All Forum Posts by: Nate Monson

Quote from @Emma Powlin:

Quote from @Nate Monson:

Hi @Emma Powlin congrats on taking action and going for a house hack! A couple simple things would be increasing your earnest money deposit amount and moving your closing date up as soon as would be realistic for you bank (talk to them and see what is possible in a best case scenario). 

Some outside the box ideas would be to maybe play around with the inspection threshold amount. Traditionally this amount is $1500, but I've had success with my clients raising it to $3000 or $5000. This will usually give you a leg up against similar offers with financing. As a first time home buyer, I don't like recommending to eliminate the inspection contingency, but depending on the age of the home it could be an option.

If you've got a little bit of extra money to play with over the 3.5% you might want to consider adding an appraisal gap coverage clause. Basically what this would mean is if the house did not appraise for the contracted amount you would cover the difference. You can specify how much of a difference you would cover as well if you have a limited supply of funds. This is especially good in competing with cash offers. The benefit to cash is security, so putting a clause like this in provides a similar level of security to the seller. 

The biggest thing to remind yourself is to have patience. Unfortunately there is no magic wand you can wave to make this happen. Sometimes you will lose in multiple offers, that's just the reality of being an FHA loan and a first time home buyer. But your not the first person who's done a deal FHA and you certainly won't be the last. So stick with it and you'll be in your first house hack in no time!

 Thanks, Nate. This was very helpful! I only started looking a few weeks ago, so this is still very new to me. Definitely have room for more than 3.5% down, but probably not the typical 20% down for a conventional mortgage just yet. But who knows, if the search takes long enough I can certainly get there. 

There are certainly conventional mortgages that are under 20% as well. Different lenders have different qualification standards but there are 5 and 10% options out there for conventional loans. Please don’t hesitate to message me if you have any other questions along the way! 

Hi @Mike Nowa to answer your question on whether you "should" invest out of area is more of a personal question on how comfortable you are with risk. But if you have the right team around you it can be a relatively low risk proposition. That being said I am in the Albany, NY market, if you'd like some info about this market please don't hesitate to reach out.

@William Bowers On a refi, I would just shop the best interest rate and terms/closing costs you can. Whether it's a residential or commercial loan type wouldn't matter as much to me. 

Hi @Emma Powlin congrats on taking action and going for a house hack! A couple simple things would be increasing your earnest money deposit amount and moving your closing date up as soon as would be realistic for you bank (talk to them and see what is possible in a best case scenario). 

Some outside the box ideas would be to maybe play around with the inspection threshold amount. Traditionally this amount is $1500, but I've had success with my clients raising it to $3000 or $5000. This will usually give you a leg up against similar offers with financing. As a first time home buyer, I don't like recommending to eliminate the inspection contingency, but depending on the age of the home it could be an option.

If you've got a little bit of extra money to play with over the 3.5% you might want to consider adding an appraisal gap coverage clause. Basically what this would mean is if the house did not appraise for the contracted amount you would cover the difference. You can specify how much of a difference you would cover as well if you have a limited supply of funds. This is especially good in competing with cash offers. The benefit to cash is security, so putting a clause like this in provides a similar level of security to the seller. 

The biggest thing to remind yourself is to have patience. Unfortunately there is no magic wand you can wave to make this happen. Sometimes you will lose in multiple offers, that's just the reality of being an FHA loan and a first time home buyer. But your not the first person who's done a deal FHA and you certainly won't be the last. So stick with it and you'll be in your first house hack in no time!

@Gary Bonds Hi Gary, I'm going to send you a message. I'm an agent in the Albany area who works closely with investors. Would love to chat and discuss some strategy in this market with you.

@Jacob Northfield Congrats on jumping in to real estate investing. Figuring out the scope of work and correct estimates can take time to learn and do yourself. But it's really about building relationships with good contractors and putting the time in to learn about different aspects of work you're interested in performing. There's really no substitute for experience here so while you're newer in this business it's probably best to rely on a contractor to give you work ups for the properties your looking at. It could be hard to find a reliable contractor to do this so maybe you could even buy a contractor lunch and have him give you his process on coming up with at least a ball park estimate. I would be careful using a realtor for this, only a truly experienced and investor friendly agent will be able to give you accurate numbers for this.

For the ARV, using a realtor is probably the best way to go about this. Learning this yourself is important too, and again it's about putting in the time to know what things are selling for in the area you're looking for. You can use Zillow, realtor, or your agent to start to get to know these things. But it does take time to feel truly confident in this yourself.

@Jacob Northfield to me it seems like you got a pretty good deal. 80k with 2 units that could rent for $1000 minimum will cash flow nicely. I think your strategy of living there and fixing it up is good. If the other unit is rented and paying your most likely going to be paying less to live there than anywhere else. 

I would agree with your realtor that having a non paying tenant in the eviction process handed over to you isn't the best scenario. So I would probably make the offer contingent on that as well. But other than that based on your numbers I can't see why this isn't a good deal for you.

@Andrew Fudge I think a lot of real estate investing has to do with your attentiveness to the project and your initial analysis on the deal your going into. There are plenty of people who make college rentals work and there are plenty who have lost their shirt in them. That can be said for any type of real estate investment. There are positives and negatives to any investment you get into, but if you set up your systems and expectations with tenants correctly you can do very well with college rentals. So if you do decide to get into college rentals make sure you commit to doing it the right way by putting effective systems in place.

In my market the upside to college rentals is they generally do command higher than market/long term rentals even in the areas where they don't get paid for the summer months. The downside is that if you put a loud obnoxious tenant in your unit you could experience higher turnover costs when they leave and potentially have their neighbors be calling you to complain. However, with the right systems in place you can hopefully manage this and find tenants who won't be crazy.

One other thing I like to look for with college rentals is properties that don't have too much common space. College kids who want to party will go to the house that's best suited to host said party and if you've only got one small living room and a kitchen in your apartment you probably won't be the party house. Good luck!

I echo a lot of the responses made already. If you're looking to scale and go the more "optimal" route certainly buying with a loan makes sense. If you'd rather play it safer and are looking for an immediate cash return using the cash would be better.

The one piece of advise I don't think I've seen that I have is on the acquisition I would always make your offers and buy with the cash. And then refi out if you choose to do so. You'll save yourself money on closing costs (refi closing costs are lower), and you may buy yourself some buying power simply by having a cash offer versus having a loan. Good luck!

I agree with @Nathan Gesner on being careful with the numbers. And taking it a step further it's important if you are going to go out of your area to get some boots on the ground you can trust to lead you to the areas you'd be interested in owning property in. In my market moving a block or two in the wrong direction can be detrimental. If your considering out of market investing as well taking some time to analyze multiple markets could be worth while as well.