickly, and sometimes doesn't even have to list properties since he has often has a wait list of folks who have asked about availability.

Hi @Graham Storey, I bought two rentals in Burlington due to the much better cashflow potential than what's currently possible in Durham.  Like you've pointed out, I also appreciate the location between the triad and the triangle and the big manufacturing presence, Elon, and Lab Corps.  I've seen lots of others speak favorably of the area on the forums here, and definitely felt the investor competition while I was looking to purchase (I found that I needed to make strong cash offers within a few hours of a property coming on the market).  My assessment has been that it's primarily a buy-and-hold cashflow market, but I'm also not as in touch with the flipping side of the business.  Hopefully other folks with more experience will chime in!