All Forum Posts by: Scott Hollister

Hello @Sourabh Bora!!

I am glad that you're looking to get into the USA market! And I'm even happier that you're going to the meetup tonight, see you there and we can talk more about getting you in contact with the local investors to help reach your goals! 

Keep up with that education:) 

Hello @Hong Lem, 

Everything might look and sound great but a lot of people may "fudge" the numbers to sell the property. 

That is: 

• It might not all be rented, or accurate rent for that matter. 
• The maintenance costs may be off. I personally don't know how big the lawn is but $50 seems really cheap for 26 units. (Its probably small but you can tell) 
• Water and trash is only $900 a month for all 26 units!? Seems cheap
• So jealous of your taxes, that is the tax for my small 3 bed rental in CT...ha. Verify that the new improvements are taxed so you don't get a surprise bump in next years tax bill. 

So basically do your due diligence and verify all the information above. One of the best quotes I see floating around is TRUST but VERIFY. 

Hello @Sandeep Agarwal,

I am with you on this! Not sure why it costs so much to find a tenant, especially when I used the tenant screening tool on BP, took maybe 2-4 hours of my time:

• Collecting phone calls (High standards with good credit, recommendations, no criminal/evictions, and good job (3x monthly rent)
• Gather email of prospects, put it into the system and it tells me recommendations based off their qualifications after their done paying for and putting information into system. 
• Calling 3 references. Job verification. Look at materials. 
• Meeting tenants, signing lease, showing property (One open house where all possible tenants come to, not a million different showings) 
• Collect rent and take phone calls. Now I even have my tenants meet with and schedule times with my HVACC, chimney, and other professionals. 

So...

• Time consuming, somewhat.
• Hard, no. 
• Cheaper than one months rent? Yes
• Valuable experience, yes. 
• Scalable with multiple units, I would think it will become difficult with many multiple units. 

I feel your pain Sandeep! Good luck! 

@Phillip Tutino 

1. What does it rent for? 
2. Cost of insurance? 
3. Taxes still $4,413? 
4. What work have you done since buying it for 90k?
5. Do you think that 150k appraisal will hold up with current comps? 
6. Any association costs for beach rights per year? 
7. What CAPEX work will it need in the next few years?

Thanks Phil! 

Hello @Stephen R. does? 

Good luck Stephen! 

@Mark Campo that is most realtors. They will put you on a MLS email based off of your guidelines.

Now here is my young advice, why would a realtor do that work for you? Vet through and run initial numbers? 

• You want to be in control of your business and you need to run your own numbers. First you have to study the market you want to invest in. Lets say you're looking for 3/2 buy and holds, find what they sell for/rent for so when one pops up you know its a deal and can act quickly. 
• Its for your benefit to state financing and here is why:
  • My last REO that had an reverse mortgage on it and turned into a multiple bid situation on the 2nd day with over 10 bidders. (At least this is what my agent was told from the sellers agent) The asking price started at 100k, so we went in right over that (Knowing my numbers and what I could pay) Eventually the highest we could pay was 110k or walk away. I originally said I was using hard money but the deal was actually all cash. (The sellers agent ask us "is this actual cash or hard money?")
  • The reason we GOT the deal is because it was actual cash and not hard money. Because banks know that HM is a little harder to close then actual cash. HM has restrictions just like any other lender, as-is appraisal and after repair value. 
  • The point is, you want to make yourself attractable to the bank. Why should they go with a lower offer who is using a 203k loan with a long drawn out process as opposed to you? 
    • BECAUSE you can close in 2-3 weeks, no contingencies, and CASH. 

Hello @Jorge Pesok,

If you're looking for conventional financing then you will need to show reserves. Moving forward you will need two months for your primary and 6 months for each of your investments. 

Here are you options because I was and am in your same position. (Saving for reserves) But I'm also in another pickle with being to aggressive on my returns and showing a loss:(

• Find a NEW bank. Thats right, just because one bank says no doesn't mean another will. You have to have tough skin and go through 100 no's to find one yes. 
  • Local Credit Unions. Typically some can be more lenient on the reserve contingency because they keep them in house. Most will have them because they underwrite them just in case they have to sell them to freddie/fannie. 
  • Conventional Lender. I'm pretty sure that the bank is giving you the run around, why would you need a "gift" from your wife when she is your wife? I would dig deeper into this and ask why because you too are married. But they might have really tight policies, because there is more risk if they give one person 10 loans. You have to think in their "shoes", "what if this person can't pay his mortgages?"
  • PS please don't take a Credit Card advance for reserves...ha. You want to run your business in the green at all times. 
  • Also, do you have a 401k or ROTH account? I may have heard that some banks will accept this as reserves just as long as you can access the funds. (This may be incorrect, check with you lender)
  • Commercial Lender. There are some in CT that are great and come to our local meet ups. However your LTV and terms won't be as favorable as conventional. But they can get you out because they don't have reserve contingencies per se.

Just remember that those reserves are there to help you, what if you have an eviction in one and have to put a roof and a furnace in the other at the same time? I know this is a long shot but you don't want to be skinny dipping when the tide goes out. 

