All Forum Posts by: Matthew Swisshelm

Using the recent sales history on Zillow or like-sites is very effective. The reason for that is because it gives you an exact number someone else thought the property was worth. 

Anyone can put a number out on the market for their property, but that doesn't mean it's going to sell for that number. It's the actual SALE price that is of importance. Look at Comp sales for your market and use those to figure out a good pricing strategy. 

Rent is the same way. Look at what things are CURRENTLY renting for. Again, just because someone posts a rent amount of X doesn't mean someone else is willing to pay it. Look for recent rental agreement prices when creating a pricing strategy.

The value of the properties and the value of the notes should be calculated in two completely different ways. 

It sounds like the properties themselves are not great cash flow opportunities and the returns would be fairly minimal. You may be increasing their value in your assumptions because of the chance to purchase additional properties in the future from the seller.

Just because he's offering the notes at a +30% discount doesn't mean that it's a deal. Make sure you run the Time Value Of Money (TMV) calculations to verify their PRESENT VALUE. The PV isn't going to be 189k that's for sure. It may look like he is offering you 30% off but in reality he may not be giving you a discount on them at all.

I don't have all the numbers so I can't help you out with the exact values. If you would like help with them please feel free to PM me. If you want to help others here on the forum post the notes Terms and I'd be happy to break it down for others.

I would have never thought of using CL to build a kitchen.

What a fantastic idea, I'll have to use this. Thanks @Nat C.!

@Shawn Connors - Congratulations on getting started! I'm planning on implementing Direct Mailing sometime next month. Keep us posted!

-Swiss

@Steve Hassan - Hey Steven, I can't really comment on Lincoln, but I've been researching southern Omaha for Multifamily properties. The ability to cashflow these properties is very good, and if you're house hacking then you can certainly life for free if you find the right deal. 

I plan on house hacking as well. So, keep me posted!

@Joel W. - You're right about the "Military" keyword alert haha. Prime example.

@Bryan C. - I don't currently own any properties right now, but I'm buying one in the next month or two after my PCS. I just changed jobs and my new job has a VERY high deployment tempo. Knowing this has made me factor in PM in every deal I've analyzed so far. 

I think it can be done, but it will be on a case by case basis. There isn't going to be a blanket strategy for most investors.

@David T. - Thank you for your reply. You obviously have more experience in this than I do. This is my understanding of the points you've made.

1.)  The bank doesn't take rental income into the equation at all. At least none of the lenders I've spoken to do. 

So, if I want to qualify for a $150,000 loan. The rental income isn't factored in at all and would have to qualify completely on my own income.

2.) I knew there would be closing costs and additional expenses during purchase. I wasn't aware you could recoup most of those at closing. Are there and sources you can think of to learn how and what is recoupable?

3.) I don't have a disability rating. So, no waiving of fees for me.

4.) That is awesome and is certainly more leverage than can be brought to the negotiation table. Thank you for the insight. Anything I don't have to spend out of my pocket is just icing on the cake to a good deal.

5.) I could be wrong here, and someone please call me out if I am.

The second-tier VA loan is only applicable when the initial loan is over $144,000. If the initial loan is under that amount it does not qualify you for a second-tier VA loan.

If I am wrong, that would make things so much easier. I will do more research on this.

6.) That is an option I have kept in mind, but at the end of this 3-year plan is a time when I will be making a few choices. My job status would be one of them. If I can still qualify for an FHA loan after a potential job change then I will probably take this route.

@Sarah Miller - The minimum credit score required for a VA loan depends on the lending institution that would be providing it. The minimum credit score for most is 620.

I'm pretty sure it's right around the same minimums as an FHA loan. A lot of lenders look at the two in much the same way.

@Jane A. - Thank you! I had no idea about a potential 20% down on a refi. That's a huge hurdle that I wouldn't have seen coming. 

Now I can plan accordingly.

“Victorious warriors win first and then go to war. While defeated warriors go to war first and then seek to win” - Sun Tzu, The Art of War

I'd forgotten about PMI actually!

So, there is another difference between FHA and VA loans. FHA loans do require PMI which is a huge factor in monthly cash flow. A benefit of using VA loans is that they do NOT require PMI.

Because part of the loan is secured by the VA it is guaranteed to the lender.

This is going to be my breakdown of how VA loans work. Again, I have never used one.

This is simply my understanding of them at this point. If I am wrong, someone please correct me so I am not giving bad information!

Say I took out a $200,000 VA loan to purchase an owner-occupied property.

(A common misconception of VA loans is that they are a loan from the VA. This is incorrect. The loan/mortgage is taken out from a lending institution and a portion of that loan. Normally 25% is purchased by the VA.)

$200,000 loan @ 25% = $50,000 covered by the VA.

This means that in reality. The lender is only on the hook for $150,000 because the VA is covering the remaining $50,000.

With the VA taking responsibility for 25% of the loan, some of the risk is then taken off of the lender. Essentially, the VA is putting down that 20% down payment for you, and that is why there is no PMI.

Go VA benefits!

Man this is a long post, but I now want to address Drew's comment about forcing appreciate after the increase of rent. This section I am a bit shaky on and would REALLY like someone with experience to either correct or validate this.

When you use an FHA or VA loan to buy property you are limited to Residential property which is limited at 4 units. Anything more than that is considered commercial and not qualifying. The Market Values of Residential units and Commercial units are appraised in different ways. 

While increasing monthly rent would, in fact. Force appreciation of a commercial property because of the increase of NOI and Cap rate. When it comes to Residential properties they are appraised using the Comp. Sales method. Now, while Gross Rent Multiplier (GRM) is taken into account for rental properties. It does not directly affect market appreciation.

If you want to force appreciation. It would have to be in the same way people normally flip houses. In this case, it would be on a 3-4plex vs. a single home. Then it would be compared to recent sales in the local area and adjusted to market value. There are fewer variables to force appreciated because of this.

Again, someone with more experience PLEASE chime in on this!

-Swiss