All Forum Posts by: Chris Purcell

Hello all!

First time BP post here! I've recently relocated (somewhat temporarily) to Chicago but had been investing in the Green Bay area since 2012, focusing on buy and hold SFRs. The reason for my post today is not only to introduce myself and get to know some of the other investors, but to also get some feedback from the BiggerPockets Community in buying long-term buy and hold in a hot market. It's incredibly difficult to secure a contract on a property with all the right numbers when families are willing to overpay for almost any property. With being in Chicago, I'm not really looking to buy a property that would need extensive work. And, with only wanting to pick up 1-2 houses/year, I haven't found a wholesaler that will give me the time of day. I'm currently working a full-time and a part-time job so I'm not ready to try start my own marketing efforts. I'm hopeful there has to be a way to find a lead even in a hot market, but I'm starting to wonder if I just have to wait for things to cool down... my hesitation with waiting is two-fold: 

1) All the market trends and government fiscal policy indicate interest rates will only climb in the near future. With my W-2 income, I can still qualify for a 30-year fixed rate loan at 4.625% (a no-brainer in my opinion)

2) I have capital that I need to deploy and the measly 3% interest I'm earning simply doesn't compare to how those funds could serve me in the rental market. And as far as risks go, the only risks I'm willing to take are those in real estate (not into investing in the stock market until a lead comes my way). I'd consider a lending role, but would any investors would only be looking for $60-80k? And I wouldn't want to tie up that capital for long periods of time as I'd be hoping to invest myself!

I'm sure that I'm missing something and I would love to hear from anybody that's willing to shed some light on this for me! Thanks for your time and I'm looking forward to getting more involved in BP!

- Kyle Pockat, CPA

Would you seek out HML in this case if you didn't have the available cash to buy outright? Or are there other options you'd consider first?

I recently purchased a 1402 Sq ft condo in Charlestown MA. I knew the condo association was reviewing bids  for an upcoming exterior paint job and repairing rotted wood. After closing on the condoI asked if they could send me the bids. As a GC myself I like to review that kind of stuff. I could not believe my eyes. A few bids came in around 45k which I was not shocked at. I was shocked when I saw one bid as high as 102k. The biggest issue I saw on the bids was everyone wanted 10 percent down the day the contract was signed and 33 percent on the day work would be scheduled to start. Long story short we I refused to let the condo association sign anything. I have always said you can trip over a good electrician and a good plumber but finding a good GC is like hitting the lottery. Nobody should ever put down so much money prior to any work being done. I understand materials cost money but 43 percent down is unrealistic.

I would not waive an inspection contingency. What your agent should do is say "my buyer wants the home as is at the offered price, and won't haggle on seller subsidies pending the result of the inspection". That way you can still back out if the inspection shows massive costs to repairs, yet make the seller take your offer over others. That's typically been my strategy.

@Chris Purcell not at 100%, usually they will use the income at about 75%, but they also add the debt to your total debt. You will not be able to get 10 mortgages while making 80k or even 150k per year in your regualar job. You have to get a little creative or get some friends or family to lend you the money from their self directed IRAs.

Very simple example. You buy a property for 60k, you put 15k rehab into it. All of this money is borrowed from the private lender. Now the house is in great condition. It is worth 100k. 

You refinance with your local bank(you are not able to do that yet) for the 75k. Your private lender gets paid off, you have a lower interest rate loan for 25 or 30 years. Do the same thing again. The problem is when you dont have enough income to qualify for the refinance loan. You might be able to get a couple or a few loans, then you are tapped out.

Having the refinance piece is critical. If you are NOT able to refinance when the time comes, you will get foreclosed on because the private lender will want their money.

If you can get a lender who will lend you with a longer balloon payment, that should work. If your balloon is in 5 years, you should be fine. By then you should have provable income. If you dont, you could just sell the property with plenty of time to figure something out. It is when your loan is due in a year that things will be a little tougher.