All Forum Posts by: Melissa Kirchhoff

@Account Closed - Granted, I'm from an area where I've never seen a house without a furnace (or steam system for radiators or gravity heater or such) but I can't see why a lender would care if a buyer does? I don't even think it matters for government loans, honestly, and those are usually the most red tape around.

If needed, go to (or call) a local lender (to the area where you are flipping this house, like everyone else, I doubt it's actually SD?) and ask if that will be an issue and what options you have if it is an issue for lending. Offering a credit? A few window units?  

That seems the smartest move to me. People can have different answers but why listen and then find out later that it's still an issue when it's under contract and the price is set? Figure it out now and if needed, price it to compensate for the additions needed, not when it's too late. Also, rules in lending change like the wind, so best to call a few of the biggest ones and ask.

@Cory Collins - Just please be very careful with this. I know a lot of people who invest in liens from out of area and there's an area south of me that gets tons of them, but there's a reason... They look good but if you don't know the area and you can't see what you're buying, you can get yourself into a terrible situation. Some of these houses aren't even worth the few thousand that the lien might be, nonetheless the other legal fees involved. If it's something near my neck of the woods, I'd be happy to give you advise and help in any way!

Also, for mine I tried getting, I used @Emmett R. McCarthy because he was recommended to me from other BPers and they told me he specializes in this. He's in Chicago and was very good, I'd highly recommend him and would plan on using him in the future if I wish to acquire any other liens!

Good luck!

@Jake Diamond - Depends on so many things. I assume you can't purchase for the $50k equity alone right now. So I would personally look to see if there's ways to increase those without spending tons. Can you get another mortgage to acquire another property? I would be talking with a lender about that. Once you know financially what you have and can do, just keep running numbers and looking for those deals!

@Tim Polk - Welcome to BP! I love your details and plans. I do have a few things first that popped into my mind and then I'll answer what questions I can. First, I've been listening to Dave Ramsey, lol, so don't mind me, I think there's some good nuggets there. I would say have some savings currently, at least like 2 months for you and your fiancé to live if something goes wrong. Aside from that, I think you are doing amazing! Second, since you said you were looking for an audiobook, check out Buy it, rent it, profit by Bryan Chavis. Amongst everything on here (listen to the podcasts too, they are gold!) that book really helped me the most. It's more systems and just really smart stuff to think about in being a landlord, even though you've got some under your belt, I think this can really help with going bigger scale.

Personally, I actually relate to you a lot, I have always been obsessed with real estate and my boyfriend is an accountant and working to get his CPA in the future. Him and I both want to get into passive income and owning apartment complexes one day. So it was kinda cool to see someone who mirrors our journey! =)

Another house hack? Why not, if you can. Like you said before, I wouldn't let this limit what you are looking at, if you see another opportunity, why not? But I would be careful not to limit yourself by just looking at those!

Start with an FHA and roll into conventional despite current rates? This depends. Personally, I wouldn't if I didn't have to, no reason to pay PMI if it's not necessary, but if you have to do FHA to get another loan or you don't have the money down, then I prefer it as to not getting the second property. However, I believe FHA with low down has to be owner occupied, so that might prevent you from getting another deal that isn't house hacking. So I would talk to your lender about the different options so you know what you can buy or not.

Hang tight and save money? I wouldn't wait too terribly long. I don't want to sound like dooms day but I do think the rates will be climbing. Like I said before, I would save up maybe 2-3 months worth of expenses maybe while you're looking, just to have something to fall back on. 

Go big, stay small? Just find a good deal! I've never went into this saying I have to buy XYZ, it's always shifting depending on where my money can be best utilized and what I feel comfortable with.

7-10 years a SMART goal? Absolutely. I think it's a good timeframe. Do you know though how it breaks down, like how many properties do you want to acquire in that time? What's your plan for getting them, is it possible financially? I would look at that stuff.

Leverage 401k funds? If you have to. To me, it sounds like you are sitting okay. With the refi of your current place, could you pull money from it, and would it make financial sense with the mortgage payment and rent if you aren't living there? And will you be able to finance the new purchase? If so, then why bother with that? Leave it there for if you need it or for retirement. Also, right now, the market had been low lately, so you might want to watch that before pulling out, you might not be doing yourself many favors!

