All Forum Posts by: Megan Phillips

Hi All,

This may be a newbie question, but what tools would you consider "must haves" when planning to do at least some rehab work yourself on properties. Think painting, some flooring, replacing vanities/toilets, putting in some insulation, replacing P traps under sinks, potentially hanging gutters, etc -- and general around the house help.

Are there tools you simply can't live without that make specific jobs you always do yourself much easier?

Also any recommendations on brands and general price ranges would be great.

I was told I should plan on getting a decent impact drill/wrench, but that's all I've got planned so far (besides basics: hammer, tape measurer, etc)

Thanks!

Ask for attorney referrals (preferably offices that deal will real estate regularly - I got a list from my mortgage lender) and call a few different offices and see how much they charge to create an LLC. Mine was $625 and included the $125 fee to the Secretary of State for filing. Mine was for in state use though, not sure if you need an LLC in Ohio?

@Kristen Ray You will have more flexibility if the underwriting bank is a portfolio lender and keeps your loan in house. There are some restrictions (as far as maximum cash back at close and no unsecured LOC for down payments), and what's been stated is generally correct. However, I'm under contract and the underwriter allowed for purchase directly under an LLC, 20% down on a 7/1 ARM loan, and a gift contribution from a family member for the down payment on a non owner occupied investment property. My circumstances are rare, but ask around, you might be able to find something that works better for what you want/need.

@Rob Krach I've mentioned this on couple other posts, but it seems to fit here also, if not, disregard.

I'm in the process of closing my first duplex, using conventional financing (not commercial) and not planning to live there. Most frustrations for me have actually come from the financing side. I've never purchased a house or other real estate, so I didn't know what I didn't know. I guess pain points depend on the purchaser and how much they've dealt with real estate overall.  Some will be more familiar with loan requirements and restrictions than others.

For a couple examples of what frustrated me, I was discussing what my final closing costs (I'm still in the process of saving a couple grand every month trying to get it together) would be when my lender realized this was a property I would not be living in. I thought that it was clear, but they just assumed I was going to live there. This meant I now needed 25% down, instead of 20% -- which simply, would not have worked -- this was remedied by switching loan types. (I was previously told by them it was 20% for an investment property, but whatever). Then just last week, they informed me that the maximum cash back at close from the seller was 2%, when our contract already had us both agreeing they would provide 5%. A difference of $3900 that is now added to my closing costs because that's what the additional 3% was going to be used for... more of an issue with the underwriter of the loan, but still, it can't be the first time my mortgage guy had heard of it.

The difference in what I need to have saved and prepared for the purchase has changed by several thousand dollars. It was of course not their intention for me to misunderstand these things or misinform me, but they were aware of my resources, that it was my first purchase, and what my financial expectations were, etc., for the most part. I can't help feeling like they dropped the ball a bit. I am still in the closing process, but I was very nearly not going to be able to continue on this property because of loan restrictions I was completely unaware of. 

Overall, they've been very helpful with my questions and I think they're knowledgeable, and next time it will be easier now that I know what to expect, and I don't mean to place 100% of blame on them, but it's been a stressful closing period! Having very clear documents showing the restrictions for each loan type for beginners may be very helpful.

I haven't had to use creative financing yet. Fortunately, the 25% down was dropped to 20% by switching to a 7/1 ARM (rate is fixed for 7 years and can then go up or down) loan instead of a straight 30-year loan with a fixed rate. I'll likely be refinancing much earlier than 7 years so I'm not worried about the rate changing. My original closing costs/down payments were going to total around 27.5k, and now they are going to be closer to 32.5k. Luckily the underwriter for the loan will allow for a gift to help with the down payment that I was not planning on (the extra 3% that I can't get back at close from the seller was going to cover $3900 of closing costs)... I say luckily, but if I was just able to use the 5% that was already agreed upon, it wouldn't even be necessary. If they refused to allow for a gift to help the payment, I'd be sunk. It's looking like my closing will likely be delayed (not my fault) anyway, so I potentially have more time to save a couple grand and reduce the gift amount, but it's still frustrating. Should be easier next time already knowing the potential restrictions, but when you've saved what you think you need and then they go, "nope, you actually need 5k more... in 3 weeks... and you can't use unsecured lines of credit" it can be quite the mental scramble!

Let them know if they follow through and you can do the final walk through today/tomorrow as planned, you'll give them part or all of the security deposit back, kind of cash for keys, but at least not money out of your pocket. If not, you keep it, and also move forward with eviction. You'll know within 48hrs which way it's headed.

@Jalisha Oracius Welcome to BP! Reading the UBG is a good place to start as well as these forums. 

This insight might be a bit ahead of where you are, but I'm in the process of closing my first duplex, and the most frustrations for me have come on the financing side. I've never purchased a house or other real estate, so I didn't know what I didn't know.

If using conventional loans from a bank, make sure you very clearly understand your loan requirements/restrictions and try to work with someone that is willing to answer a lot of questions and understands what your goals are. For a couple examples, I was discussing what my final closing costs were when my lender for some reason finally realized this was a property I would not be living in, and informed me that the down payment needed to be 25%, instead of 20% as I was planning (I was previously told by it was 20% by them as it was an investment property, but they thought I meant that I would be living there... why would I pay 20% AND live there?). Then just last week, they informed me that the maximum cash back at close from the seller was 2%, when our contract already had us both agreeing they would provide 5% for weeks. The difference in what I needed to have saved and prepared for the purchased changed by several thousand dollars, and a lot don't allow "gifts" or unsecured LOCs to help --- so like I said... be very clear and ask a lot of questions, and be prepared for hurdles along the way. Good luck!

As a side note, I used to work in the Clearwater/Largo area for a couple of years - Dunedin was my favorite town down there!

@Megan Frank Something else to consider - just because it wasn't gas, doesn't mean it was safe. Methane is also flammable, and potentially explosive. Their negligence could have cost a lot more than 135 bucks.

@Kevin Noell  Mine is about the same,  130k purchase price, a difference of $3900 that was directly going to be used during closing. Now within weeks of closing, I need to come up with 4k, that is of course, secure! (can't use a cash advance CC or whatever) ... Very frustrating. Like you mentioned, of course the mortgage broker was aware of this, but it never came up until way too late. Now I need to use a gift from a family member to cover closing that was previously not going to be necessary. The difference of the $3900 was not lost, and is going to be issued as "pre-paid items" at closing -- aka, the seller is going to cut checks to a general contractor or some construction company that I want to use to make repairs at the property. I would much prefer the cash at close, but, I'm still technically getting the money, just not directly. It's the classic "you don't know what you don't know." Everything should be more simple the next time around because I'll know what to expect, but as this is the first property, it's been really frustrating dealing with the financing hurdles that should have been made much more clear, much earlier.

I was most frustrated that this is a portfolio loan, so the underwriting bank had to option to just accept a higher percentage of cash back at close and move on because the loan is being kept in house. I'm trying not to be too annoyed, because they are good in that they are willing to accept a gift on part of the down payment on an investment property which is apparently rare. They are also allowing me to directly purchase the property under an LLC, which is apparently very rare. c'est la vie.

@Megan Frank I would potentially reiterate that you were "kind" last time when it came to a large bill that was their fault. A dry toilet seems like it's their fault also? I'd add it to their rent. It wasn't done purposefully, sure, but leases generally state that damage or costs to fix something that was done on purpose or not, is still tenant responsibility.