All Forum Posts by: Callum K.

Mehran Kamari - from my experience, David Beard is 100% correct. I went through a similar issue as you did but I made the mistake (that ended up costing me several months to get my next deal) of listening to ONE lender and treating it like gospel. That was a horrible approach. Try different lenders, try different people with the same lender and use different approaches to communicate your situation.

One thing I found out was that the manner in which I communicated my 2 yr rental history. MOST lenders will tell you that you must have 2 years rental history PER property similar to what Paul Cordero stated, however there are lenders that view the regulation as 2 years rental history per applicant, which means you only have to be in the business for 2 years and be able to show that on your tax return. As I started pressing the lenders that told me it was 2 years rental history per property I found them coming back to me surprised to find out that their guidelines would allow the income and I won the argument for only needing 2 years rental income PER person.

With respect to your return, be careful what you put as expenses on your return because many lenders will take out expenses from the allowable rental income (even after the 75% is addressed). I have managed to win most cases of them trying to remove depreciation charges as they are non-cash expenses, however any repairs to your property you wrote off will likely be a battle to get them removed for their analysis.

Finally, with respect to how long they will require rental income, once I hit my 2 year tax return on my first rental property, I was able to buy my 2nd and 3rd rental within several months. That third one was difficult, but I kept pushing and researching on BP until my banker and I found a solution. The hardest part was finding a loan rep willing to work in the trenches with you. Most of the lenders act like the know the regulation and treat their interpretation as a fact when the fact really is that they don't realize its their own interpretation that is so restrictive. My recommendation is look at small local/regional banks.

Hope this helps!

So I went to my first sheriff's auction last week and I was amazed to see the banks buying their own properties. I get that they do not want to just give away repo'ed homes at a huge discount and in turn just "buy" them back but I had to laugh when these bank reps (Attorney's) placed rather strange bids. Did they really need to go down to the penny?

Okay, so my questions were this:

1) Some of these bids placed were so high and so defined that the property NEVER sold for anywhere close to the bid. How do these banks/attorney's derive these amounts?
2) If they bid it out completely, what is the process for the homes after the auction? Do the banks just put the home up with a realtor?

Moderators: I didn't see a subject for Sheriff Auctions. If there is no subject would it be advantageous to add a group labeled Auctions that might be able to include Sheriff Auctions as well as other RE auctions?

Josh W., you must realize that when you up the payments, you are exchanging cashflow for equity buildup. By going with a 15yr note, you are making larger payments versus a 30yr note (if you are able to get it) and in turn are sacrificing cashflow. Personally, the spread between 15yr and 30yr is too small to justify to warrant the mandatory higher minimum payment. I would rather have cash in the bank than equity. For me, borrow more at longer terms while you can as rates are bouncing around generational lows.

We have a few condos and there are pros and cons with them but then again there are pros and cons with SFR's. Here is my view.

Pros:
Insurance - Significantly less than SFR's (ours is about 20% of that of SFR's)
Responsibility - You are not 100% responsible for roofs, exterior walls, etc
Ammenities - Typically you share the cost for pools, fitness centers, etc
Repair Expenses - Typically smaller units and easier to maintain
Economies of Scale - It can be helpful to be able to acquire multiple units in a facility. You get more votes on the HOA, plus you can do referrals to other units

Cons:
HOA Fees are mandatory
HOA requirements - You might be accountable for strict HOA covenants (I know we are)
Influence - Those who own more units yield more influence on key decisions
Assessments - This is the big one to me. If you are not actively involved with HOA, you might not be aware that discussion to replace the entire parking lot or repaint the complex is about to happen. When looking at the condos due diligence on this is a MUST. Look around, is the community pool closed due to problems, do the roofs look to be in bad shape, there there old access gates that break. Talk to the neighbors, talk to the HOA, check meeting minutes. I have seen $2500 per unit assessments and that will absolutely KILL all profit for several years.

Overall, I prefer SFR's, but I got into condo's and they provide value to some of the things I dont get with the SFR's.

Hope that helps

That's @Bill Gulley country. I bet he can help get you some insight. He is a wealth of knowledge and probably is active in a ton of different stuff

Josh Rowley They are ranging between $160,000 and $230,000 homes. It all depends on the financing though. These homes I bought from distressed sellers or were homes I rented out after living there for several years. I have been shooting for at least 1% of the sales price for monthly rent and trying to acquire equity on the front end to protect the investment. I must say, its been easier to do over the past few years due to a growing RE market, but they are producing returns I can't complain about

You just gotta be careful to not let those chimps unionize. Demand for increased compensation and benefits will suck your profits dry!

how else are they going to move their mobile home once they are evicted in the middle of winter?

Financing ten $25k properties would scare the hell out of me as far as lending fees are concerned, but my banker would love me. I hope its hard money you are borrowing.

I am not sure I agree that "A" properties are low margin. I have multiple rentals that rent for $1500 - $2400/mo and they have provided fantastic returns for me. I haven't seen anyone on this thread investing in rentals at this level, and frankly it has been a gold mine for me, for many reasons. In order to achieve the results in this niche, I agree that you must borrow to maximize returns.

First, stricter lending requirements have isolated many people who have the job stability and income requirements but cannot buy a home because of lots of different reasons including exorbitant medical bills, high levels of expenses (car payments, credit cards), inability to document income sources (1099's and commission-based compensation), job relocation, bankruptcy, not enough money for the down payment, etc. The list goes on and on. For those of us who have been able to borrow and have the money to put the 20%-25% down payment, it has been fantastic.

Secondly, there are a lot of people out there who don't want the hassle of owning their own home. I have been approached by doctors, lawyers, business owners all looking to have a home that they can simply call a landlord to resolve rather than them having to mess with it. I certainly realize this is not representative for all higher income individuals, but lets not forget that there is a market out there.

Third, is the investor pool. This thread alone proves my point in that the supply side of higher income properties is minimal. I have had relocation service reps contact me asking me about my properties because they have clients looking to rent because they relocate their personnel every 5 years and there are just no homes of this type for rent. One of my rentals did exactly that and because his job moves him every 5-7 years, he will not own a home until he retires. He was willing to sign a 5 year lease but I kept it at 2 for starters. My ROI on this commitment alone has already paid back my entire investment, and no I am not even accounting for home appreciation and unrealized gains. My only competition are distressed owners who can't afford to sell the home and are forced to rent it out for an amount comparable to their mortgage payment. Landlords in financial distress is great competition because they are positioning themselves for even more risk if a large expense hits them. Many of the owners I speak with are out in a couple of years. Landlording to them is an opportunity to buy some time, not a solution to make money.

Personally, just because everyone else sees no value in a niche, doesn't mean there's no value. Perhaps they have not been able to identify a model that will work in that environment. Given current legislation, I recognize my model will cap out at 10 properties (per FMNA), but 10 properties for me earning $2000/mo is good money, especially as I begin to pay the homes off. I am sure there will be curve balls at my existing model, but for now, I am okay with everyone else focusing on the highly competitive <$1500 rentals.

Hi Carmen Alexe, Thanks for the response.

I am familiar with the exchange traded REITS and have actually invested in them within my retirement accounts, however my inquiry is more targeted towards investments in apartment complexes offered by property management companies like Greystar, and Owner/Operators like Bell, Camden, Lincoln, etc. The investments desired are in fact equity (not debt) and to my knowledge its just another way for these property owners to be able to finance deals with other peoples money.

Thanks again for your response.