All Forum Posts by: Anna Laud

@Stephen Nulty

Hi Stephen! I will send you a message with some helpful real estate contacts and you will be able to see a few people in the legal world of real estate to connect with that might be able to offer professional advice.

@Christian Morales

Hi Christian! 

This past year was a great year to start an online education of any kind, and while it didn't strictly pertain to real estate for a lot of folks, real estate was industry it possible for. 

While there are usually different hour requirements for different states (you can find out what it is for Texas exactly by visiting your State's page/managing State board's) there is one provider that may work for you Aceable Agent. 

You do need to verify that this course will be providing you with 'State approved hours'- again you'll be able to find a complete list of providers that are approved on your State's page. 

Due to COVID, many online education provider's had the option to test online as well (while offering the option to test at a center if you preferred).

If Aceable Agent isn't an approved education site for your State, you can possibly find some more choices from getting in contact with local brokerages, and asking if any of their newer agents were able to use (or did  use) online education and what those companies were.

Good luck Christian!  
 

@Stephen Nulty

Hi Stephen! 

Before you begin your overseas investing journey, the first thing to do would probably be to seek professional legal advice from an international or real estate attorney State side. Let me know if you need help connecting with someone there, but if you already have someone that's great!

Having said that a State that offers some benefits for setting up an LLC would be Delaware. Delaware does not tax out of state income for foreign LLCs. Delaware also offers lower fees in setting up an LLC and has a separate court for hearing business cases that can make things faster (Chancery Court).

Numerous people State side set up LLCs in the State of Delaware for these reasons, taxes and low fees. 

Another perk to Delaware is that due to so many people setting up their LLCs here, the process is pretty fast and streamlined.

To start this you can simply go to the State of Delaware's site and use the links there or use one of the various LLC set up services online that is US based- you may however have a yearly fee from $100-$500 USD to maintain this LLC as you're setting it up as international.

Hope this helps! 

@Matt M.

Hi Matt! This is a great idea and overall could be used in a way to your benefit as well. I want to suggest a few things used at open houses that could serve as helpful information to your tenants, but come off as 'nice' and 'welcoming'- could save you time/money too in some cases maybe! 

Making sure your tenants feel welcome to the property and the community is always a great idea- things that we've used at open houses that get kept (and keep tenants from hoarding in some cases- the win for you!)

1. Community recycle days/locations

2. Electronic recycle days/locations

3. 'Shred it' days/locations

Putting these in a simple sheet outlined "each third Thursday of the month between the hours of blank and blank' at xyz location you can take these items here and drop off for free" - this can keep a stockpile of unwanted goods/items from accumulating - which in the long run can prevent pests and other bills

Another thing to do is include some freebies or discounts - most of the time, everyone likes free stuff! By getting in touch with local coffee shops for 'first coffee in the neighborhood is on us!' types of coupons to pass along in your baskets- it's multi- serving. 

Your tenants do get a little gift at no extra cost to you, and they get more familiar/connected with a local place (a great time to add to above mentioned sheet for things like 'open poetry reading night at xyz coffee house' as well)

The other self serving portion to this being in your conversations and connections made at local places, you're bound to meet folks that know of someone who want/need to rent and you've got an in to having another source for your future tenant pool.

Another thing to add on you growing sheet here of helpful (yet self serving in a way) items would be contact information of either yourself (if acting as PM), PM, or people you've approved of for emergency repairs. This could be the difference between a leak causing hundreds in damage vs thousands in my tenant(s) have multiple ways to et help ASAP.

It's always nice to include menus from local restaurants as well, especially those that do take out/deliver (when picking up menus they may have coupons to add too!). If your tenants are newbies to the area, you can even include locations/phone numbers of urgent care facilities, then add a few amenities on there as well like local parks (basically things that would be helpful and of interest)

If your area (or HOA {may or may not apply}) has Facebook pages for events like block parties or free concerts, you can add that info too.

By doing these things you're giving your tenants some very helpful resources (emergency and otherwise), as well as welcoming them to the community. I would ALWAYS suggest including the local police non emergency line, that comes in handy often and prevents unnecessary 911 calls.

