All Forum Posts by: Kerry Baird

I also second Joe Fairless' podcast...listening to it right now.  :D  And Jason Hartman has an awesome real estate podcast.

A wholesale house would be one that is available at a significant discount from that desired by a regular home-buyer, a retail house.  You'll see 65% of the after-repaired value as a common starting point...and then items that require fixing have to be subtracted from that number.  

A wholesaler is a person who aims to buy low and sell higher. Sometimes they wholesale to rehabbers, while other times they find houses in good condition that they can sell on the MLS.

The discount at purchase may be due to any number of situations: foreclosure coming up, financial difficulty, an arrest, a divorce, medical situation, a vacant or abandoned house, or an owner's death.  Any reason that a seller needs to sell can create the right conditions for a wholesale deal.  

Same song, another verse.  We were mil-to-mil. I got out after ten years, while hubby is still making the W-2 income. I have over a dozen fix and flip deals, buy and holds, and a few wholesale deals.  We, too, bought in the US while overseas, and we also bought two owner occupied residences in England.  

Enlisted military family here.  We moved to the States about a year ago, and bought our owner occupied residence in December and an American car right after.  Then we bought my brother's house in Feb with the same mortgage lender, so they had to pull credit again shortly after the first closing.  

I was tipped off to the CreditBoards by someone here on BP and figured that we weren't going to buy conventional for some time, so why not play with my FICO a bit.  I kept notes.  Here's what I did:  

Sept last year 816, 825, 811

January 779 Fresh new mortgage in place.  Fresh new auto loan in place.  Opened a Home Depot credit card. $8000 limit. 

February 759

March, 785.  In order to close the investment mortgage, the lender told me to close my longest line, held about 20 years (!!) and with a $25,800  limit.  Mighty GRRRR.  Long, big trade line *poof* Waiting to see how score declines. Applied for a credit card at Keesler Federal CU while score is still high.  Approved for $16000.

April down 728

May 771.  Don't know why score is up.  Applied for AmEX. Approved. Applied for Chase, and denied.  Used their free credit score because I was denied...score now 726.

July 773  Applied for Barclay. Approved $5000.

Aug 755.  Applied for Chase Slate.  Chase was my big trade line, but they only gave me $5000. Approved.

Sep 773  

Oct 757

Nov 769

SO five new credit cards in under a year. I still have fairly high scores.  And got $34k in new credit, plus the auto loan at about $35,000 and two mortgages in a year.  Still not sure how the AmEX line works yet...I don't see a limit when I look.  I am *very* careful about paying on time.  This year with renovating our own home and moving from overseas, have a balance on everything. 

NOW, I plan on improving my PAYDEX score for my business.  :D  

Not much more difficult is relative.  We are an enlisted military family and it takes time to raise that extra 5%.  

My sub2 deals have not been called due, either.  I use this technique to flip before selling, rather than long term holds.  There was a post a few months back about a loan called due.  Flagstar recently called a loan due, as well.  

The links don't look complete as I insert them, so I put the search term as well.

Search BP for:  Due on sale called what now.

https://www.biggerpockets.com/forums/83/topics/190...

Search BP.  Post titled: Due on sale clause was called by bank!

https://www.biggerpockets.com/forums/311/topics/18...

I had a similar situation back in 2005 or so.  My lawyer said my deal, selling on a lease option where the tenant/buyer stopped making payments, was also clear as mud.  We had to foreclose and evict, and we got the property back several months later, now excessively damaged.  I wish cash for keys had worked.  As above, talk with a TX lawyer.  We're military, too...I wouldn't use Legal on base for this kind of situation.

However, you *can* move your paid-off house into your LLC and turn it into a rental. One very smart guy I listen to (Jason Hartman) has many investment properties and he rents the house he lives in. The reason why deals with the rent to value ratio.

--You can buy another owner-occupied house with discounted rates and down-payment, live in it at least a year, possibly improving it along the way, and turn it into another rental.  This strategy keeps your interest rates lower than if you buy investment property from the beginning.  It isn't exactly a scalable way to grow your business, though.

If you do that (save up and buy investment property) things start getting difficult on mortgages 5+. 25% down and higher interest rates are common with investment loans. Not all investor lenders are OK with title in an LLC; buying with a conventional loan and then transferring title to your LLC can result in triggering the "infamous" due on sale clause.

So how do you scale? Commercial or blanket loans offer a solution...buying cash and refinancing.  Owner-carry deals aren't available on every single deal out there, obviously, but here and there we can find those.  It is said that multifamily owners of 5+ units are likely to owner carry because traditional lending is tough over 5 units.  You can "buy" on lease option so that you aren't getting new loans.  You can buy with hard money and refinance to commercial or flexible conventional.  You can do up to 20 owner occupied houses, by being a serial mover.   Or...what you are aiming for from the beginning...private money. 

There are a lot of ways to look at it.  The top half of the lower third of a market tends to give nice cash flow returns, so C+ to B- houses.  These cash-flowing houses may have clientele with job issues, often late pay troubles, and if you buy older houses, these will need major systems repaired or replaced.  Because these are cheaper, you can accumulate these a bit more readily.

Newer B to B+ to A- houses don't have as strong a rent-to-value ratio, but they often have fewer things go wrong over time, stay rented steadily, and have fewer tenant drama issues.  Modern major systems (roof, A/C, plumbing, electrical) will stay in better condition longer than in older houses. And frequently these will appreciate more in an up-trending neighborhood.  So, while you pay more up front, and therefore can't buy as many to begin with, they offer distinct advantages.  

It is a balancing act.  For cash flow, though, multifamily such as duplexes and four-plexes throw off a good deal of cash.  You could buy a few of there units first, and use that cash to save up for newer, nicer houses and get a blend in your portfolio.

You'll have "odd" income over the next year, too, to include family separation pay, hostile fire pay, and tax-free income.  So your taxable income will be lower, while you will be receiving extra entitlement.  You may know this already, but in case you don't: the DoD Savings Deposit Program while you are deployed to certain areas (Iraq counts) where you can deposit up to $10,000 at 10% interest.  That, and the other pays I mentioned accumulate nicely into down-payment funds. Search for it at DFAS.

Tenants with pets, especially a large but friendly dog, have a difficult time finding a place to rent.  They tend to stay longer.  That means less turnover.  And more wear and tear.  So we do allow non-violent dogs.  My insurance doesn't approve of those "certain breeds" of aggressive dogs, so we don't allow them.

Cat urine is a crazy difficult substance to get out of a house, so I do not allow cats (even though I have one myself).