All Forum Posts by: James Stinnett

@Nick Colvill

Hi Nick, 

A lot of great information above but I'll give my take on this; anything I repeat from above please take as me 2nd-ing their input!

I was residential loan officer/mortgage broker from 2000 to 2008 and a Realtor since 1993.  2008 and the next few years were difficult times to be in real estate finance so I jumped to bank owned sales during this time, so I have both perspectives.

Both as an LO/mortgage broker and real estate agent I would regularly have banks/lenders ask for a comp-based appraisal and a rental survey on 2-4 units properties; which is Fannie Mae Form 1025/Freddie Mac Form 72. 

Also, when a buyer was buying single family home there would ask for a comp-based appraisal and a single family comparable rent schedule Fannie Mae Form 1007/Freddie Mac Form 1000. 

Then most lenders would allow for 75% of the projected rents as additional income for the buyer, though they would ask for lease agreements -- and if those were not available or incomplete or several years old they would ask for an estoppel from each of the tenants. The idea behind the 75% was that 25% was estimated to go towards repairs, vacancy, CapEx etc.

Also, as mentioned above 1-4 unit is residential and 5+ is commercial. In 1- 4 underwriting focuses on the buyer in 5+ it focuses on the property.

I don't remember underwriters asking for Sched E from the Seller, but as many stated above I would think that would be difficult to obtain and then would question the validity and thus value of any I did obtain.

Hope this helps, best of luck!

James Stinnett

@Jeb Brilliant

Ok, thank you for the info and thank you for the heads up about tonight! 

I look forward to the next one!

James Stinnett

@Constantia Petrou

Hello, 

I'm a real estate broker in California and I recently (Feb 2018) leased out a SFR in Long Beach for a client.

As I was preparing the lease I noticed on the California Association of Realtors "Lease/Month to Month Rental Agreement" that there was a line advising that the Tenant's or their guest's personal property and vehicles are not insured by the Landlord, Manager, and HOA (if applicable) against any loss or damage from any cause.

Next was a line in bold print advising the Tenant to carry their own renter's Insurance to protect Tenant from any such loss or damage. 

And, the very next line started with a check box, meaning that the terms following the check box would only apply if the box was checked. Those terms stated that the tenant must obtain liability insurance in an amount not less than (and had a blank line to fill in a minimum amount). 

When I read this it seemed clear to me that the lease was only advising the tenant to get renter's insurance but had an option to make liability insurance a requirement of the lease. My client wanted to require the tenant to get a renter's insurance policy.

I called the a real estate attorney to ask if I could add a line requiring the tenant to get a renter's insurance policy, she informed me that there had been recent case law that called in to question the legality of requiring a tenant to have renter's insurance and she specifically advised me not to add this to the contract.  However, she did go on to explain that we could require the tenant to get liability insurance and that when they call to get the liability policy it is common practice for it to come with a renter's insurance policy bundled with it. 

Hope that helps! If someone has updated information or heard differently please comment, thank you!

(I am not an attorney and this should not be taken as legal advice, please consult with an attorney.)

James Stinnett

@Tim Wilson

Hi Tim,

Some great info and tips above and I know a few members above have already mentioned this so I'll just add to it from my perspective as a former mortgage broker - Dig into the credit report, there is a lot more than just the credit score - I know many landlords and PMs are looking for potential tenants to make between 2 to 3 times the rent in gross income, which is equivalent to a front-end DTI ratio used when underwriting a mortgage, but with all their current payment info from the credit report you can also calculate the back-end DTI ratio. Credit report/scores do not account for income, so while their scores maybe great and they might gross 3 times the rent they could have a back-end DTI that makes them a higher risk tenant than another tenant with similar scores and similar rent/income ratio. There is a reason why banks/lenders have upper limits for both front and back DTI's. Hope this helps some!

James Stinnett

@James Call Good point about the repairs on an older home, I missed that.

@Jaime Hall         

I completely agree with @Account Closed !  

Hands down Real Estate Trainers - http://www.retrainersca.com/

Wouldn't go anywhere else! Best of luck!

James Stinnett

@Christian Villanueva - Hi Christian, 

Well I can help with some of the above, but I'm not exactly sure on the following estimates you used:  Homeowners' Insurance - you used $115 -- that seems high but I'm in Los Angeles so that might be right for there;  Vacancy - you used $100 -- I would usually use 5% but again that would depend on what in the norm for that property type in that area so that may be right for there. 

I looked up the taxes and added them up and came up with a rate of 2.821909%, so that 3% estimate is very close, I got $423.29 so just about $27 less than your $450 per month.

The Lawn Care, Repairs, and Capx seem like they are in the right ballpark and same with the Electric, Water and Gas.

Now regarding the loan figures -- FHA charges Two Mortgage Insurance fees on each loan;
Up Front Mortgage Insurance Premium (UFMIP) and Annual Mortgage Insurance (MIP) paid monthly.

At a $180,000 purchase price your Base Loan amount is $173,700 (.965 x $180,000) which you have, but your Total Loan amount, which includes the UFMIP would be $176,739.75. This is calculated by taking the Base Loan amount of $173,700 and multiplying it by 1.75% (.00175 x $173,700 = $3,039.75 - this is the UFMIP) -- then add this $3,039.75 to the Base Loan.

The Annual MIP which is actually added to the monthly mortgage payment (1/12 each month) is calculated by multiplying 0.85% (.0085) by the Base loan amount of $173,700 and then divide that by 12 to get $123.04, not far off from your $115 estimate. Note: that 0.85% can vary depending on the percent down and other factors so check with a loan officer for different scenarios.

Finally, your monthly P&I payment is based on the Total Loan Amount (Base Loan + UFMIP) which is $176,739.75 and on a 30 year term at 5.00% this gives a monthly payment of $948.78, so about $16 more than what you have.

Not sure about closing costs in TX -- here that $3K would be low. 

Also when I looked at the photos of the place and read the agent comments the $7K in rehab number seems low too, it looks like the family room or living room is missing flooring and the kitchen and one bath could use some love.

Overall your analysis seemed very close to me but would love to here other member's opinions!

Hope this helps, sorry if it was too detailed -- Lol

James Stinnett

@Matt K. - Ok, got it, thanks!

@Roland Paicely - Are most Wholesalers doing a physical inspection, with a contractor or home inspector or are they just eyeballing it on their own? If you know..  And thank you for your previous response!

Hello, anyone out there have suggestions on a business bank for a new property mgt company in southern California? 

When you acquire a purchase contract from Wholesaler do you typically have inspection contingency that allows you to renegotiate the price based on newly discovered information from your physical inspection? Or are you pretty much locked into the existing terms once it is assigned to you?