All Forum Posts by: Isoke Craig

@Evan Swanson there is a third option. If you connect to a small local bank they tend to offer 0% down loans as long as you will live on the property for a year and the have special programs that help to lower your down-payment (like if you open a direct deposit account with the bank)

Often successful stories are shared & while we can learn from wins, I often find I learn more lessons from failure. So I wanted to share my experience with the community. Thanks for reading this is long! Buckle up!

I am a REI rookie I want to get a tri/quadplex as my first deal and house hack it. I have learned to run the numbers, saved, and now actively searching on and off-mkt for a deal.

I have been beat out on a couple deals now so when I saw a triplex in a university area I was pretty gung ho (first at the open house and then in submitting an FHA asking price offer after running optimistic numbers). This was my first mistake. I did notice major issues at the open house but I have heard stories that fha appraisals were so much stricter than regular appraisals I thought that would protect me. WRONG!! I calculated my offer by running the value of my comps, not as an estimate with cost of repairs.

My inspector saw the major issues. All the major MEP was marked deficient in the inspection report. Foundation; bad on both structures. Electrical; illegal and exposed wiring on exterior, knob & tube wiring in the attic, galvanized plumbing, old roof and mold in the one tenant occupied unit. At this point I should have run for the hills. But I had a 2.75 APR 30yr loan and excited to finally be under contract.

My rookie REI realtor only sent the roof quote to sellers before my 4day option period ended (they agreed to pay for a new roof-10k). I got quotes for foundation- 20k, electrical- 14k but my realtor also assured me of the fha appraisal and stated the appraiser would note these issues and we shouldn't try to negotiate again before the appraisal.

The appraisal came back at asking and they did not note a single issue with the house. They literally took pictures that didn't show the meter out of the panel box, much less the foundation or mold issues. The comps for rent & sales were not comparable. I pointed this out to my bank and they sent a note to the appraiser stating the issues and attached my realtors comparable comps. They didn't do a formal appeal and when I asked why they said they just don't as nothing good will come from it (deal will likely fall through).

The appraiser stated he didn't see any issues I pointed out and left the property value high and the rental comps low. He didn't want to use our comps. I had zero leverage to bargain with the sellers and ended up losing escrow.

Lessons learned 1) Run worst-case and conservative analysis. 2) Negotiate at every stage of the process as you find new information. 3) The only person that cares about your money is you so ask for what you want from the members of your team (realtor, banker) 4) Most important there will be setbacks in RE. Learn & continue moving forward.

Thanks for reading!

No worries this is a good start and appreciate you taking the time to respond. Best of luck on you investment journey. 

East End Revitalized, North of UH

@Brad Schewe hey there. Thanks for your willingness to answer some questions when are properties reappraised in Houston, TX and what percentage off of taxes would a homestead exemption grant?

@Miguel Angel I'm currently closing on a triplex in Houston would love to connect.

@Lawrence Briggs big big congrats on this second property and building generational wealth. Keep building your network and net worth!

It's great to be in such a strong financial position. What interests you in STR over buying a place for yourself and house hacking? With the $300K you currently have 15% for downpayment plus reserves for a duplex or 25% downpayment of a 3-4 MF property and this is before exploring FHA options that allow 3.5% down on 1-4 MFs. With house hacking, you should, in theory, be paying the smallest possible rent, and also you would have a property in a high value/high appreciation market, with a tenant(s) helping to pay your mortgage. Rather than renting and helping to pay off someone else's mortgage. In this strategy, you can get a better idea if you want to be a hands-on investor that manages the property yourself or if you prefer to be a passive investor.

If you really have your heart set on STR then you need to research your markets. Talk to property managers, contractors, lenders, and other investors in the areas you are looking into. In the beginning, there will always be a learning curve that requires money that you do have but the time may be your issue. Investing in real estate and picking the strategy that is right for you really depends on these two things. How much time do you want/have to dedicate to this vs how much money? But the time to start investing is always 10 yrs earlier. There are dollar-cost averaging that you can use to determine if the 7-10% you will be making from an ETF is better or worst than investing in real estate.

In this day and age with all the uncertainties of life, it is better to both have a high-paying job and investments on the side so you have the most flexibility in how you chose to go forward working toward retirement. Keep on learning and reading the forums and you will find what might be the best your you. 

Good Luck!

Hello,

We are newbie investors and currently have a triplex under contract. It is a single-family w/ a 2x1 and a duplex with a 2 x1 unit and an efficiency unit with 2 storage areas that can be turned into a 2x1. This is really rare for Houston and we were able to get a 2.75% 30yr-fixed FHA loan with 10% downpayment!

But the property needs work. There are illegal electrical and foundation issues in the single-family and duplex. The duplex requires a new roof and we were able to get the sellers to agree to pay for the new roof. Since we are new we hope to complete all work necessary before renting out the place to reduce issues in the near future since we are self-managing the property. I have started to get quotes for all the work necessary but my question is, would it be better to finance this construction work with a HELOC, cash, or a construction loan. Can you also explain why the particular financing is your preferred method as well?

Also, we gladly welcome recommendations for foundation, electrical, and roofing contractors as well as investor-friendly banks and insurance agents.

Thank you for your input, we greatly appreciate it.

Have you created a group that meets? I would be interested in joining.

I'd be interested as well