All Forum Posts by: Anna Laud

@Namit Raisurana

Hi Namit!

There are a few things that I can offer insight on in the Hoosier State- specifically as it pertains to Indianapolis and areas to be aware of/learn about here in Indy.

Indianapolis has been at the top of the list for many investors historically speaking dues to being a flat market (pretty much the opposite of TX right now in reactive real estate as people flock in groves from CA realizing work from home could be here to stay & want lower tax rates/cost of living) and perks like cheaper purchase price point and lower tax rates (Marion Co for example just above 1% {for comparison NJ is right around 2.49%} ).

Right now TX and Vegas among other areas are really seeing some hot activity - but this is more reactive and not what a more truly flat market like Indy does.

When you first look into Indianapolis there's likely going to be a lot of info or posts about Fountain Square- I wanted to touch base on this first and say from the start- FS was BOOMING not that long ago- one of the main reasons being that the numbers here made a lot of sense (I'm talking about purchase price point here mainly) now as most home owners do, they've seen a lot of neighborhood changes, and in most cases talked to neighbors that have gotten "X amount" for their home and the natural thought of "What could I sell for now too??" comes to mind.

Now flash forward about two years to where we are now, and the purchase price of a fix and flip in FS is going to be a considerable amount more in most cases than it was just two years ago- the numbers here might not make as much sense then in this case (it's certainly going to eat away quickly at your ROI).

There are some 'younger siblings' of FS that I would consider more enticing right now for various reasons. (So dig a little deeper in area searches) Irvington for buy and hold properties (this area has been unique as well as stable for some time with buy and holds), other areas for fix and flip would be Haughville (truly seeing some changes in the market recently and level of finish to homes), Brightwood, Bates-Hendricks and most recently near Riverside Park bound by 16th St to the North, 10th St on the South- Indiana Ave & River/Fall Creek East & West. This last little area is "16 Tech Innovation District" a $500M development causing area changes quickly.

Another Indy development is going to include the Children's Museum and just under $30M there for expansions, but not as ready to go (yet) or in progress as 16 Tech area- worth watching however!

If you have any other questions you feel like my reply didn't cover- ask and I'll do my best to try an help = )

I’ve put together an Indy area guide I can send you as well, it may have some more in depth information that helps

Anna Laud

@Alex Brant

Hi Alex!

There's not a limit on the number of times you can use the Veteran's loan program because it's a lifetime benefit. Maybe they are speaking of the entitlement portion of the VA loan- like the guarantee of the loan if default occurs broken down in preliminary and secondary entitlement.

That can be a little market dependent on the amounts. It basically means that if you used your initial entitlement amount, once a loan is paid off, you can request to have full entitlement back one time. Now depending on the number of times you've used the program, your specific military service in some cases, and the loan type there are funding fees for the VA loan program; if you're at 0%-4% down, it's under >4%, 5%-9% down, it's a little over 1.5%, and over 10% down under 1.5%.

So if you wanted to sell the investment after time and use this as your primary & house hacking until ‘dream home’ days, you could sell and pay off the original loan balance and go this route or pay off original loan amount without selling and keeping it and apply for the one time benefit restoration - which is not the same as entitlement re- installment for active/permanent change of station orders or foreclosed upon properties. 

It depends on where you are too if this is worth waiting on as in some areas (higher price point markets) the ‘bonus entitlement'/2Tier for first time users of the program can be higher. Based on your COE (Certificate of Eligibility) you could qualify for basic plus bonus and that could be the ‘dream home' consideration they are speaking of for first time VA loan usage.

Best advice I can suggest is speaking to a VA lender in your area/state of loan origin for full clarification on this before deciding what to do and have them walk through the options/numbers with you to fully get the best use out of your VA loan benefits!

Hope that helps = ) 

@Sean Parno

Hi Sean! 