Even if utilities are paid by you, it's not a bad idea to include the numbers of your eclectic, gas, and water providers- even if their names aren't on accounts, they can find out when power will be restored quickly (saving you or PM a three am call maybe)

As far as gifts go and actual items, things that would apply to most everyone in being useful seem like a good idea (an not offensive in any way like scented candles - those items are not across the board items) but things like nice dish towels, simple kitchen tools/gadgets, a welcome mat, fridge notepads and nice pens, etc. 

If many of your tenants have pets, even including coupons for 'doggy wash/day care' places would be nice, as well as potty pick up baggies (a self serve there as well, creating good habits for tenants), local dog parks, local vets info. 

If they have children- just by going to the local school sites you should be able to print off free school year calendars too for events, school breaks, etc. 

Basically keeping it as user friendly for the most people as possible and avoiding things like could be seen or taken as offensive to some (wine, wine openers, scented candles/soaps etc.) 

Even having a few baskets ready for tenants to grab quickly - they have pets so they get the pet welcome basket, they have children- they get the children friendly welcome basket- you get the idea. Just keeping in mind they should feel (ideally)  instantly more connected with the community, which can be very helpful for both you and your tenants

Hope this helps! 

@Scott Hughes Hi Scott! 

So this is going to be what sounds like an out of state investment for you, and you're nervous about not seeing it with your own eyes. To be clear one one thing from the start- you're not alone! 

It really comes down to who you're working with and your 'boots on the ground'. If you trust your agent/person/team in your remote location- you should be pull the trigger ready. Why?

Deals (depending on the area) can go quickly and this makes a difference when you need/want to get an offer in for sellers to consider.

I would suggest that you to consider your agent here and how well they know you and your needs and wants in a deal.  Here's what I mean; 

When we work with an investor in or out of state, we have a complete investor profile we go over with them. We discuss short term goals, long term goals, how they are financing, how much they are putting down (it's all relevant - like if they are putting x amount down, and I know they then have x amount to cover each month in a mortgage payment, I'm not going to show them deals that fall short- so it's not just being nosey stuff!) why they are doing this (investing), we take SO much time and energy into getting to know our investors from the start to figure out two main things;

1. Are we a good fit to work together? If not, who can we connect them with that is?

2. Is this someone that we can see working with and making friends with at least 10 years in mind and we reverse engineer it from there to help as best as we can (i.e. if long term goal is to have a dozen buy and hold properties, lets work it in reverse from a dozen to just one deal and figure out how to financially meet the other 11 deals quicker)

After spending this much time and building a superior relationship (connecting them with PM's, contractors, real estate attorneys, lenders, etc- whatever they need) it's pull the trigger time, and when there's a deal presented, they trust it's with them and only them in mind and it's a 'fit'. 

Now as for seeing the property- that's where we've gotten creative (we knew people in NY that were doing drone showings at the height of COVID outbreak) but really, at minimum having a virtual tour in agent (or wholesaler if you're working with one) taken pics /videos can help (above/diff from MLS pics/videos- different POV). If this doesn't suit you enough maybe a Zoom meeting.

I say that as you could be as curious as you wanted to be, "Hey agent Jim, what's behind that door to your left? Can you open it up?" type thing. Your 'virtual eyes'.

If you've got the right person/team, even off market deals can be in the same boat really (remember, they would have at minimum gotten you in contact with a contractor who met them at the property to walk it as well and you're getting an idea of rehab costs in real time) 

As for earnest money down, usually it's 1% - and can be adjusted, but your agent should (and I'm sure they will) put in all of the necessary contingency clauses with your offer. Title/escrow isn't something you deal with/figure out as the buyer- that's between the agents. 