Leverage equity? Absolutely, if you can. If you are at 24%, that may not leave you tons, but like I said above, if the numbers work, why not cash out that extra and use toward a downpayment and skip FHA and the restrictions of it and PMI. I think FHA prevents a lot of people from buying properties with tons of hidden equity, but if it's your only option, that's a different story. Also, there's tons of 3.5-3% conventionals, so you might want to look around.

Move to a hotter yielding rental market? Again, it depends on what makes sense. It's all a numbers game and a matter of what you're comfortable with. I look in a pretty big perimeter personally, and it just comes down to what numbers make the most sense and what work I'm willing to do.

Am I in a hot rental market and just haven’t found the right 2nd investment? Sometimes it takes a while to find the right one. Don't rush it. Also, inventory is generally low this time of year. There's some great deals, but not a lot out there. I always tell people wait until that early spring time and stuff will be coming back on the market faster than you can imagine, you just have to hold tight and work with the seller's perception that spring is the time to list!

Multi-family properties appear to be highly overinflated Depends. Again, it's a matter of looking, finding those right properties and right sellers and constructing an offer around the condition. Again that's why I prefer ones that need some love. You will always be paying way more than necessary for turn-key in my opinion (and I think a lot of that has to do with a lot of our local markets being concentrated with government loan buyers which is why I think conventional can give you a very awesome advantage!)

I am closed off to looking at multi-families only in good school districts so I can get more reliable renters. Should I expand my horizons? Is this possible head trash or do you think it’s wise to stay away from lower income areas? Goes back to your comfort zone. I think you can get some in-between school districts and still get great renters (could even be a niche type thing, really nice places to rent if most of the market there isn't. You've got to have renters that are in that district but still have the money and like nice things) but if you're not comfortable with it, don't do it! Give it time to find the right deal. But try running numbers on some different stuff you wouldn't normally consider. I like to make sure I hit everything and challenge myself to see if I'm missing some huge opportunities just because they are out of my comfort zone. You should at least find that answer then sit down and see if it's something you want to pursue or not. (And there's been plenty that is good money but still something I chose not to pursue just because it didn't seem right for me. That's okay too, but you should still be challenging yourself and asking those questions!)

Any geographic location in Chicagoland I should be putting as spotlight on due to any outlier projects such as transportation, new construction, updating etc? Yes! The smartest investor I know is amazing with this, and I try to be better. She knows locally like every little effing thing and makes moves based on them. She completely blows me away constantly with this. Like around us, there's being lots of money thrown into our local state parks and they are being expanded. She's basically gambling that this will vastly increase tourism locally (and our downtown is doing stuff to help this as well) and is investing differently based on this. You should be researching and predicting in the same way, I believe. I think those are the ways you can really make the most money. So do your research!

FHA Clarity â I was told while buying my first house in the Chicagoland area it could only be 2 units and it had a capped lending amount? Ask your lender, to my knowledge, it was 2-4 units (because that's still considered residential) and anything over 4 units is considered commercial and therefore, a different loan. I thought the cap was income, not a lending amount, but it would make sense that it is somewhere. Rules on this stuff is changing, so best to ask your lender!

Any thoughts on putting my name on one property and another in my fiancés name if the right deals came along? I don't understand what the benefit of that would be, unless she's financially contributing and worried that she wouldn't have anything if there's a split, or if you mean that you can use her as another mortgage, in effect. If that's the case, sure, why not, if it's financially do-able. And I'm bleak, but I would think about the possibility of not being together and if it's still plausible. Not to say anything bad, like it won't work out, I just think planning for the worst is the smart way to go. And, again, not to be too dark, but what if one of you passes, or things like that? It's something me and my boyfriend discuss because it's important to make sure you have a plan if the worst happens, and you don't leave someone in a bad situation. Same with post-marriage, is there a plan that's manageable in situations like that? Also, again, speaking to your lender on that is a smart move, the ones I know are really good at explaining those risks and rewards and advising.

Hopefully this helps, also, from your list above of people on your team, in effect, I would very highly recommend a good attorney experienced with landlord and renter issues and a very good real estate attorney to use with all your future transactions.