Warren Buffet says it like this: "You can tell who was skinny dipping when the tide goes out."

My wise advice for next time: 

• Partner with HM or someone else that has deep/bigger pockets, if you are of the Rich Dad Poor Dad mindset you should never spend your own money. 
• For instance a HM money lender will only require 15% down and cover 100% of the rehab up to 75% LTV. With those numbers you would of had plenty of reserves for the next deal, even enough to do two at a time if you decide to scale up and stick with conventional financing. But first I would decide where you want to go. But I think the road to get there is cheaper with conventional lending up to 10 loans.
• Find a mortgage underwriter that knows how to underwrite and understands what you do, most people don't have an investor mindset. Some will understand that when they cash you out you WILL have the reserves. Its all in who you talk to!
• And my best advice, don't take NO for an answer:) 

I would find conventional financing with money from your wife for this time, but I'm not sure why they can't see those reserves. Do you have separate checking accounts? 

Thats awesome Charles. Ya I hear you on the moving out of the state but I still think REI is a game of monopoly. My view is to scoop as many houses up as I can, as long as I can make them cashflow. (Even planning for market fluctuations when rent goes down.) The BRRRR is a great method to get houses for sweat equity while leaving 0$ of my own money in the deal. Because my goal is financial freedom and I want/need to hit that number, but I also understand the balance of buying for an investment and buying something just for buyings sake.

Have you had success with the BRRRR strategy?

@Charles Wiegert I think its important to note the larger economic scale. If these big businesses keep moving out, whats CT going to look like...

But every time I see BP post about the best places for returns I get motivated to move! 

And we have Hartford as top ten worse:( Just saying I can hear the seagulls on the beach in FL right about now... But for me, family is holding me back, is that true for you too? 

Hello @Mark Campo and welcome! 

This is a great post, lets dig in! 

1. Congrats on the pre-approval, 500k too! ha
   1. Yes you do need a pre-approval for each offer you submit. Put yourself in the banks shoes, if they didn't require this then the housing market would turn into a craigslist posting site with tire kickers throwing out millions of low ball offers hoping for someone to accept. The letter is just proof that you have financing available. 
   2. Hard Money. Yes that is typical, they have to vet the deal and make sure that you're buying right. (Which is the most important detail, you make money on the buy) Some people may or may not be sent a "word document" pre-approval letter and just change the address and date to save everybody time with each offer. I wouldn't advise this. You also must know your ability to close a deal and not waste time. You want the reputation of a closer, someone that gets deals done! 
   3. Correct, the deal won't be funded unless everything checks out. This also protects you. So the appraisal, an inspection, etc. You will also pay for the earnest money deposit.
   4. My advice, if you use that conventional pre-approval, most banks won't want to deal with you because if they have two offers, one is a cash deal with quick closing and the other is bank financing who do you think they will go with? (See below for your goals, if you house hack this multi then ignore this) Just remember if you're just getting started, a house hacked multi is a great way to get started, even if you go conventional!
   5. I'm not sure if hard money will loan you the rehab funds as a 2nd position on the house. Also they want you to stay under the 75% LTV of the ARV, so you would have to buy right. (Ask your lender this)
2. 
   
   1. Ok lets simplify what you're doing because I may have missed something.
   2. What is your goal? Will you be living in this multifamily? 
• If so: Then your best bet to beat investors is to find a property that has a owner occupied offer window. For instance, with HUD. That means if you were to buy it will HM then you will have to wait until that period is up and bid as an investor. If it is a great deal then it will be gone in those first two weeks.
• If not: Go hard money, it sounds like you can afford it with the 500k pre-approval. My advice would be to use hard money, put 15% down plus closing costs, have HM finance the rehab up to 75% LTV. Then you can do a cash out refinance once you have it stabilized, thus pulling out all your original equity while getting the property for you sweat equity.
3. Im all over the place here, I apologize:) 
   1. We have this argument at our meetings all the time and its always the realtor that wants their investor to sign. FOR ME personally I can see both sides but here is why I never signed:
   1. My belief is if you work hard, are responsive to phone/email, get offers in quick, etc. then I will ALWAYS use you. But again, its like getting into marriage, make sure you test the waters first, don't go to the alter day one. Make a deal with him, this first one is a trial period, if you do good on your word then I will sign. (Only if you feel comfortable) Most of my investor friends never sign because we have mutual respect. 
   2. The other side: I will be getting my license in the next few months and I can see how someone who is not consistent or unsure might waste my time. If I'm busting my butt to get you deals and you go with someone else that is a slap in the face. But then again, your word is everything in this business. Do what you say and follow through and you will be fine. 
      1. I have not heard of a person making up the difference, typically in a buyers market it is the seller that pays closing costs. The seller paid my agents commission on the last 2 deals that were bank owned REO's.
   3. If you're aren't happy with him then go to your local meet-up. Set a keyword for Connecticut and you can choose the nearest one to see who fits your personality. We have ours in Manchester next Tuesday at 6pm. But then again, have you gave him a fair chance? If he truly owns that many then he might have some wisdom to offer and you might benefit having him around for a year. Just my 2 cents, good luck Mark!