Please be aware if you're using financing for a deal that (you likely are already aware)

1. Your lender knows (from your preapproval) that this is for a non owner occupied, out of state loan and they know the state you're working in (if not, a great place for your agent to help you get connected)

2. Your earnest money is a cashable check- it's going to be cashed, even if later returned to you for contingency clause(s) reasons

Having said that, and in hopes your agent will (again, they should as it's very standard) puts in the right contingency clauses- choose your inspection wisely. Most investors use a 4 or 5 point inspection, however if you're very uneasy a full inspection might be what you want (usually for more of a buy and hold, minimal rehab/cosmetic investor purchase)

If it comes back (and wait for full report!) that there's simply too much that needs fixed, this is where your agent goes to bat for you and 'asks for the moon'  in the buyers' response to inspection, to either get the issues resolved (usually submitted with a subsequent inspection period post professional repairs and for all repair receipts to be submitted to buyer 7 days prior to closing)

This either will give sellers a chance to make repairs (not on an 'as is' obviously) or it's your opportunity to exit the transaction AND get your earnest money back. 

I would suggest getting in touch with your agent about at least the possibility of a video/pic/Zoom walkthrough, asking for contractor contacts, as well as speaking with a couple of home inspectors now and tell them what you are looking for in an inspection- see what they offer in terms of investor preferred inspections (some have an investor 'menu' to choose from and offer as standard practice things that you might not even know to ask for, or assume will cost more)

Hope this helps Scott! 

@Neil G.

HI Neil! So those are some bigger ticket items on the docket it seems maybe. I would absolutely wait until  the full report is in- if you don't and you go back with a purchase price reduction counter offer of to little (in terms of asking) and another bigger item comes along, you're only the seller's acceptance away from being locked into the deal. 

I'm assuming you're not using an agent on this transaction or they would be advising you on how to proceed, which his fine, only pointing out as you said this was your first investment property.

Now the waiting to get estimates on these expected repairs - you need to keep in mind how many days you have in your contract to reply/as it pertains to predetermined closing date (otherwise you've essentially accepted the inspection as you've not offered a counter). 

I'm not positive about FL, but in IN you have to give the seller the opportunity to either offer to adjust the price or make suitable repairs (this could (should likely)  cause a subsequent inspection post repair period)

Again, verify for FL, but under IN law (when you go to read your full inspection keep in mind) 

 Under Indiana law, "Defect" means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises.

So to ask for a purchase price reduction it would need to meet that qualification most likely. 

Now with all of that said- if the full report comes back and it seems like the repairs are going to be far too numerous (and costly- you're going to have to have the capital to finance these repairs even if purchase price point is lower (well, assuming there's a loan involved to purchase). 

If you don't have the capital to make these repairs, even at the right (or better price point) it would be time to "ask for the moon" in your response to inspection (your exit option if it's just too much). This would be best submitted with another inspection clause so if the seller DOES do the repairs, you can sign off on them as up to your standards. 

Last bit of advice, in terms of 'legal writing' in your response to inspection addendum (where you list out all the repairs to be made {if you don't go the lesser purchase price point}), make sure that it's clear you're asking for all work to be professionally done. 

But yes, in a nutshell wait for full report = ) 

Hope that helps! 

Hi Nicolas!

You may end up benefiting from doing this actually- and I will get to that part.

You should be able to review your montage contact and see if there are any rental restrictions that would apply. This may or may not be something then that you would be required to let your lender know about (but might still consider doing for a perk)

If your lender has a written in rental restriction, it’s likely they will want information on your renters- odds are if they do want any info, they have a system in palace for screening them on your behalf (and theirs), it might be beneficial however to draw up a quick ‘mock’ application you can email in quickly right after the call to speed things along (just credit info, rental history, income- go the extra mile here with a couple of references if your type “A” personality to keep lender happy- BIG bonus if from previous landlords)

This might be the only ‘next steps’ required on your part as well- so you could save yourself time here by being ahead of the game.

As far as getting renter’s insurance - your renters need to do this on their own, and that shouldn’t fall on you (or pull from your own personal resources/affect your personal insurance rates) apart from maintaining homeowners’ policy as you have now.

