All Forum Posts by: Konstantin Ginzburg

@Carlos Romano

These are not strange requirements at all. If you are working with a conventional lending institution; they will require very precise accounting criteria to be met. Many of these institutions are not providing you a loan with the intention of keeping it on their books; but are rather intending to re-sell your mortgage to a larger FHA institution. These institutions have precise requirements a mortgage must meet in order for them to be willing to purchase it from your direct lender. Since these institutions are often closely tied with the federal government; there is a level of bureaucracy that comes along with their underwriting. One of the primary numbers that is considered for these loans is your DTI (debt to income ratio). Any debt or expense you have would be factored into this calculation which includes both an unpaid vehicle balance and a credit card balance. If your DTI is too close to the DTI limit allowable, you will be asked to pay off outstanding debt in order to lower this DTI to a permissible level that will allow them to sell off your mortgage after close. Requiring you to use your own funds is also a common requirement since all funding for a deal must come from "sourced funds". These are funds that are traceable to a source. This requirement is also done for a variety of reasons ranging such as money laundering prevention.

@Andy Ramdeen

I am not a real estate lawyer, nor do I have any experience practicing law but to the best of my knowledge; you are required to provide a full disclosure on all known issues with the property during in the property inspection. Intentionally withholding information would be considered a violation of this requirement. It may be a good idea to consult a local real estate lawyer for this situation. While you may not get sued in this instance since this would take money, time, and energy on the party of the buyer to go through; they may be asking to either pull out of the deal entirely with their earnest money or renegotiate the deal prior to close. If this happens, it might be a best use of your time and energy to allow this happen and include the flood in your disclosure for future buyers. 

@Shannon McQueen

If this is your first investment property, I would advise investing as close to where you live as possible. Real estate is not a passive investment and you might be required to make unexpected repairs or other work to the property. You may run into a lot of trouble if you are not able to respond quickly. There is also a lot that needs to be learned about tenant screening and management. While this can be done from a distance, there is a large learning curve for how to run a successful rental and having the property far away from you will steepen that learning curve. If you do want to proceed with long distance investing, then I would suggest focusing on finding a property manager or other boots on the ground support team in the region you want to invest in prior to looking for the property itself. A good boots on the ground team will be the difference between a good return on your investment and a very stressful money sink for you. 

@Brandon Allenczy

Is there something near your property that may create a market for an MTR? Examples would be a large hospital that requires a traveling staff or a nearby University that would need student housing? Typically, you need something nearby to create that demand for you. Your marketing can be tailored to that specific type of demand. For example, if you are near a University and want to market to student, then post your listing on facebook groups or forums where those students congregate at. If you are near a hospital, try to directly reach out to the hospital's HR department and see if you are able to get contact info for housing staff or boosters.

@Kelsey Bramer

You should have gotten access to the leases of the current tenants during your due diligence phase. Whether you follow out the lease to its termination relies on what the local tenant laws are but generally, an existing lease is honored until expiration when a new owner takes of the property. That lease should state when it is expected to terminate as well as your options in that case. That will also depend on the local tenant laws. More than likely though, if they had run out on the lease early, you may need to file for small claims court if you feel its worth your time and money but your best course of action may be to shift focus on turning your unit and finding a new tenant to limit your vacancy. 

@Alex Hileman

Most financing packages for investment properties do require between 20 and 25% deposits. You could look into getting a HELOC loan to convert some of the equity from your house into a deposit for the next house. If you are open to the idea of renting out your current house and moving somewhere else, then you can look into primary residence financing such as FHA loans which allow for 3.5% down payment options. Another option you may consider if non-conventional financing such as seller financing if you find a motivated seller willing to offer that. Someone who is willing to seller finance may be willing to offer terms for a low down payment option but that will come down to negotiations since there are no standard rules for seller financing.

@Brianna Johnson

When you refinance a property, you are essentially acquiring a new loan from a finance institution for the property. Whatever is needed to pay off the previous loan is deducted and used to pay off the previous loan. Whatever balance is left over, is written out to you. So for example, lets say you purchased a property for $100,000 (lets pretend it is all financed for the same of simple math) and were able to make enough renovations to increase the property value to $200,000 (I am just using round numbers to make the math easier). You then approach a lender for a refinance who is willing to give you a refinancing loan for 75% of the Loan to Value ratio for this new property value. This means that you will be able to get a loan for a maximum of $150,000 (75% of $200,000). $100,000 of this is now used to pay off the previous loan balance and close that loan. The remaining $50,000 is now yours to do with as you see fit; whether this is personal use or additional investment. In an ideal BRRR, you would be able to pull enough cash out of the refinance to recoup the full out of pocket cost you had to put into that deal.

@Tammy Helble

What does your lease outline as late payments? When in doubt, always refer back to what was agreed upon in the lease (as long the lease does not violet local tenant laws). If your lease should not only state how much the late fee is for but also when the late is triggered. If your lease does not specifically outline this, then I would look into amending the lease to add this the next time you are able to renew the lease (once the current lease expires). 

@Ethan Gidcumb

While macro trends may be helpful, I think real estate is a very regional based market where prices can fluctuate a lot when comparing state to state or even neighborhoods within states. There previous events in US history where national home prices all decreased at once such as the 2008 financial crisis that caused the flooding of properties to the market from foreclosures. While it seems many people are anticipating this type of event, it is important to remember that events like those are not common and can not be expected to occur on a ten year time scale. Prices all went down in 2008 as the foreclosures all entering the market at once caused a rapid spike in supply, putting major downward pressure on prices. In the current market, I do not see an upcoming event that will cause a sudden rush of inventory to the market at once. There is an opposite situation occurring with a severe lack of inventory currently being available on the market. The high interest rates may have decreased the demand side of housing as more people are priced out of the market but the same interest rates have made sellers also pull out since they would not want to sell a house at a low interest rate to be given another mortgage at a higher interest rate instead. One potential source of supply I have seen brought up is a potential flood of former vacation rental properties as the saturation of market and regulation in regional markets have caused many STRs to no longer be profitable. While this is possible, it would also be a regional event rather than a national one. There may be unforeseen events in the future that could trigger change but those are hard to predict. One possible event I am personally keeping an eye out on is lender financing of commercial properties and what happens as these adjustable rate mortgages cycle to higher rates. This does have the potential to trigger mass short sales in the coming few years. Similar to how forced foreclosures in 2008 affected financing and led to a recession; there is a potential for a repeat of that occurring depending on what interest rates do over the next few years. Again, this is all conjecture and speculation. There are simply too many factors that go into housing prices to effectively predict "price stabilization". 

@Gloria Wong

Your strategy sounds great to me. Housing hacking the way you have described is a great way to get first time investors into the real estate business by giving them experience with property management, cutting down their living expenses, and also giving them access to primary residence financing packages which are often better terms than investment property financing.