It is possible to remove your name from your current mortgage loan with your wife, but it isn't maybe the easiest or quickest thing to do. Maybe you already know this, but its greatly increasing the risk to the lender as the loan is now less secure- so if your loan balance was $200K- she alone would be left with that in the lender's eyes and not the two of you with a combined income, credit etc. 

I'm not sure who makes a higher income, or even if there are two incomes, who has a higher credit score etc- but maybe it would be worth putting the person with better income/credit on the first loan. -That's me assuming a higher mortgage balance as primary than investment would be. 

If you can get this approved by your lender the quitclaim to you or your spouse (whoever took on the primary loan) would be next it seems- just like basically making it how things would transpire in a divorce as far as this goes on paper. 

Having said all of this I'm not sure how making another residence primary while not living there would go, but it seems like maybe this is a lot of work when refinancing (cash out) on your current primary would be an option that would be faster and easier. Again, refinancing under both of your names in theory should be better for approval, rates etc assuming things are pretty equal with DTI, credit etc. for you both.

This is usually pretty 'cheap money' to borrow and it seems like a lot less of a process if you're looking to be as expeditious as possible at least = ) 

Hope that helps! 

@Alex M.

You bet = ) Well negotiating with a lender is a bit different and if it's like a local bank/credit union, usually there are local professionals involved who have evaluated the property, comps etc.- people that are very familiar with the area who will work/price for the lending institutions best favor.

In either case of National or local lender, they are trying to get as much as possible in most cases and may not work to keep going back and forth with them on the price. You can go the route of getting a CMA, showing in pics/writing how much it will be to rehab etc but it's maybe possible to not have this make much of a difference. Especially if there are numerous buyers are interested.

If this counter is too high for your margins to make sense, it could be time to find another deal. 

@Alex M.

Hi Alex! 

When you're saying market is very high with people leaving the city, it's likely there are going to be multiple offers on the table for the seller to basically pick and choose from which I would maybe keep in mind when offering. 

This is important when you offer to know that in these cases, coming in with a lowball might not work in these cases, even if paying cash as there are probably other cash buyers as well. I would base then on a % for my offer accordingly - dependent upon asking of course. 

Usually the golden rule of 'all in' is our 60% - but there are some that will say 70% and it's whatever works best in your market. Now when you're talking about higher price point properties, it can make sense to get closer to if not just beyond that 70% 'all in' mark. 

Doesn't usually make sense to do that on a $100K deal, but $330K is a bit different- at least I know it would be here in Indiana. 

So if ARV is truly at $330K, I would want to be no more than $198K all in on the low end (60%) to $233,100 on the higher end(70%). If you're saying that rehab will be $55K-$60K, combined with closing and holding costs, etc. that should give you a pretty good idea what to offer based on asking price maybe.

If you're very confident in the rehab costs, it might make sense at this price point to go slightly above 70%, but I wouldn't personally go near 80% all in- again, that's Indiana and maybe there are markets in NY where this is commonplace- just seems to really be too tight in margins for  my comfort personally. 

I would want to stick to these margins- maybe feeling better about 70%+ a little 'all in' your case as you indicated that you would be doing the work yourself and have a more clear picture on rehab costs - not the same situation maybe as someone who's less familiar with the costs and not knowing things do come up in almost every rehab that add to your rehab costs. 

Hope that helps! 

@Taylor Busick

Hi Taylor! 

Welcome to BP and the world of REI! It sounds like you've got a plan laid out already- kudos there! I would only add to this network as much as possible and make friends in all walks of real estate life, have great conversations with folks and as as many questions as you can to gain from their experiences.

It doesn't hurt to speak with as many people as you can, from agents to lenders (HML and PML included), home inspectors, contractors, investors in your area (REIAs can be helpful) and more. This way when you're ready, you already know who to talk to and who you would like to work with the most that can help you the best.

You're young and if you're just starting out it might also pay to get your real estate license. You'll learn a lot this way and it could be helpful too in your REI long term plan.

Hope this helps!   

@Anthony Bratina

Hi Anthony! 