And another side note on acquisitions, do you check auction sites? I have a list of them that I go through daily, though it's harder to find multi-family units, there's lots of SFH for amazing prices. Would you consider renting SFH instead of multi? I am just a numbers girl and sometimes those make more sense (because they usually rent for more and get more of the families which can be good) and the resale is typically good. So you might be able to buy up a few SFH and either refi or sell in the future use it to buy a bigger complex. I'd still just say keep your options open and consider different options, especially if you're not finding the multi deals you're looking for.

@Susan M. Mendrysa - SW Resilience is what I bought! That's amazing to know. And yes, it makes sense with the brick, that's why I am also waiting on doing some finishing work on the basement cinder type blocks, I can tell they are really cold, but the siding is like a wood shingle so it's actually not as cold to the touch. Thank you, you made my day and now at least I feel like maybe I can get it done earlier spring if not sooner considering the warmer winter we've been having.

@Kyle Hartzell - Thank you, yes, that makes sense, and since we have such short days (that can be really sunny and warm) and drops more at night, I know that will be a challenge. But the days are getting longer now so I was hoping if I hit a decent stretch I could be getting something accomplished.

1. Yes, as above the paint I bought apparently is that, I will look into it more though. I can't imagine painting a whole house and having it peeling in a month or years time.

2. I can't imagine how to do that but that is a great idea for the basement work I've been putting off for the same reasons! Thank you!

@Teri Feeney Styers - Yes, I was hoping to power wash then wait a while before painting to make sure it all dries out. Also, we've been getting like frosty dewy stuff in the morning but that's a good idea. I always think of painting everything one long day but that may be a better idea, bits at a time since midday we've been getting more sun and drying everything up. Then it would probably still have plenty of time before night to cure.

Thanks everyone, I knew you all were smart and could help me out on this!

@EJ Ehrlich - Well, first, how much will this next property bring in? Will that make it worth the other one dropping? I would weigh that out first. Second, I don't think rates will be dropping, personally. It's good that the fed agreed to only do 2 raises/year but I think rates will continue climbing. However, you could work with a lender to see if you can get your score improved enough to get a better rate. Are you maybe right in between and doing a couple strategic moves that can make it go up quickly?

Those are probably the two things I'd consider in making that decision. If the second purchase can be very worthwhile, it might be worth those consequences, if not, I'd work on improving credit score to get a better rate (but keep in mind, in the time that you improve, it might naturally go up anyway and be a wash!)

@Skye Payne - I'm a real estate agent, so yes, I am biased. However speaking as an investor, I wouldn't exclude these just because of that. There are many excellent deals (here, anyway) on our MLS. I bought mine off that as an auction and got a ridiculous deal. Seriously. So they are out there and it's not something I would eliminate just because of that. If the numbers work, that's all that matters to me!

Speaking as an agent, there can be benefits of working off the MLS. Honestly, I speak to lots of people (especially lenders!) and hear about people who sell FSBO and the whole process is a nightmare because no one knows what they are doing or that they have to legally disclose certain things. Now, experienced sellers won't have this problem, but if you are dealing with that, then it makes me wonder if you, as the buyer, are getting taken. Since having a buyer's agent in most places is free (seller expense), it might be worth working with a buyer's agent to have someone experienced looking out for you. I've been on the buyer's agent side on many of these, and though a seller will threaten to not give you a great deal because they have to pay one side of commission, in the end, the buyers always end up sitting pretty in the situations I've been in. They get a very good deal still and don't get screwed over on other contingencies (it's not just about price, people!) and the whole process gets to close, because you have someone familiar with it. I have tons of stories about times like these, but I won't get into it. Just want to give you points to consider!

I know most places don't use attorneys for this like IL does, but have someone who is looking out for your interests in the transaction either way (like even an experienced investor mentor), inspector, or something.

Bottom line, is make sure the numbers work and that you do your due diligence! 

@Wayne Brooks - Thanks for the input and be happy you don't have to deal with this weather! Yes, I've spoken to some paint professionals about it. With both things I hear conflicting things so I'm curious to hear for people who have done it. Ultimately I do want it done right though, but if I can do it right and early, that would be great too!

