All Forum Posts by: Dante Pirouz

I went back and forth with 5 Arch over the last month and I did not like that they demanded a pre-application fee before beginning the underwriting. I have never heard of something like that and I've worked with all kinds of lenders, residential, commercial, hard money. And they wouldn't budge on that...Why would I pay $6-10K to just be considered for a loan with no guarantee that it would go through?? And the interest rate they quoted me seemed much better than their competition which might mean it is too good to be true. They also require all sorts of stipulations like you can't go to another lender if they don't close, need to set up a DE LLC, etc. It sounded like a bit of a bait and switch to get a couple thousands out of me for nothing...my husband veto'ed moving forward with them.

It all depends on how good the numbers are in your analysis. If the price is low enough at asking, then there is a lot I would accept before asking for concessions because they wouldn't be necessary. But it all depends on how the numbers look in your spreadsheet analysis. I've accepted mold, raw sewage in the crawlspace, structural issues, etc. and the numbers just have to be close where you need them to be to close. 

You haven't given us any of the numbers...do you have a handle on any of that? You have to give us those details... 

I would not call the broker and try to verbally talk about concessions...that is definitely a tell that you are relatively unsophisticated as an investor and could potentially waste the broker's/seller's time. Think of it from their point of view...time is money and they just want to get it closed quickly with minimal hassles. If you think your numbers warrant concessions, put it together in writing and submit it...period...don't spend a lot of time back and forthing verbally. And if not move on to the next deal immediately...do not waste time wondering...there's always another deal to consider somewhere or you wait until there is one...

@Marylynn B. Just to clarify your previous post, did Corevest ask you for prepayment of fees and is that why you were hesitant? It sounded like the fees should be in the closing costs although I just said no to 5 Arch because there were asking for $$ to start the application process which I have never had to do before with any of my lenders. I just asked Corevest whether they needed a pre-application fee to start the process, and they said no only appraisals were needed to be paid to process the application. Is that different from what Corevest told you? 

@Bo Kim did you ever close with Corevest? Let us know the details if you did!!

Taking hard money is like holding on to a ticking time bomb. If you don't enjoy that level of risk the other option is to wait until you find a deal that you can purchase with the cash you have. 

I suggest starting smaller with a small amount of capital because to reposition at MF you will need cash to invest on rehab and upgrade of each unit. Figure at least $10K+ per unit and more if the systems (HVAC, roof, plumbing, etc.) need upgrading. Plus you should budget a contingency amount for emergencies, vacancies, moving out "pain in the a" tenants, etc.

@Yonah Weiss would your 100 unit owner friend consider selling the units and then using the equity as a down for a larger MF maybe as a 1031? We own 15 units and that's what we are considering doing right now in order to scale up.

You have to run the numbers in order to know if this is worth pursuing. Try to calculate costs, get estimates from potential vendors/builders, look at possible future rental income (be conservative), and then calculate what the returns might be. Build costs are not yet at the point where building is a slam dunk. Existing housing stock + rehab costs are still cheaper in most places than building from scratch.

I think you are overthinking things before you actually go and meet with the inspector. I’m not sure if someone else has mentioned this but permits make money for the city/municipality. Most cities want to see investors fixing up properties but they 1. Don’t want to see a jacked up rehab and 2. Want some money!! That means permits will cost you couple hundred+ to pull. They want you to pay up before you start your rehab. That’s nothing to panic about! So go and meet with the inspector, expect to pay for permits and keep him/her informed as you go through the rehab. If stuff isn’t up to snuff better to have him/her catch it during the process than to have an appraiser and/or buyer/renters bring it up and squash the deal. 

@Russell Brazil I know this response took a long time but the reason I don't want to continue with residential loans is that while the interest rate is slightly higher 5-6% for my current commercial lender vs. 4-5% for our residential lending bank, all of the mortgages were showing up on my personal credit which leads to a lower FICO and a high DTI. I was trying to establish a relationship with my local Michigan State U. Credit Union (since I'm faculty there) and they turned their nose up at me because I have all of these rental property mortgages under my name. My husband has almost none of these under his name (it's my business), I bring in the majority of the income and his credit rating is excellent. For all the hard work I put into this business I at least want to have a good FICO (maybe I'm just being hyper-competitive with my husband but I can't stand being penalized because I took all the investment risk). So I am refinancing with a private lender who just recently started doing commercial buy and hold lending. Took me about a year of false starts with a bunch of traditional lenders to find this one.