All Forum Posts by: Bryce Y.

@Aaron Mazzrillo

Interesting strategy, but why would any competent seller agree to this? I'm not talking about the 37 year term, but the substitution of collateral. How do they know you will not sell the underlying property, then substitute it with a cheapo property then stop making payments? Plus what if the substituted property is far away or out of state? I as the seller definitely don't want that headache if I have to foreclose (or just simply want to drive by and check up on the property).

Is there a clause that says you must get an appraisal done when you make the substitution, and it must appraise for x% of the loan amount? Are you personally guaranteeing the loan?

This is an interesting concept. Maybe I'm missing something, but why is this model limited to rural areas with large lot sizes? The foundation and framing seem to be the 2 biggest areas of cost savings, plus you could use city water and sewer rather than septic...

I would think most of the future buyers would have farm animals. Would it be advantageous to build facilities to accommodate them?

Thanks Ann. That makes sense. If the borrower is able to get out of the loan before the end of the term, I guess he just loses the remaining prepaid insurance?

@Bill Gulley Good point and I can understand how a HML is not set up to escrow funds, but in the case of requiring insurance to be paid up front, there would be no escrowing involved. The borrower is simply making early payments to the insurance company.

@Ann Bellamy undefined

Why don't you require insurance for the term of the loan paid in full before funding? Same for property taxes? Maybe even a "utility escrow" which they would forfeit in the event of default...

I have done exactly this and switched focus from multis to SFH and couldn't be more pleased. Don't get me wrong, I love multis at the right price, but it seems much tougher to get a deal than on a SFH.

The two major pros of multis are financing (for 2-4 units) and management. Management is not very significant until you start getting into 30-40+ units, but you can finance a 4 plex selling at 30k per door with conventional financing, whereas a SFH for 30k would need to be bought all cash or with a private/portfolio loan.

Edit: I should also add that calculating the correct ARV is an extremely important skill to have, whether you are a flipper or buy and hold investor. It's more forgiving if you buy and hold but still should be an automatic part in your due diligence process.

This is not entirely correct. Since you are occupying one side you will not have vacancy, management, and repairs/maintenance will be minimal since you are presumably not going to trash your own place or have to evict yourself. So it brings it closer to a wash. But I do agree with the premise of your argument. The biggest factor imo wasn't mentioned. A house that makes a good rental (ie 2% rule) in most cases will not be the most desirable place to live.

I take a contrarian view on this. I have thought about this extensively and have chosen to rent while I accumulate investment properties. I have a 4-plex and have debated living in one unit, but ultimately decided against it. First of all, it's not in a great area (not warzone, just not a great place to live imo). 2nd and most importantly is that I rented that unit out for 595. It costs me less to rent right now (I am living with a roommate). However, even if I decided to get a 1 bedroom or something, I'd only pay maybe 1-200 more than what it'd cost to rent that unit out. Plus you don't have to live in a less desirable area, don't have to live next to your tenants, and can live closer to work. Are those intangible benefits worth 1-200 per month? Only you can answer that.

Of course if you don't have the cash to put 20% down and FHA is your only option, then none of the above applies. (I am anti-FHA since they changed the PMI restrictions) I just believe that the benefits of home ownership are grossly overrated. I'll buy a home when I'm ready to live in it for at least 10-15 years.

They are doing this in at least one suburb of Dallas. 10% is probably calculated by rent - TI. Maybe true for the first few years but as we all know not sustainable. They are renting for about 1% of the total all in cost.

A HML (or private lender) will not lend to you if you intend to owner occupy. Also you cannot do a cash out refi into an FHA. If you cash out it will be minimum 6 months to season and only at 70% LTV for a duplex.