All Forum Posts by: Jesse Byrer

@Marshall Shen I'm not sure if you're talking to lender that told you that you can get a 4% rate with only 20% down, but if you go to Fannie Mae and Freddie Mac's websites you'll see that 25% in the minimum down for an investor buying 4 units.  Most of the the non-QM Lenders have tried up thanks to COVID-19 so the only real game in town would be Fannie and Freddie.  Not to mention your interest rate will most likely have a "5" on the front of it unless you're buying down the rate.  So, I"m guessing if you adjust these 2 factors it will make this investment even less attractive.

@Gabby McNabb I don't want to repeat many of the comments provided, but they are right... the main benefit in getting the loan is the lender will protect the money and therefore protect you. Some of the guardrails are the appraisal, the validation of the contractor, and making sure you qualify for the loan. If the rehab is a large project a HUD Consultant would be involved (or you could elect to have one involved)... their main role is to make sure sufficient funds are set aside for the project and oversee and manage the project. All things that would greatly benefit a new home buyer that thinks like an investor (you do have to live in the property). Of course the leverage component and low rates is a huge benefit as well. Most investor programs require a 25%-30% down payment on multi-unit investment properties... you would only have to commit 3.5%!! You do get to pick your own contractor too... not sure who @Jaron Walling works with, but that's not how the program works.

@Trecia Benjamin Ok, Buy and Hold... I don't know if you own the home you live in or not, but if you do rates on your primary home are much lower than those on investment properties. There are a couple different strategies, but another component is whether you are doing a BRRR or turn key. Turn Key is much more straight forward... it more a ROI play on your cash. BRRR will be more involved to set up property, but if done right you can scale your rental portfolio using the same money. Just make sure to stick to the fundamentals! i.e. don't over pay, over rehab, move quickly, and know your comps!

@Trecia Benjamin Jesse, great name, is right... HELOCs are often time the cheapest method to tap into your equity.  Down side is it's a variable rate product which is tied to the Prime Index.  HELOCs are great now as Feds have lowered Fed Funding Rates, but can and will go up.  Depending on your current mortgage (if you have one) and the rate on that loan, doing a cash out might make sense as fixed interest rates are so low you could take cash out and lower rate killing 2 birds with one stone.  Are you looking to Flip or Hold?

@Andrew Syrios - Thanks Andrew...  actually over the years I've had to change me contractors.  That was my first flip so the contractor I was using was very inexpensive, but we had a major language barrier...  to the point I wasn't sure if he really new what  I was asking him to do.  So I liked his prices, but had to move on to a different contractor!

@Daniel McDermott - simple answer is FHA does not allow you to close in a LLC. On future deals, if you're considering LLC, I would consult an attorney because traditionals loans from GSEs won't allow it and if you try to Quit Claim into LLC it can trigger Due on Sale Clause! I've found LLC are used on Free & Clear Properties, Hard Money, Private Loans, & Commercial Loans. If want inside to House Hacking reach out to @Lumi Ispas  she specializes on these in the Chicago Market!  Good luck

@Jordan Noble I don't want to speak out of school, but the question on your splitting ownership on the property is best answered by a title agent or real estate attorney, but I think you could have a Quit Claim Deed Prepared adding your partner as Joint Tenant (I would double check this is the best way to hold title). I would caution you from trying to set up a business entity (LLC, S-Corp., etc.) because if you move title into a business it could trigger a Due on Sale Clause.

Second Question - If the father is independently wealthy that would be probably the best way to go from a speed and flexibility stand point, but I'm not sure what the terms will look like. If you're moving into the property that has health and safety issues a regular Conventional or FHA (203b) would not be an option. But a FHA 203K would be a great option, but if you go that route make sure your lender of choice looks closely at the Self-Sufficiency and Departing Residency Guides.

@Mike Marino Great questions.. I'm going to let you know how I'd handle it!  

#1 is a tough one to answer because you're trying to him a moving target.  No only does the scope of work on everyone property differ, but contractor's charge different prices, and depending on when you're buying the property the labor and material costs can very.  I would ask your sphere is anyone knows a good contractor and see if they have specific resources you can use.  If not that, then make sure you have a contractor lined up and get them out during your home inspection/attorney review period.  This is not wasting their time since you have a property under contract and if the costs are more than you anticipate you have a bid from a contractor to go back to the seller to renegotiate.

Question#2 - it's always a good idea to get a Pre-Approval before you start looking for a property.  How do you know your buying power with out getting Pre-Approved first.  Also, the terms of your financing can have a significant impact on whether or not you're making a good investment or not.  I'd be happy to share some of the bigger players in this space.  Not sure if they lend in your area off the top of my head, but happy to help where I can!

Investment Info:

Single-family residence fix & flip investment in Romeoville.

Purchase price: $74,550
Cash invested: $15,000
Sale price: $135,000

This was a 3/2.1 that I had bought thinking it was going to be a buy and hold. Turns out after I closed I found out the HOA did not allow rentals. This was my first investment property so I learned some lessons along the way. This was a great time to invest so even a rookie like me couldn't have messed it up :-)

What made you interested in investing in this type of deal?

I cut my teeth in the lending business helping home buyers and investors finance fixer uppers. I saw them making money and thought... why not me!?!?

How did you find this deal and how did you negotiate it?

I used a realtor that I knew from an office I supported. That office specialized in buying HUD Foreclosures so I knew she would know how to identify the properties as well as how negotiations would work on a REO deal.

How did you finance this deal?

I used a bank that I'd set up a commercial loan with that didn't mind that the property needed work. It was a short term rehab loan that gave me 100% financing.

How did you add value to the deal?

Water had ran from the 2nd floor so I had to redo the ceiling on the first floor, redo the floors, new granite counter tops, SS appliances, and had to redo the basement. It was all done with Romex and proper permits were not pulled.

What was the outcome?

I was able to rehab the property in close on the sale 4-5 months later for about $45K profit.

Lessons learned? Challenges?

When buying in a HOA make sure know if they allow rentals, make sure you're not getting stuck with back HOA dues, and confirm with the village if there are violations you are inheriting that will be required to be fixed.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I think agents specialize in areas... so yes, if someone is interested in the SW suburbs (Plainfield, Bolingbrook, Romeoville, Joliet Area Kelly Reina is who I've used for years. I know many in this space that do a very good job. It's about someone with experience in your area of interest that supports you the way you need it. As for the lending, well that's what I do! I feel my 2-Step Program is the best! Need to be bank-able and have money, but what I provide my client is remarkable.