Two considerations here maybe would be to look for properties that would be accessible via separate entrances and conversion maybe.

It might be possible to find a mix used property and change it into fully residential- but this will all depend on local zoning laws. You could easily call your local zoning authority and get clear on this as it is allowed in some areas. 

Another option is to get with an agent in your area and ask to look at properties that are suited better but still SFR. Properties that have a 'mother-in-law' quarters or those with full basements with separate access (walkout or simply an exterior door). You might also have some luck in the conversion of a bi-level, depending on floor plan of course.

Hope that helps! 

@Ryan Storms

Welcome to BP Ryan! It sounds like you're already off to a great start! Happy to help answer any questions I can  = )

@Joe Mark

Hi Joe! I think Gail Gabe you some guidance here too but I just wanted to include a brand I’ve had great luck with going on 13 years use. Haven’t needed the warranty but I’ll include the link to it as well. Limited lifetime I think, Pergo brand at Home Depot or Lowe’s. Some flooring stores sell as well, but you might get a discount at the box big store if it’s rebate season (Menard’s has 11% rebate here for example, but they might not be in GA)

https://pergo-cdn.azureedge.net/pdfs/2020_06_op_warranty.pdf

@Chris Lawlor

Hi Chris! The 'why' for seller financing in terms of benefit is the terms, specially those end terms on the back end of the deal when you eventually apply for financing and pay off the sellers in most cases. 

This is combined with money coming in over time (over the term) of the contract and ideally, it covers more than anything they pay out monthly if they have a loan. 

Pitfalls to watch out for would be contract verbiage used and outlined as to who pays what for repairs, property taxes, insurance etc.  

To be clear, there needs to be a reason the seller would do this- a benefit, especially in seller's market. This is where is terms come into play. If they can sell this duplex now for $100K (I'm just giving a rough price for an example) cash- why would they do seller financing with you? It would only be for the end terms and eventual purchase price in most cases as the seller is the lender aka calling the shots here so it would likely be the end terms would be a total purchase price of more than asking now like $120K. (can go either way as a 'locked in' price however- they could lose money if it appreciates over the terms, or gain money if the market is more flat in the area and stays stable; could be a pro/con for you just the same )

On the front end of the deal, they aren't getting from you what they would if they just sold it outright. Over the term of the deal, they aren't getting a lot (ideally more than they have outgoing if financed) BUT on the backend of the deal is where they make the money. 

They wouldn't have any commission to pay here and that's a perk obviously, and in a buyer's market they would have the assurance of someone 'buying' already (not the case right now). 

To move forward with this it would be like a lease with option to purchase, which gives them the obligation to sell to you, but you have the option, not the obligation to purchase. How do you sweeten this pot then as you aren't obligated to buy it?

That comes in the form of your down payment. Now usually a lease with option is going to be 3-5% down of the end terms purchase price the seller has determined. Having said that, in most cases a wholesaler (or even agent) is involved that will take this 3-5% as an 'assignment fee' (on an assignable contract) or commission if an agent. 

In this case I would think about more to prove true interest (good faith) in closing the transaction out in time

Good news for you is that your sellers would keep this money now and get this money on the front end of the deal. 

You can approach them with the idea of "What do they suggest? If this won't work out for you that's okay, and if you're not able to accept more money on the back end of the terms (in time) I just wanted to talk to you about this now and say there is this offer if you'd suggest it could work for you." 

Be ready to have a plan laid out in timeline (usually two years before traditional financing and you're saving up funds to make larger down payment during this time or pay cash to sellers directly), who will cover repairs, taxes etc. and it can be great for them to know that you would be taking care of the property as your own now (level of care) because you truly want to buy it at the end terms and exercise the right to purchase. 

You need to speak with them about the asking price and cover who would pay what and work out the terms, then proceed with a lease with option to purchase contract if they decide seller financing will work for them. 

The other option is a land contract which puts them in a different position if you default and they keep any payments you've made, but as these are friends of yours that might not be as necessary. 

Hope that helps!