All Forum Posts by: John Matthews

@Felicia Dooley Just like regular lenders, you'll want to know their fee schedule, their rates, minimum loan amounts, any cross collateral required, their maximum term, the number of guarantors required, your personal requirements (credit, income, DTI, experience etc.).

You'll want to get in touch with them, and ask about getting prequalified - that'll tell you if you're good for them, it's usually a quick process and usually (in my limited experience) doesn't cost you anything.

You will definitely want to have an out planned in advance. If you're flippng, that's one thing, if you're refinancing, well it sounds like you're having trouble getting a conventional loan, so that may make it hard for you to get an HML.

That said, be aware that you'll be paying a pretty penny for their services. Expect to pay up to 6 points (or more) + several thousand in origination fees + up to 16% interest for the duration of the loan.

Do you need to go the HML route? Have you considered bringing someone else into your team who CAN get a conventional loan?

50% of a deal is better than 0% of a deal.

@Jon C.  How much will rehab cost? The most a flipper will pay is somewhere in the ballpark of $105k ($150 x 70%) minus rehab, so if plenty of rehab is greater than $65k (105k - $40k), there's not much else you can do.

I wouldn't worry so much about "reasonable" offer as I would worry about "the most you would buy for". First, you need to find out what their situation is, and get them to understand the situation (how much the house is worth and taxes owed), then get them to throw out how much you solving them problem is worth to them. Ie. get them to put down a price first.

Who are the back taxes owed to? Are they definitely to the city/state? Or are they to HOA or some other organization? If so, you could go and negotiate with them to reduce those fees if you'll pay them outright, thereby giving you more room to play with.

@Dave Nay So you don't actually have to transfer your other house to someone else's name, you just need to live in your new one for one year. So you'd need to move, but you could keep the other one and rent it, or sell it, or...anything you wanted. After one year you could move into your next owner occupied residence, rinse and repeat. I'm 90% positive you only have to live there for 1 year, but double check with an authority since you don't want to be caught up in mortgage fraud. But the bottom line is, you can be an owner occupant in one home and own hundreds of other homes (if you wanted). 

Secondly, to use the @ (mention) function type the @ key followed immediately by 3 or so letters of the person you're trying to mention (must be a collegue or someone in the thread) and look below the reply window - you should see a drop down with their name for you to click.

Also, just including @Joshua Dorkin so he can see your praise (which I echo, btw - thanks!)

@Dave Nay welcome! 

I found BP the beginning of the year and I've got 41 podcasts to go, that's impressive. Though I guess you spend a bit more time than me on the road huh...

I would say, it's not a lofty goal at all. My goal is to be able to be free from my 9-5 within the next 12 years (ie. be able to generate about 50k of todays dollars after taxes) and it looks attainable. Look at it this way - if each unit is spitting off $150 / month net you only need 28 units or 14 duplexes. So you'd only need to buy 2-3 duplexes a year for the next 10 years. If you can put away $15-20k per year between rentals and your job I think you should be able to hit that no problem.

On the note of prices in the area, I actually think it's pretty cheap around here. With conventional financing, you can get into a cheap duplex in north philly, west philly and norristown (I'm not sure I'd recommend blindly buying in those areas, but there are some areas worth looking at) - I know because I have about the same budget and am looking for the same thing!

As far as price range, if possible (I don't know your situation) I'd try to owner occupy a good multi - you should be able to get a 4 plex for around $150k or 7.5k down. Then depending on your patience level and risk tolerance you could either keep looking for another conventional mortgage place (20% down) for about 85k - that could get you a duplex or triplex, location depending.

If you can't owner occupy (can't move for whatever reason) then I'd shoot straight for a place in the $125k range. That should set you up for a triplex or quadplex location depending.

Note: you definitely want to have cash reserves for emergency payments, but I didn't factor that in - so you may want to curtail your purchasing a bit depending on the amount you want to have sitting around.

Anyway, let me know if you need anything in the area and best of luck.

@Jeff Rabinowitz That's exactly what I'm saying. It's expensive - but it's good education (for a variety of reasons) and it allows for deals you wouldn't otherwise been able to get - even if they aren't as good if you could do them with a cheaper option.

But before you pull the trigger, you need to do your due dilligence.

@Charles Kappe As @Troy Sheets said, hard money is definitely expensive, so you need to check and double check your math to make sure it works. If it were an option I would do as Troy said and house hack my way into a quad, but my fiancee won't move...so that's out of the question for me! So I settled on hard money.

There are some pros to using hard money - but it's definitely expensive. Just to give you some numbers on a deal I'm doing now their closing costs are just around $10k. Some lenders will roll those into the loan, some won't. So if you don't have ANY money, the strategy may not work for you. There is one that I'm working with that WILL roll the money into the loan, but they require some form of cross collateral (ie. they put a lien on another property - if you don't have one with sufficient equity - they require you to hold money in an escrow account that's released at the end of the deal).

The other part of it is they're usually more stringent than flippers - the majority that I'm qualified for will only lend up to 65% of the ARV - so unless you've good a hot deal you're still out of pocket money.

With all that said, they still have their benefits (hence me working with them), but once I've got sufficient cash to do my own deals, I'm cutting them out.

If you STILL want some lenders - PM me and I'll refer one or two.

@Nathan Emmert - Good point.

@Jesse T. - I don't think so - not sure if they own the property outright, but it's an estate sale (which is why I don't think so). But I'll ask.

Thanks @Joel Owens for confirming my suspicion. I definitely will not do that then. 

Does anyone have any idea if it is typical for HML lenders to not allow for second mortgages, even if the total loan amount on the property is less than their desired ARV? and if so, why? I would think that they are in just as strong a position, if not stronger since they've got less skin in the game, for the same value asset that they can foreclose on, so they wouldn't care.

@Bob E. That's what I'm thinking is the really only option left, but I'm going to call the lender to see if that's also against their rules since I don't want to burn any bridges this early in the game.

It's unfortunate since they're only 4k off my goal, and it seems silly to lose this deal over 4k...(total acquisition costs + rehab fees are going to be around 120k...so it's only a 3% difference in price)

That said, looking at this is making me question wanting to move out to the west coast...I've got a triplex on contract for 85k here (~115 including renovations) that'll gross around $2500/mo...do I really want to move out there?!?!