All Forum Posts by: Keenan Rusk

I am in the process of finding contractors to complete a rehab in Baltimore. Meanwhile, I've been trying to gather forms to generate my own contract to use with any general contractors/subs I hire. I've read numerous other forums and I am pretty clear the contract should include language regarding W9, insurance (liability and workman's comp), SOW, draw schedule, independent contractor status, and lien waivers. The latter is what I have questions on.

Do you request a partial lien waiver at each payment/draw from the GC or one final lien waiver? Should the GC be responsible for obtaining partial lien waivers from their subs?  Is there a statute regarding the retainage amount in MD?

Any feedback is welcome! If there are any real estate attorneys who could check the forms I have, that would be great as well.

Thanks,

Keenan

@Angela DeBorja Thank you for the recommendation! 

@David N.  Thanks David. I will PM you shortly

Hi @IanBarnes

Thanks for the recommendation. To answer your initial question, no I'm not obligated to refi with them. Since I've only done business with them, I was more curious from a technical standpoint (LLC vs. personal ownership) what other investors would do if their only recourse was to obtain a hard money loan that remained in an entity structure.

Keenan

Hi BP,

I intended to BRRRR a property in Baltimore City by initially using a Hard Money Loan (HML). The lenders that I've spoken with thus far will only lend to an LLC. I have no problem creating a single-member LLC, but I have read numerous time that refinancing out of the loan could be problematic. That is the trap I am trying to avoid long-term.

I've built a relationship with Howard Bank and they've informed me that they could do the refinance out of the loan at favorable terms, but I would have to move the property from the LLC to personal at closing and avoid the post-transfer seasoning period under my name (about 6 months, from reading other posts). Since I do not own many properties, the loss of perceived liability protection is not significant at this time, as I intend to purchase umbrella policies. Alternatively, my hard money lender said they could also refinance into one of their 30-year rental loans, but it would be rate/term (no cash out) and the rates are higher than what I could get by going conventional.

I am curious what other investors have done in this specific scenario with regard to using HML to acquire property using an entity. Would you find a lender that allows the property to remain in the LLC or transfer it and take advantage of conventional rates?

Keenan

Hey @Matthew Roder, I'm also looking into the Home Possible program for a house hack. Do you know what the residency requirement is for this type of loan? One benefit of the FHA is that you are only required to occupy the property for a year, at which point you can move on.

Does Home Possible have a similar requirement, or would one have to refi out of the loan when ready to move? 

@Shawn Clark thank you for your feedback! I remembered that Baltimore used to bill water quarterly so I used a very conservative number (about $250 per quarter) and assumed responsibility for it, but knowing that billing is now monthly makes it easier to run my numbers with the tenant paying if the amount is much lower. 

Hi fellow BP members,

I'm looking at a 2-unit property in Baltimore City for a potential house hack.

In researching market rents in the area, I've come across few posts about utilities in the city. One of my concerns is the water bill. The numbers work if the tenant pays water, otherwise the property won't be an option for me. What I've gathered so far from other posts on BP is the following:

-Property owners are ultimately responsible for ensuring the water bills are paid

-A tenant who is in default of the water bill for >90 days can result in a lien being placed on the property and unless stated explicitly in the lease, they cannot be evicted for nonpayment

-These consequences don't apply to sewer, gas, and electric bills

For landlords and property managers, I have a few questions:

1.How are you ensuring tenant compliance with water bills in multifamily homes, aside from proper screening? Can water and the other utilities be separately metered?

2. If you pass this responsibility to the tenant, do you "inflate" the rent cost and pay water bill yourself or stipulate water as a deliverable with rent each month and nonpayment as a condition for eviction? Given that Baltimore City water bills are increasing each year, it seems fairly easy to list above market rates for rent.

Thanks,

Keenan

@Account Closed Hey Anthony, I'm curious which route you ended up taking regarding the FHA loan vs. Freddie Mac Home Possible.

I live in Baltimore and am currently looking at house-hacking a 2-4 unit multifamily for my first property. I'm looking to take advantage because of the more favorable terms, specifically lack of the upfront 1.75% mortgage insurance premium and PMI that appraises out at 80% LTV (with FHA, PMI is for the life of the loan and it takes a while to gain the necessary 15-20% equity that most lenders require for refinancing out of it since you only put down 3.5%). As Christopher mentioned, you cannot own any property at the time of closing so in using Home Possible first, it seems like you would still have access to an FHA loan a year later for a second house hacking opportunity. Best of luck!

@Mark Moyer I'm not sure what is meant by your comment, as I'm only seeking to gather information. Which neighborhood are you specifically referring to, and what are landlords doing that you would do differently?

Hey BP,

It's been a year since I joined and made my first post, and I feel like I've made substantial gain in my knowledge and preparation for this journey of real estate investing. I've completed The Book on Rental Property Investing (a few times I might add), listened to many of the BP podcasts, and read many of the forums related to investing in my hometown of Baltimore. Staying at home with family, I was also able to save up enough money for a sizable down payment on a property. I'm attending my first REIA meetup this week and looking forward to learning more, but I'm ready to take action and hope to purchase my first deal soon.

After researching different areas and strategies, I am looking to pursue the "BRRRR" strategy in Baltimore with C-class single-family homes (3 BR) and rent the properties to market-rate and Section 8 tenants. After studying the pros and cons of Section, the potential for good cash flow in these neighborhoods makes sense with the right team in place given the backlog of tenants, fewer properties that accept them and generally lower turnover. Areas like Dundalk, Middle River, Northwood, Hollins Market seem like good candidates.

For investors and property managers experienced with this program, 

1. Are there any significant differences between how the program is administered between Baltimore City and Baltimore County that favor one over the other? Are there better neighborhoods than the ones I've mentioned?

2. For the sake of refinancing, does renting to a Section-8 tenant have any adverse impact on determining property value (ie. is 75% LTV unrealistic for these type of properties)?

3. Given that Section 8 performs their own annual inspection of the property, how important is a "lead-free" certificate over "lead-safe"? I imagine any property requiring lead paint remediation will be expensive.

4. I read a post about some of the headaches of the program, where someone declared that HUD can withhold a voucher for payment for broken items in the home, tenant/HUD not notifying the landlord for a fix, and waiting weeks for re-inspection before payments are issued. Are these exaggerations or examples of situations that can be mitigated with the right property management in place?

I know this seems very specific for a newbie, but it's something I'm looking to refine. I am also looking to connect with real estate agents, lenders, and property managers in the area.

Keenan