@Peter Tverdov - Thanks for the reply. Yeah, I thought of doing that credit for the central air but with the exterior work, first, the house looks really terrible, no curb appeal at all. Second, I already picked out and bought the paint. So I feel like it is advantageous for me to do the work because I think it will sell for immensely more (and pass gov inspections, which was my main goal with flipping this) if the work is done. But looks like I just might have to learn some patience instead, huh? 

I'm so not patient! I had some issues with burst pipes and delays getting the water on in a house I'm flipping and winter came early here. So the only work I really need to do is power washing and painting/staining the exterior. The weather now is on that not super horrible but not warm enough to do the work and it's really making me feel the itch to get this stuff done!

So now I'm wondering if anyone here is smarter than me and has figured out a work around for this? What are the lowest temps you've successfully power washed and painted/stained?

For now I'm guessing that I'm just stuck waiting, but patience really isn't my strong spot, so if anyone has any tips, please let me know!

@Carter J. 

Regarding this, I was planning on going through alternate methods of finding highly recommended contractors and/or assessors to independently assess what is wrong with each property before I buy it. Perhaps I'm living in a dream world and this isn't as practical as I would like to think. I know people keep knowledge of good contractors a secret, since they are hard to find. That's why I have to also consider finding independent assessors, though I haven't really heard of this so maybe that's not really a thing people can do. I'm still new to all this. Are there any recommendations you could make for how to independently assess whether or not a property is too good to be true?

Yes, most buyers in our market do a home inspection. Just make sure you find someone good, there are some that aren't as good and others that are amazingly thorough. Also, some have a special guarantee, like one locally is insured with something that if an inspection issue was missed, allows you to sell the house and buy another one without losing out on any money. I think that's a little extreme, but just want to let you know what type of questions to be asking and 100% get an inspector. We see new construction houses with major problems and the flips out this way make me cringe with some of the make-shift things they do, and I'm hardly an inspector!

I'm planning on saving about 10% of the property's purchase price in an emergency account in case of unexpected capital expenses that insurance doesn't cover. Does that seem like enough or is that unreasonably low?

Nope, that's awesome, most people don't hold money back, so that's what I was looking for. Of course, I'd base it on the inspection, like if the furnace was old, or the roof, I would hold back more or less depending on what might need done, but have some just in case anyway. The most unexpected things can happen!

Honestly, this isn't a big one for me. I plan on buying 40-60 properties over the next 10 years and so if I bake that amount into the numbers I run, I'll learn from the first few deals and be more conservative in the future. I'll certainly have fewer properties that match my numbers, but I believe I can learn from these situations.

If anything, I would plan more conservatively now, and when you have more units in the future, I think you can take more risks and not have it effect you as much.

In this case, this is where I believe having multiple properties are going to really help. There will be dry months, but the more properties I have, the more the sum total of rentals can offset vacancy of others. With that said, I have baked in about 5% vacancy into each of the properties I have run, just to be safe.

As long as you are planning for these things to happen, I think that's the important part.

If I lose my job *and* there is vacancy, then similar to the above answer, I'd be able to rely on the extra money brought in by the other non-vacant rentals. Additionally, in order to pay my own mortgage, pay for living expenses (food, utilities, etc.), I have saved up 6 months of expenses in an emergency fund to handle that type of a situation. For my risk threshold, this should give me time to find another job to replace my current income.

What you're speaking of though sounds more like you are purchasing a complex? Initially I assumed you were talking about SFH? And at 1%, does that really cover the mortgage and the cost if something comes up and your vacancies and your living expenses? And is 6 months long enough for you to get another job (it probably just depends on your position) but just some things to think about. To me, those numbers don't really make sense, which is why I would personally want to do more than 2%.

I want to build enough passive income to not only meet, but exceed my current W2 income. That way, once I'm comfortable with living off the passive rental income, I can not *have* to work. However, knowing me, I won't stop doing things, but at least if I want to take some time off, I am not forced to work if life throws curve balls at me.

So then, my question, why 1%? Why not buy up cheap properties and have a team to rehab if that gets you a higher amount? Plus, then, you could have the option to BRRR and build that up even faster, IMO, than buying turn key and not necessarily knowing what you're getting. 

Just a few things to think about but otherwise, I would suggest buying one or two and seeing how it goes. Plans can always change and you can see if it works well for you or not.