All Forum Posts by: Greg Scott

The banking industry got hammered by creative financing that allowed people to do cash out refis, so many of those options are gone. A cash-out-refi typically requires seasoning of the loan and may not allow 80% LTV. That said there are other ways to go about doing effectively what you want.

1) Start with a private loan or hard money loan. Those people will often lend against the ARV not the purchase price. Then after it is all fixed up, you replace with a conventional loan in what is known as a rate & term refi. In other words, you aren't changing the amount owed, just the interest rate and the amortization schedule. This strategy requires you to pay higher interest up front and be smart about your rehab costs and ARV.

2) Pay cash for everything.  Then you can do a cash-out refi.  I have never used this strategy but I understand that if you pay cash, you can do a "delayed financing" withing 6 months and the bank pretends that it was the same as if you financed at closing.   This one has some risk if the appraisal doesn't come back as high as you hoped, your cash may get stuck in the deal.  I would only use this if I were very well capitalized.

3) Dont go with a conventional loan.  If you do a portfolio / commercial loan (meaning the bank holds the note and doesn't resell it) they basically make their own rules.  They typically have higher interest and while you can get a 30 year amortization, they often have a 5-10 year balloon.

Good luck.

I'm not familiar with this variant, but I do know that the HUD-1 form was discontinued a few years ago. All my closing docs now use a Closing Disclosure and ALTA statement. Are you sure this form is still in use?

If you don't want seller to see your wholesale fee you can always do a double close.

Every basement has moisture issues.  Every house has mold and mildew.  The real question is how significant is the problem? 

I would be unconcerned about the utility room.  If it is unfinished, you should be able to see everything that is going on.

I would be far more concerned about the finished portion of the basement because you can't see what was done behind the walls.   If they did not install a vapor barrier or have foundational leakage, you could have moisture trapped there and it could be developing into a bigger problem.   It is nothing you can't fix by tearing out the walls and starting the re-finish over, but better to know before buying.

Have it inspected.

@Christina Torres

It did not appear that the problem was the assessed value but rather the ability to qualify for the loan.  On single family properties which use recourse loans, you need both to get a conventional mortgage.

@Taylor Silker

Banks have internal rules and rules the Fed forces on them.  Some times they do things that appear very stupid because they need to comply with some (arguably arbitrary) rule.

Ralph R has a good idea that might solve your short-term loan issue.  Go in with your sister.   The downside, is that would effectively commit you to being an AirBNB landlord.  Do you think you would have as much success renting our place in January as you do in August?   If you think you can get strong rents year-round, this solution might buy you a few years.  If you are not sure, I would cut bait.  Take the loss.  Consider it a good education bought and paid for.   Every investor gets a life "seminar" every now and then.

Of course, you must honor the terms of your lease as it is a legal contract.   Most leases have a clause about how many days a landlord has to give to notify the tenant  the lease will not be renewed.   If there is no notification, most leases convert to month-to-month.     Once you are month to month, you can really change it any time with 30 days notice.

Now most people will want to give the tenant a few extra days to think about things, but you are basically giving the the option to sign a new lease or move out.

One of my property managers also uses an incentive to get them to sign, rather than drag things out.  He notifies the tenant that if they choose to stay month-to-month their rent will go up $100/mo but if they sign the new 12--month lease, the rent goes up only $25/mo.  That can actually be beneficial for both parties.  If the tenant wants to stay 2 more months and then leave, they aren't forced to leave early or lock in a 12 month commitment.

I would find a way to get out of that as soon as you can.   The bank can foreclose on you once your construction loan comes due, even if you are making payments.  Then you will be in a major hole.    Your income is higher now, but most banks are going to want to see 2 years of tax returns to be able to use that to qualify.   So, while it is great that strategy has bought you some breathing room, it isn't a long-term solution.

I don't think there is "the" strategy out there.   There are many strategies.   The key is to know what you are doing and start early.

I raided my kids college funds and we bought each of them one rent property. We put each property in its own LLC and they were a member. We averaged about $25K out of pocket on purchase, but had equity of $40K the day we finished rehab. Each property has cashflowed about $4000/year and the average appreciation has been about $30K.

The properties have kicked off enough cash the kids probably won't need to sell their houses to pay for college  (but that is their decision).  Hopefully they will get out of college and still have a rent property kicking out income.

Electric usually costs a lot more to operate than gas.   But a bigger question is why tankless?

A few years ago the tankless manufacturers had convinced congress to offer rebates on tankless systems.  I did a thorough investigation on costs and efficiency.   Contrary to what the tankless manufacturers have been putting out there, in most cases a good old fashioned gas water heater is actually more efficient than a tankless system.  It is also cheaper and easier to install.

@Daniel Elijah Richardson

The downside of the free events is that they tend to attract a lot of new or unsuccessful investors.    While you don't always get what you pay for,  I've also found that if you are paying a lot for really good education, you usually find yourself surrounded by highly successful investors.  Meet-ups like that can often be more lucrative than the education itself!

The key is to make sure the education is solid and not one of those pressure-cooker sales tactics to get newbies to fork out thousands.

@Nick Rupcich

Congrats on becoming an investor.  Oakland County has many great places to invest.  But all the other counties in Metro Detroit also have great places to invest.   

There is a big education event this weekend that may help you get going... and in the right way.     Lifestyles Unlimited, a huge real estate education group from Texas, is in Detroit this weekend.  I've been a member for years and have profited handsomely from their advice.  I posted details on the event section or you can go to givemetotalfreedom.com