All Forum Posts by: Jay Hinrichs

Myles, I understand if you hold a tinge of automatic defensiveness but my question in discussing was legitimately exactly that, just a question in discussing, not a hidden slight of any kind. 

And you may be surprised to find myself as a more senior person within that exact SubTo community you keep referencing, FYI. 

My question stands, as as of yet has not been legitimately answered; why not try a mortgage assumption first? 

The time is a non-issue. That statement of yours on such only makes me question your motives here and your actual experience in foreclosures. 

I have dealt with a plethora of foreclosure situations, over many many years. And in virtually every instance I was very easily and readily able to get the foreclosing entity to put a hold/freeze on everything. 

It's a simple phone call, discussing situation and that I have the property under contract. From there I have found every bank I have ever worked with, big, small, microscopic, very receptive to working together to bring a positive end. 

Because despite the tin-foil-hat-club's thoughts on it, finance entities don't want to take the property back, it's a giant pain in there azz. 

SubTo is NOT some fit-all magic wand. 

SubTo has some very legitimate MAJOR pitfalls, and risks. 

SubTo is far more complex and complicated than a purchase with mortgage assumption, by a multiplication factor. 

SubTo has it's place, there is a place for it, and that place is FAR from being the 1st go-to transaction tool. 

I notice you employ the use of the strategic "in my opinion". So I will clarify, my "opinions" above are formed & supported by the facts of multitudes of transactions, not feelings. 

If I come off a bit annoyed it's because I am. 

The now clear and obvious click-bait of this post, not being written as any legitimate question but as a quazi promotion of self or SubTo is annoying. 

The assumption of general superiority and talking down to persons is annoying. 

Under contract without any ability to extend 

You’re making a common mistake, @Josiah Guyer. You are not paying $68k in fees. The $54k down payment is not a fee; it goes toward the purchase of your house and becomes equity when you close. It’s still your money.

You appear to be borrowing $161k ($215k – $54k). The remaining $14k for closing costs, points, and fees are expenses. Your points and fees are $7k/$161k, or 4.3%. This could be high but does not seem excessive. Similarly, $7k for closing costs sounds a bit high, but not extraordinary. Of course, this could be regional.

You need to shop around a bit instead of jumping to the last lender who financed your personal residence. Ask them to explain their charges individually so you can make relevant comparisons and avoid the wrong assumptions.

Well said by both @Travis Biziorek and @Patrick Roberts, but there's more!

You don't qualify for Section 8 by making good life decisions.

What we've had to deal with is majority of S8 tenants are single mothers - yet many have a revolving door of boyfriends who move in with them. Which is a violation of their S8 HAP contract. Yet, it's usually not wirth reporting and having the rent abated - because they don't just move out when rent is abated.

It's also NOT the SWAT teams breaking down doors you have to worry about. It's the fights that happen that lead to broken doors. It's the ex's that come by and use a baseball bat to break as many windows as they can. S8 tenants don't have the money to fix these, but they do pick up the phone and complain to their caseworker, who issues a 24-hour Emergency Repair Notice to fix the windows - or the rent will be abated.

NOT ALL S8 TENANTS ARE TROUBLE!

We have several S8 tenants that take great care of their homes and cause no problems.

The real challenge is owners NOT having realistic expectations and freaking out over rent abatements and/or repairs because they have a mortgage payment due.

 Residential transition loan AKA fix and flip

Hi Ethan, ignore everything that was said on this thread. A lot of people are intelecualizing, moralizing, and complicating things. This can be much simpler than people are making it. 

First off, it is kind of your grandmother to offer to lend you money at 5%. It shows she believes in you and wants to help you be successful. Thank her for that. 

Secondly, you need more experience and understanding to become a good real estate investor. With a savings rate of $2000 - $2500 a month you have shown that you can manage your personal finances successfully so great job!

This would be my suggestion, continue to go to real estate meetups in your area and start connecting with other investors on a regular basis. If possible, invite a real estate investor to lunch each week and pay for their lunch. Ask them how they got started and what type of deals they are doing currently and what the numbers look like. After doing this for a few months and having gotten to know several (ideally 20 or more) investors, ask one of them that you felt most aligned with regarding the type of real estate they are doing if you can lend to them short-term on their next deal and if you could see the process of how they invest. Make sure your interest in the property gets recorded with the title company and then learn as much as you can about the process. 

After doing this on 2 or 3 deals, you will be much better prepared to recognize a deal, how to get into a deal, what's important and what's not important in a deal, and how to make the deal profitable.  

You are getting too much feedback on how people buy houses the normal way and get loans the normal way. Well your regular average person that buys a house the normal way gets rich very slowly if at all. Skip all of that. Learn how to find really good deals, and then get into a really good deal and turn that deal into a great place for you. 

This is an idea of what I would do specifically if I were in your current situation after having dove head first into learning, networking, and participating in deals.

1. find a house from a wholesaler that is an older build but that doesn't need things like electrical upgrades or things like that. Look for a house that is around 1800 - 2200 square feet where you can change a 3 bedroom home into a 4 or 5 bedroom 2 or 3 bathroom home. This would make an ideal situation for a house hack/rent by the room situation which would exponentially build your income quicker. 

2. Purchase the house with a hard money loan from a lender you met over the past year of doing deals with successful investors. Get a 90% or higher loan with rehab reimbursement draws where you can get money draws from the lender to reimburse what you spend on repairs. This will make it so you can recycle your rehab money and make it go much further.

At this time you should have an additional 20k - 30k in savings so you should be at about 50k or more to work with on the purchase and rehab. 

3. After the repairs are complete and you have started renting the property by the room, look into either refinancing as a primary home or get a DSCR loan if the primary home loan lender is giving you a hard time.

If done well, you should be at only a 75% - 80% loan to value and you would have taken your $50,000 in cash and turned it into $100,000 or more of equity. You should be able to live in one of the rooms for free and cash flowing $500 or more a month on the property.

After doing this, go back to your grandmother and show her the deals you have been a part of, what you have learned, and the deal you put together. Then ask her if she would like to be your money partner on deals and go start crushing it. Outline the partnership expectations in paper, continue to build your support system, don't get over leveraged, and improve your craft. 

I would encourage you not to use grandma's money at the beginning until you are already doing your own deals successfully. It makes it too easy to use easy money and it doesn't push you into finding really good deals. It would likely make you into a mediocre investor. So don't do that. Focus over the next year at building the investing rocket ship and then let your grandmother provide the fuel.

I've also been told that Kiavi has halted all RTL funding in FL by several sources. As best as I can tell, this is factual. I also saw something that they are stopping all bridge funding nationwide on stabilized properties. It's either perm financing (DSCR) or nothing.

I have directly spoken with 9 or 10 private lenders and institutional RTL lenders in my two markets in the past two weeks. The universal expectation right now is that there will be increased experience requirements and higher borrower contribution requirements (lower LTVs) on RTLs for purchases going forward.

On the primary mortgage market side, we're hearing rumors of coming updates to DU and LPA that will be more conservative on approvals for investment property loans.

Ive been expecting this for a while. I know I've mentioned this before on here, but I have seen too many deals in the past year or so that are being strung together by hopes and wishes. A lot of investors are buying doors just to buy doors - there isnt much economic justification behind it, all with way too much risk layering. 

My guess is that the institutional lender programs that offer 90%+ flip funding to 1st-time investors are about to evaporate. My other guess is that DSCR loans are going to start requiring higher ratios for upper LTV programs, probably 1.15+.