All Forum Posts by: Joshua Nudell

@Jerry Poon,

It should count towards DTI, but if it's not reported, it's up to you to let any financial institution your work with in the future know about that loan. They will discover any mortgage against the same property you're using as collateral when they do a title search. Additionally, all banks make you sign documentation that you attest to the fullest of your knowledge that you have disclosed all of your assets/liabilities. If they find out about the loan, there could be complications for you because you didn't disclose the private loan.

Also, with the private loan, make sure you're not paying anything directly to the lender in order to secure the loan.  Those types of deals are usually a scam and you should be careful.  Any funds requested should be handled by a lawyer through escrow until closing.

If it's legitimate, I would go with the private lender as well.

Not legal advice. You should always consult a lawyer when dealing with private transactions.

@Debbie Schoemann,

You mentioned that you found a mortgage lender who will give you a 30 year loan and you want a 2 year loan.  Just because it's a 30 year loan doesn't mean you have to pay it off over 30 years.  You can always pay it off early, but be sure to ask the mortgage lender if there are any prepayment penalties (for paying the mortgage off early).

As an example, let's say you get a $50,000 mortgage against your $300,000 house.  Your approximate payment will be $270 per month at 5% interest, or $300 per month at 6% interest.  If you paid $1,000 per month instead, you would be able to pay off your loan in roughly 6 years.  Or, you could pay $300 per month for 24 months, and on month 25 pay $48,000 to pay off the balance of the loan.  anything you pay above the monthly mortgage payment goes directly towards reducing your principal balance (the amount left on the mortgage).

Even if you have cruddy credit, you can apply for a mortgage, you'll just get a high interest rate.  But if you're comfortable paying that (which it sounds like you are if you're looking at a hard money lender) then I would work with the mortgage lender you mentioned would work with you.

@Alec Saenz,

Check the local government tax assesor's website to see if you can find out more information about the property, maybe even the owner's name.

If you can get the owner information, you can take the approach of sending a handwritten letter asking the owner if he/she is willing to sell the house.  If you do a little bit of searching on the BP site, you can find some examples of how to word the letter, or the general tone you should try with your message.

Listen to the podcasts, there are quite a few about marketing and how to talk to sellers who might be motivated.

I would caution against rushing anything, but certainly get used to doing "homework" on properties of interest that you find.

The method you are describing is called driving-for-dollars, so do a search for that to see how other people have approached this method and what they say has worked best for them.

Good luck in your research!

@Mark P.,

I think you actually have negative cash flow for this property because there are other considerations besides just the mortgage payment and the taxes (insurance, vacancy, maintenance, capital expenditures, etc).  If you haven't started going into your pocket to keep the expenses paid, I have a feeling you might be soon.  You have had this property since Aug. 2011, but has it been a rental that whole time, or was it your residence at some point?

On the other hand, you purchased a property for $199K, but after closing costs and the upfront PMI fees associated with FHA that would be closer to $210K - $215K which is what you say the property is worth. Which means if you sell now, and pay a realtor and pay closing costs you won't even break even, you will have to come of pocket to close in the area of $15K - $20K.

Is there something I am missing here?  If not, it looks like you bought wrong, and you might be learning an expensive real estate lesson in the near future.

Hi Paul,

Let me see if I have the numbers right:

$65,000 purchase price

$55,000 renovation work

$140,000 ARV

I have several problems with this. The only solid number you have is the purchase price. Your ARV you got from a realtor (hopefully not the realtor who is selling the property for the current owner). Where did you get the renovation estimates? What are your carrying costs while the property is being renovated? Are you going to live in it while it's being renovated? Are you paying for the renovation costs out of pocket (as far as I know VA loans only work for move-in-ready properties)?

If the ARV is $140,000, then you should not be paying more than 75% of ARV AFTER repairs, which is $105,000 - $55,000 = $50,000. That's only if it's a pretty good area, most people look for 65% - 70% of ARV to get a deal.

If you're in due diligence phase, you should be checking comps for the area and talking to several (3 or more) contractors to get estimates for the work to be done.

As far as the ex-wife not signing off, it sounds like you should find a way out of this deal until you can clear up the ex-wife issue.  Wholesaling it might be an idea, but I'm not sure the numbers make sense for a wholesale (or a flip).  If you have a contingency for the financing of the property you can use that to let the deal fall through.

@Mark S.

I think you have an opportunity to accelerate your real estate portfolio here.

You can take the package, and then find another financial services job (they're always hiring as well) and have a double salary.  With the double salary you can invest in twice the amount of properties, and go full time in a shorter time span.

If you're really aggressive, you can also rollover your 401k into an SDIRA because you've left your current employer and now qualify that type of activity with the 401k (keep it where it is, rollover to an IRA, or any of the other options you have for leaving your employment). Depending upon the size of your 401k, this gives you even more resources to accelerate your real estate holdings than you would have if you stay in the same job.

@Brandon P.

You can use a realtor, but they work on commission. If the owner does not have an agreement with a broker (which he/she doesn't if he/she is doing FSBO) then you'll end up having to pay some sort of commission to the agent to compensate him/her for the time (the cost would be negotiable with whatever agent you choose, but it would be an agreement between you and the agent, the owner would not be involved in that).

Alternatively, you can just pay a lawyer to write the contract and close for you, which you would most likely have to do anyway.

@Bobby Hughes,

I'm not sure what your options are with an annuity that has already been established, but I would ask your financial adviser / annuity account representative if you have the option to convert that annuity to another form of tax-deferred retirement account. If you can, you can take advantage of a SDIRA (self directed IRA), and at a minimum of involvement from you invest in a REIT, most of which can provide returns of AT LEAST 8% and some over 14%.

You can also loan money out from your SDIRA and earn money that way, but you have to be educated about vetting the borrower with regards to their creditworthiness and their experience at real estate investing.

If you're more interested in being involved in your real estate investment, you can make over 20%, but that route requires A LOT of education as well as personal involvement in the management of your real estate holdings.

If you can't do anything tax-deferred with the annuity, it might not be worth it because of the taxes you would have to pay upon the withdrawal of the money to move it to another account.

I agree with @Max Kim about your financial adviser recommending the annuity for more personal reasons, or just for the fact that he might take an ultra conservative view given your age and your goals.

I'd be interested to know what your adviser / annuity representative says about the options for moving funds out of annuity.  I thought that those investments were typically a surrender of the cash value of your account in return for a steady monthly payment for the duration of your lifespan.

Hi @George Chang,

I have lived in NYC my entire life (except for a short stint in college) and have followed the real estate market here for over a decade.  I would like to offer some caution about investing in buy & hold properties in NYC as a newer investor.  It's a very complex and nuanced area to invest in because for the most part part NYC is VERY tenant friendly, and that makes things difficult if you ever run into problems with a "professional" tenant.  If you run into a case where eviction is necessary, it can take months, and maybe over a year to evict someone.  When you're talking about an area where rents can go from $1,200 a month to over $2,500, that's a huge hit that can bankrupt a lot of newer landlords and take a very long time to recover from.

I think you have the unique opportunity to make your mark in an area that your family already invests in.  You could build up some experience, and a good amount of cash flow and reserves in a more forgiving market.

If you still want to invest in NYC, I would suggest attending some of the local REIAs and networking with current landlords to get a feel for how they run their rentals, and what their issues with tenants are, and how they deal with them.

Good luck in your foray into buy & hold investing!

Heh, updated... From 1950s to 1980s. :-)