All Forum Posts by: David Beard

You're spot on, Bill, thanks (and I'm glad I solicited a 2nd post out of you. :-)

Citimortgage:
* 30 year fixed = 4.75% + 1.75 pts, or about 5.375% if you finance the pts.
* Must have 6 mths cash reserves on all properties (Fannie standard)
* LTV will actually go to 75%
* Only 1 and 2-unit properties, no 3's or 4's
* Lender fees of $665 (this is very competitive)
* He stated up front will be lengthy underwriting, having to verify operating results on 5+ properties
* Will loan down to $10K, believe it or not.

Thanks J, I looked through a few complaints, saw nothing out of the ordinary. This is a sizable and established company. Guaranteed Rate was named by Chicago Agent Magazine (in an agent survey) this year as one of the best three lenders in Chicagoland (http://chicagoagentmagazine.com/agents-choice-award-nominees-revealed/)

That said ... I received a call back from the rep (this has now happened countless times with many reputable banks/brokers) who indicated that the loan could be done but it would go through another company (damn, mafia connections? God please don't let me default...). I pressed as to who this was, and she said "Flagstar".

I look up Flagstar Bank (FBC), uhh.... shares once traded at 170, now around 2 w/ market cap of $350mm ("How long does it take you to close again??"). They do in fact have a wholesale lending unit, per their website. I call up Flagstar Bank directly, and the rep does indicate they have a "multi-property" program for financing investment properties up to 10, but only 1 and 2-unit properties. For SFRs, he quoted me a rate on a $75K loan of 4.99%, with $840 of lender fees and 1.0% origination, available I believe in all 50 states. So this appears to be quite competitive. (www.flagstar.com)

So there you go. I'm still waiting on the original Guaranteed Rate rep to call me back on what her proposal is through Flagstar.

The entanglements between these brokers, mtg bankers, loan wholesalers, ultimate investors, GSE's, and finally.. servicers is labyrinthine to put it mildly.

I've been on a search for lenders who will originate conventional investment property loans (meaning resellable to Fannie/Freddie) for your 5th - 10th property. I have had no luck with local mortgage brokers.

In searching national lenders, I came across Guaranteed Rate Mortgage, and they will do these loans. They're the 12th largest mortgage banker and fund their own loans for resell to the GSE's.

So if you're looking for accelerated wealth building, and inflation/cash flow hedge down the road from 30-year, sub-5% rates, on up to your 10th property (as opposed to community banks with their 5-year balloons), you may want to check them out. (www.guaranteedrate.com)

Good list. A few others:

* Get as much detail on owner situation as possible to determine motivation. Do they have other properties also needing to be sold?
* Get copies of tenant files including original apps and credit report, and evaluate the tenants. Were concessions made? Some sellers may try to get the units filled to make the place look "turn key".
* Iron-clad nearby comps of recent sales.
* Approx rental share in area, vacancy rate from reputable prop manager, area unemployment rate.
* School reputation for family-sized units.

On Realtyman's point about nothing on the MLS being a deal, I would dissent as it relates to REOs. Virtually all large banks and housing agencies well these exclusively through agents. There is a flood of REO activity on/entering the market (albeit foreclosuregate is gumming things up a bit at the moment), and simple supply/demand dynamics are dictating that these houses sell cheap in many instances to clear inventory, even with agent commissions paid, and do in fact constitute outstanding deals. This is particularly true for the houses that are rougher and unappealing to owner/occupants. These can be purchased at very attractive rent yield levels, with a fantastic opportunity to sell down the road at a solid profit should that be the desire.

If you can get in with a good REO agent who will show you pocket listings before inputting to MLS, that is best of all, though some agents around here seem to view this as unethical.

Outlaid net of $9,900 in return for $1,642 for three years.

Fantástico!! Motivational mission accomplished...

Best asset protection laws. Per attorney Garrett Sutton, "Nevada and Wyoming have both statutorily enshrined the charging order as the exclusive remedy for creditors. Meaning that someone with a judgment against you can't force a sale of your property to collect. Instead they must by law wait for distributions to be made. This is not a satisfactory means for collecting money, and this is both both an aid toward discounted legal settlement (at, for example, perhaps 10 cents on the dollar) and a deterrent to litigation in the first place."

I just mentioned the Fannie homepath site to the poster needing a starting spark because:

> Fannie typically has more REOs than anyone else in a given market, so the data provides you a sufficient sampling to get you on to the top REO brokers very quickly.
> The data is easily downloadable. Many bank sites just have a few properties and can be a pain to use
> In our market, after FNMA and HUD, the largest REO owner is Deutsche Bank (big issuer of sub-prime and alt-A mortgage securities) and I don't believe they have anything on-line whatsoever (and they have a reputation for mismanaging their properties and being ridiculously difficult to work with on transactions.)

To jumpstart things, you can easily download Fannie properties from their Homepath.com site and tally which listing agents have the most properties. Here's a tally from the Cook/Kane county areas, for example. Fannie boots some of their properties to auction companies to try and sell "Ebay" style. These same agents will also tend to handle REOs for HSBC, Deutsche Bank, etc. huge national mortgage bond securitizers, and other big servicer banks such as BofA/Countrywide, Wells Fargo, US Bank, etc.., and of course the smaller regional and local banks. HUD/FHA will work with very specific brokers in each area and they're easy to find from the HUD site.

You can typically search your online tax assessor database in urban areas, searching for bank names/Fannie/Freddie/HUD ownership.

FNMA REO Agent # of Listings in Kane/Cook County:
Agent # Total List
Adam Wavrunek 15 1,205,810
Arthur Cirignani 17 1,732,410
Ayoub Rabah 31 3,347,680
Bob Ohara 18 1,319,080
Carolyn Moore 15 1,538,260
Coya Smith 50 5,161,600
Dawn Tweedy (auction Co) 19 1,865,790
Don Wagner 15 1,234,610
Gary Weglarz 12 498,240
Hudson Marshall Auction Co 15 1,606,199
Ira Mizell 34 4,083,729
Jason Reiner 26 3,098,050
Jim Kennedy 26 1,481,965
Kim Devincentis 12 1,473,250
Larry Shakman 15 1,763,185
Mark Groble 29 1,874,400
Mino Miyashiro (auction) 20 2,287,370
Patti Furman 24 3,201,409
Peter Drossos 20 2,696,300
Rakesh Parikh 21 2,056,355
Rhett Schrock 13 1,301,290
Rich Gregory 11 644,200
Ronald Branch 18 1,352,130
Rosario Terracciano 30 2,551,640
Sandra Amani 11 1,602,790
Saul Zenkevicius 15 1,297,110
Vito Partipilo 25 2,600,140

Jimmy, can you add some color on a few points regarding due diligence of this opportunity:

* Why did the complex fail under prior ownership? Inexperience and poor tenant screening? Owner spent the maint. reserves and gradually spiraled down? Tainted by other business interests (financial house of cards?) Simply overpaid and couldn't weather more than 10% vacancies?

* How much rehab do the units need to stabilize and ensure their rentability at market rents to new tenants?

* Is there a negative employment/demographic/crime trend in this area that is harming occupancy and would make turnaround difficult? Volume of police runs to the property? Have any adjoining areas become blighted or otherwise undesireable?

* What does the monthly cash flow look like at the offered terms, the current 75% occupancy, and the current run rate on expenses?

* Assume no major tenant issues/lawsuits or other clouds of any sort? Have you talked with any tenants about their experience there? Talked with any nearby property owners?

Thanks.