The big perk in providing your lender with this news (apart from staying on the right side of any outlined terms in your mortgage contract) will be in time (depending on how long your friends rent for) you could qualify for a higher loan amount on another loan as you’ll be able to show more income

If this were to be a long term situation, it might be best to consider transitioning it into a lease with option, which I’m sure you’re very familiar with given your profession- especially if the rent will cover the monthly mortgage payment.

In doing this you would also be able to have your friends cover major expenses that come up (if you've written it in contract accordingly {i.e. they pay up to x amount for repairs, or until a threshold is met for an expense such as deductible on insurance {just keeping in mind you’re still on the line for property taxes, unless you adjust their monthly rental amount}, only worth mentioning as their down payment on the front end of the deal, you could save as your down payment on a new place (again maybe qualifying for a higher loan amount) and could help you in the long run)

As for negative impacts- again it's possible to be a loan term specific situation, but it does seem like it could be a very positive impact to be had

Hope this helps = )

@Jenna Barnes Yes I'm going to send you info on a full list of helpful folks and HMLs are on there = ) There are people from all walks of real estate life on my list (so keep it and it may come in use later on) but for sure have some people on there now for you to connect with. Happy to help!

Hi Kevin!

Since there's not a hard limit on how long you have to live there before refinancing and changing to IRRRL (Interest Rate Reduction Refinancing Loan AKA VA Streamline) and because you're already using as primary residence it seems like meeting the most outlined two stipulations for VA loan would indeed work as you said as long as (you probably are aware, but just in case)

- There must be a provable benefit like the rate, a lower payment, improved terms, etc.

- You aren't allowed to do this from an adjustable to a fixed rate

Having said that, you've found quite the VA loan loophole if you will on the 'owner occupied 60 days prior to closing' with the refi part. (A good thing!)

We've found that most investors really prefer working with VA renters vs. other tenants for a few reasons - one of which being VA monthly rental benefit allowance. For example, a duplex here in Indy (VA benefits range) but on avg right now $1450/mo each side.

Knowing your monthly rental yield is backed by the VA can be more reassuring, as well as being able to help some wonderful veterans who can make ideal tenants (I am biased from a military family as a disclosure) but often tenants are respectful of your property, more quiet than others (some very much preferring the quiet), neat and tidy from military style living, etc. (On a scale of tenants most likely to least likely to have wild and property destructive parties, Veterans don't necessarily come even close to the top of the list is what we've found- again, just an observation!)

Combine this with knowing that you would have an assured monthly rental income coming in each month from the VA benefits program, it would seem the best way to go might be with a traditional rental.

Yes, less than $150 a night but take this past year into consideration- your mortgage payment on the rental would have been due each month no matter what, even if there were no Air B&B guests to be had as travel restrictions were well under way. 

Now, you might have fallen under the COVID moratorium as well, had your tenants not had a guaranteed source of rent payment mentioned above- both worth considering as we move forward into 2021 and beyond.

Hope this helps! Thanks = ) 

Hi Jenna! (Warning this is a long reply but it's going to give you a pretty in depth look at working with an HML!) Keep in mind that while you said that you don't have super solid financials just yet - skin in the game from you will be a necessity. One HML that lends here in Indy and a few other states for example requires you to have $16K in an account (in your name) for 3 months. Another thing to keep in mind is that some HML's aren't super keen on the idea of financing a first time flipper- HMLs that will lend to first time flippers do exist obviously, just don't be surprised when this question comes up from one.

So here’s an example deal; (Just trying to make sure you have an example deal to see how working with an HML would work and in my quick typing I may have gotten something wrong so please use just as a basic outline for an idea in concept!)

