All Forum Posts by: Cory Melious

Hey all;

I wanted to float the question of deposits, and “What are they good for?” I’m thinking about renting my luxury condo out for $3500. I am going to require a renters insurance policy that I am a listed interest on. In my market, I am competing with a couple brand new buildings that are offering $0 fee’s (they have a leasing office, so no realtor fee’s).  They are also offering other incentives like a free month. Granted, this incentive is just to fill the building...it is something that I need to compete with right now. These two incentives combined can add up to $7000+ in move in costs alone never mind first and last months rent.

So....considering that most people who can afford $3,000+ dollar apartments usually have good steady jobs, and are not the types of people who let their dogs crap all over their place, eat the woodwork, or otherwise destroy their home, I’m wondering what benefit I really get from having a deposit on hand. If there is damage, theoretically, I could have the insurance pay for the damages. Most deposits are not allowed to be used for a months rent anyways, and I have to place it in a bank with interest. So really what good is it? To me, not charging a deposit at such a high price can really benefit/reduce the move in price of a new tenant. Consider these other two thoughts as well. If I give a free month as incentive I am guaranteed the lose of $3500, if I take the gamble and not collect the deposit, I’m hedging my bet that the tenant wont trash the place, and therefore less likely to lose $3500 bucks

. 

I’d love to hear your thoughts on this NYC!

 I looked them over and neither of them have points, but instead they have different origination fees. I gather those are fees charged by the bank for a loan, but I don’t understand why they’d be so dramatically different on a loan that is only $20k different. 

Hey y'all

I'd love some input on a refi I'm currently doing. 

Here's the skinny - 

Bought a fixer upper 1 yr ago for $60k. It was assessed at $85k. I know that's not a good gauge of value, but it's what I had at the time. 

I've put $28k in repairs, spent $13k on Mortgage payments (thats down payment, mortgage and interest combined), and some other expenses like placement fee's, etc. 

All in I'm at $51k expenses. Now I'm refinancing (long story short I was privately financed by the former owner at 6% and he was charging me $500/mo....250 principal, and 250 interest, so I needed to finance with a bank and wanted to lock into a lower rate since they are shooting for the stars right now). 

I had initially wanted to refinance at $55k (enough to pay off the remainder of the mortgage and cover the closing costs). 

BUT

After the appraisal came in at $105k...I decided to refinance at $73.5k to pull out some of my cash. 

Heres the main questions---

They are charging me a higher rate now to do a cash out refi instead of traditional refi (i guess, idk how they're different)...to the tune of about $3k. SO, doing a cash out refi I will be sacrificing about $3k to pull out $15k. 

Is it worth it?? Am I missing something?

Cory

Also....I did a BRRRR on it to see how it would fair. Can you let me know what your thoughts are?

https://www.biggerpockets.com/calculators/shared/6...

Excellent points everyone. Thanks for your input. 

The appraisal for 85k is based on the tax records and it's last sale price 6 yrs ago. Since then they've improved some of the mechanicals including 2 water heats, and installed an oil burning forced air furnace for one apartment. Tenants pay all the utilities themselves. My dad is a contractor and went over the outside with me to determine what other work beside the porch needs to be done. The only thing that definitely needs work will be a small roof section that currently ties into the porch roof that we'll be removing. 

Should I get an independent appraisal before I move forward with the purchase?

One other question that came up after I posted this is: How does seller financing work? I suppose I'm somehow added to the deed, right? IF that's the case then there must be legal fee's incurred for that process. Then, if I do the repairs and refinance, will I then have to incur another set of legal fee's to get him OFF the deed. I actually have no idea so I'm just taking a guess at my office desk. 

Im interested Scott. I've been watching that area for about a year now and like what I see. Lets chat. 

Cory

Hey y'all;

I'm looking for some advice on my first rental property purchase. The plan is to purchase this place for about 25k under value. It needs about 5k worth of repairs and a tenant in one of the 3 vacant units. After 12-18 mo. ReFi and take the equity to a new property. It should cash-flow nicely. 

I'm purchasing from a long time friend of mine. Long story short, he sold it to another person 6 yrs ago but held the papers. Fast forward to now, that owner hasn't been making the payments, so my friend is foreclosing on it and going to sell it to me for what's left on the note. In other words, I'm purchasing for about 25k below market value. It has 2 of 3 units already occupied. The third was occupied until recently, and isn't being filled bc obviously the current owner (not my friend) isn't keeping up with the property. 

The property itself needs some repairs. Part of the porch roof is falling down, and it needs new shingles on one section of the roof. Also gonna do new vinyl siding across the front. 

Here is the concern...My friend (the note holder) would like to sell it directly to me without waiting for a mortgage company. He'd just hold the note until I can secure the financing through a bank. His theory (which makes sense) is this; with the current porch roof in disrepair, as well as the vacant unit, a mortgage company will take a longer time to approve the mortgage. He suggests that I take over the property, do the necessary repairs, fill the vacant apartment....and THEN after the property is in a more favorably condition finally go through with the mortgage process. 

On paper this plan seems totally reasonable. I'm extremely confident he's not trying to scam me or anything, Our families have been close my entire life (37yrs). 

Is there anything I'm missing or should be concerned about with this approach? I'm wondering about your experiences with banks. DO they raise concerns with properties needing repair? Should I try to finance for the full value once these repairs are complete? What if I finance for the full 85-90k, will the bank cut him a check for the remainder of the 60k and then cut me a check for the difference? Will they hold funds until repairs are completed...that sort of thing. 

Here are the deets. 

Purchase at 60k. Repairs at 5k. Appraised at 85K. Taxes @ 3k. Insurance 850. Current rental income is 1400 tho potential is 1900 with third unit rented. All of the repairs slated would be road facing (fix failing porch roof, new shingles on a small section of the main roof, and new siding across the front) so the improved value could be a skosh higher than appraised value.