All Forum Posts by: Jaren Woeppel

Great advice here! Also, I am not an accountant or attorney, but this may help. In Florida, when transferring a property, even between an LLC with same members and it's o my for liability purposes, they still consider the mortgage something of value and will tax you on the mortgage balance that is being transferred. We learned this lesson the hard way…

Welcome back to the sunshine state, Eddie!

Just a few questions to get a better relationship with you and what your goals are:

What do you do for a living now?
What kind of investment properties are you looking to buy?

Do you remote manage your Jax property or do you pay a property manager? Are you going to manage your new investment properties yourself?

There are so many investment possibilities in Florida, especially in more of the tourist and remote work friendly towns. I believe there are ways to make good returns in each of the areas, but we need to balance what time/resources we are willing to spend versus the return we would get. 

For example, we have done the spectrum from single family long, mid and short term rentals, multi-family rentals, house hacks, live in flips and regular flips. Let me tell you, they are not all created equal!! The highest grossing investment, for us, was the short term rentals during the COVID boom. It brought it a ton of cash flow, but it was very labor intensive and expensive to operate. It was definitely not a passive investment strategy and finding a very good property manager, while still making better returns than a long term rentals, we found difficult and not longer invest in that sector. Plenty of people still do and make money, it just is not the right investment for us at this time in our lives. 

Hey, Veronica! Exciting about your first investment property!

I am originally from Central NY and have been living and investing in Florida for over the last 5+ years. 

As far as the 1% rule goes, especially as we get into these growing Florida areas, does not seem to be too easy to come by these days. I believe the original intent of the 1% rule was just a quick way to see if the deal was worth investing your time and doing a little more due diligence. In todays market, most deals seem to be unlocked in the due diligence phase and using a little creativity. 

What is your investment strategy for these properties. Do you already have a good amount of cash saved up and now you want to invest in strong cash flowing rental properties?

A lot can be done in the purchase contract negotiating these days to make a good deal. We have been making a lot of offers with seller concessions to pay for closing costs and buying down the rate. For the same end number to the buyer and same cash out of pocket for you, there are multiple ways you can structure the deal, we just need to know what your investment strategy is, so we can craft the offer and financing based on your strategy. 

 Welcome to the BP community and thank you for asking for help, that is what the community is all about!

It may be helpful to start looking at it from a "risk to the lender" perspective, it will help you understand interest rate pricing a lot more. In general, the less risk to the person/business lending the money, the lower the rate will be. If the debt is secured by an asset, it is less risky than an unsecured debt. One of the reasons why mortgages are typically lower rate than other debt instruments is because it is backed by an appreciating asset. Also why, even though a car loan is secured by the car, that is a depreciating asset, so there is additional risk to the lender. I would assume the consolidation loan you are looking at getting to replace the car and personal loan, is unsecured. I am also assuming your personal loan is unsecured, and while that is at 14%, I would bet you got that loan when the benchmark interest rates were lower and the similar loan today would be near your 18% one. 

Where are you sourcing the funds using to purchase the house hack? Unless using a VA loan or down payment assistance, you will at least be putting 3% down and potentially closing costs. If DTI is your only limiting factor for the purchase, you may be better off using that cash to pay off the loans, and then either work into the contract a higher purchase amount (if there is room for appraisal) and and get seller concessions to take care of closing costs. From there, you may be able to get the down payment in the form of a gift form a family member.

There are dozens of possible ways to handle it, but it may just require time. If you want to connect some time and have a conversation, I woul dbe happy to do so. 

Good luck!

Hey, Richa

A follow up comment. What I have ran into several time in the St. Augustine area is the permitting for an ADU. The regulations here are stricter than other places, so if you're building an ADU on an existing property, the zoning may not allow for it. If you're purchasing a property that already has an ADU, there is potential it's not a "legal" ADU. That doesn't necessarily mean you can't rent the ADU out as a STR, but the issues I have seen come up with this are on the appraisal side. The appraisers will generally disregard any value and income from an ADU that is not legal. For example, say we are doing a DSCR loan, which is based on the debt service and the income generation of the property, we usually see much lower appraisals, especially on the rental income value side, because no value or rent is given to the ADU.

This is something to take into consideration when buying a property but also when selling the property, especially if there will be a mortgage involved in the purchase or sale. 

 Welcome to the BP community, Louie!

@Nancy Kittleson Have you any updates on this? We have a similar situation where we have a multifamily under contract and have a traditional lender set up and had insurance good to go. The seller offered seller financing terms later on in the game, and we wanted to pivot to seller financing, and when we did, our insurance carrier said they would no longer issue the policy if the seller was going to hold the note. I have never heard of this before but I was wondering if this was happening in Florida because the insurance market is a mess right now, or what. 

Hey, BP

Would love your perspective and any possible help on our current situation. We have a 4-unit multi-family property under contract. We had lender financing and a great insurance quote. The appraisal came back poor, and the sellers have offered seller financing terms. We would like to move forward with the seller financing terms, but then we just heard back from the insurance company that they would not offer the insurance if it is seller financed. I did not know that an insurance company cares who holds the note, so this is new to me. 

Has anyone out there had a similar experience and found a good solution or what the next step should be? The next quote we received from a different carrier was 3.5x higher than the previous quote, only change being seller financing. 

This is in Florida (FL) by the way. Thanks!

@Tyler Gibson had a lot of great advice there!

From the financing side, condos are difficult to finance as a qualified mortgage, because there are so many variables with the HOA and the fees, especially in Florida since the collapse of the condo in Surfside and the new Condo 3.0 safety laws were passed.

That being said, most condos would have to be financed as Non-QM loans, which have higher interest rates compared to a qualified mortgage. I say all this to say, a big automatic disqualification for a condo to be approved by HUD, thus being a condo that can be financed with a qualified mortgage, is short-term rentals. If the condo association allows for short-term rentals, it most likely is not going to be HUD approved, which will mean each unit has to be purchased in cash or using a Non-QM loan. Ultimately, that may drive the price of the units down because it is affordable to less people.

I am not sure what condo association you are in, but if you want to connect offline I can help you look into that information.