Deal:

ARV of $143K

Purchase of $75K

Repairs are $25K

Total capital is $100K (70% of ARV remember)

Turn around is 4 months

Draws 8

This is what the Hard money lender terms would look like;

LTC (loan to capital) 80%

Term 6 months

Interest 12%

Points 2%

Misc fees $1500

(add ext fees if extending if not ideal stuff happens for an example ) 2 points for 6 month extension

Inspection fees of $175 each (remember an ‘inspection’ for each draw to make sure you’re doing the work they think you’re doing with hither money)

Now if this flip takes 4 months, here are the total carrying costs;

Total loan amount cost $100K (.8 how much lent ) = $80K

The two points at 1% = $80K x .2 (for two points) = $1600

Interest so the amount lent of $80K x .12 (12% interest) = $9600 in interest (the total ANNUAL interest) so to carry that for a total of four months would be $9600/12 = $800 in the deal for 4 months = $3200 in interest payments

Inspection fees cost (remember 8 @$175 each for each ‘draw’) = $1400

Now if you didn’t exit the deal in 4 months and added the extension of 6 months you’re adding in the points for the extension (avg of 2 points per 6 months)

So points $1600

Misc $1500

Interest $3200

Inspect. $1400

(not including an extension) all fees ‘carrying’ costs of the hard money are $7700

Where does that come from?

Sale $143K

-Purchase of $75K

-Rehab of $25K

-Carrying costs of $7700

-$11.5K of closing (remember you might be paying yourself here as licensed pro if you're a PM in a state that requires you to be a licensed real estate professional)

___________________

Net profit of $23,800

So the ‘cost of capital’ in this case is $7700 to net $23,800

While intimidating in concept, HML (hard money lenders) are a go to source of funding for many flippers. The idea is to be able to have (near) immediate access to funds to close/rehab/sell quickly as the turn around on an HML is much faster than traditional financing. The investment property itself is collateral for the loan. Meaning they aren't funding YOU personally, rather the property being invested in.

Now to minimize the monthly payments there is a deferred payment style fix and flip loan - this would be where the payments are paid back from the ‘exit’ of the deal (sale) this would be where the position of payments is paid on the ‘back end’ (at the sale of the house) of the deal and not ‘over time’ during the ‘term’ (life/period) of the loan.

To be clear on a common misunderstanding is that hard money lenders are ‘loan shark’ kind of lenders while this is more of a commonly used source of capital funding in fix and flips than not. The idea of ‘oh no, this is going to be foreclosed upon’ is taken back to they are funding the property, not you- meaning before a ‘judgment of default’ was to transpire (aka foreclosure) you would sign over the deed of the property to the hard money lender- but realizing before it ever got to that point they want you to be successful because the more success you have, the more times you will come back to them and they will make more money (repeat business for them) . 

Now to prove that you totally mismanaged their funds- it would have to be taken to civil court, they would have to prove that you were not doing everything in your power to sell the property (again, this is where if you think like a hard money lender yourself and ask, "what are they not doing that I would to sell this, or are they doing everything to sell it?" (they don't want it back and to move it themselves, they want you to sell it and come back for more business) Now considering the number of properties funded at any given moment and the ROI these HML's are getting, it would be quite an extraordinary thing to go through this entire process and not having them work with you on this (because the amount of money stood to be lost in these proceedings eats back into the amount derived from things such as an extension on the loan and simply charging you points for doing so) Again, the ‘worse case scenario' here I'm describing.

Having said ALL of this and hopping over to PMI- this really depends on your PMI source- it could be easily assumed that for some people, working with the 'Frist Bank of Mom and Dad' as your PMI would be less complicated and seem less cumbersome (not in all cases and 'mom & dad; could be anyone) Odds are if they aren't related to you the ROI they expect could be much higher than a relative (on avg it seems maybe around 10%+, whereas a family member may ask for prime alone or something like .5%-1% above prime)

My best advice would be to speak with possible PMIs you may already know as well as HMLs and simply become educated on what their requirements are- knowing what you qualify for, or alternatively don't (if you can take HMLs off the table right away knowing before you apply you don't qualify, it's going to save time in working your PMI angle faster)

The single MOST important thing to keep in mind above all else is this; no matter who you work with PMI or HML- keeping lines of communication open is virial to not only the deal, but any future deals you will have with them (as they are financing) - IF anything looks like it's going to go wrong (say missing a payment) let them know so they can work with you and NEVER against you

Hope this helps! Thanks = )