All Forum Posts by: Nathan Grabau

This probably comes down to the terms of your current owner financing. Generally speaking refinancing makes sense when: a balloon is close to coming due, you can get a lower rate, you can reduce your monthly payment, or you can get cash out. 

I carry all of my investment properties on 7 year balloons, and I do not have any intention of refi'ing out of them to cover me against the balloon payment until I am 12-18 months from the end of the term of the loan. 

With regards to how fast can you, you can whenever you want, since it was owner financed, you do not have the window where the note has a "curing" period. If your 5 year balloon amortizes on a 10-15 year schedule then it could make sense to refi sooner, but if it amortizes on a 30 year schedule, then it will make less sense to. 

The owner financing of the deal will also help for future deals for 2 reasons. The first is that it does not effect your debt to income ratio, which helps you get access to future financing. The second is if you chose to owner finance more deals, you could use the people you are currently owner financing through as a reference for people who are weary. If you do this, and it is legal in your state, I would encourage you to pay or give a referral gift to the owners. A prospectus seller being able to call them, and they say "Hoa has made the payments on time every month for the last 36 months and was very easy to work with" could be very beneficial to you. 

While I agree that prices are excessive, I believe they are excessive for a reason. In Longmont, Colorado where I live, almost every house I see on the MLS is going for 10%+ above asking price, but there is a dramatic housing shortage in Colorado. I do not think the housing shortage will get any better especially with interest rates rising. Rising rates and inflation will put pressure on new constructions costs, and it will lead to people who have a low interest fixed rate mortgage that would consider moving choosing not to. Why would you move if just to side grade your house, you payment will be 20-30% more each month. These will both limit inventory more. The only thing that really can happen, unless we see a major economic slowdown is for rents and home prices to continue to rise. Home price increases will likely slow down, but rents, which compete with the cost of buying a new home, will likely move up dramatically.

If you are looking for a market that cash flow's better, I am invested in the Ames, Iowa area. I really like it because it has some of the cash flow characteristics of a mid west market, but does not have a declining population like many areas in Indiana, Ohio, and Michigan. It also is more an agricultural and food service hub than a manufacturing hub, so the jobs in the area cannot really be moved overseas. If you or anyone else want's to DM me, I am happy to refer you to my relator in Ames who owns 100+ doors, has a property management company, and helped me secure financing on my properties there. 

I have been house hacking for the last 5 years and my biggest piece of advice would be to try to show as much respect to your future tenants as possible. If you are living in a SFH and renting out rooms this is especially important. Outside of matters like collecting rent or lease violations, I try to think of the tenants as roommates in my head, and when they think of me as a landlord in their head, we end up having this "respect overlap" where we are always showing each other more respect than the other one may feel entitled to.

The other thing that I think has really really helped us is the tenants rent is all inclusive with regards to utilities, internet, and a cleaning service. The cleaning service which for me comes bi weekly, but monthly would be okay too, has helped avoid so many potential fights about cleanliness in the house. It also helps leave me at ease knowing that every couple weeks their bathrooms/ rooms are going to be cleaned and cleaned well. 

Congrats on getting your first deal under contract! 

Generally speaking, if you rent by the room you will get a better rate of return on your investment. You will have multiple tenants to deal with them at each unit though instead of one. 

When you go to sell, the home will be valued like a single family home. That being said, a rented by the room property is typically considered not desirable by most investors, as they do not want to have to deal with the headache of multiple tenants when buying SFH's.

You would need to provide common area furniture as well as potentially some kitchen supplies. You would also be who any tenant called if they had an issue with one of their roommates, so it is good to have rules for that. There was a recent BP podcast where the interviewed person rented by the room which would be worth checking out.  

Legally my biggest concern would be laws that limit the number of people in different households that can live in a house. These are rarely enforced though. 

I would also encourage you with caution in the college town situation. I would assume that you will have to put lots of work into keeping the peace. If someone is a college student, but for some reason has elected to not live with their friends, or their friends have not elected to live with them, and you put 3-5 of them in the same house, that could be a set up for a lot of drama, that ultimately you are get the calls about. 

I am not a lawyer and this is not legal advice, but my understand of this is... 

In most situations you cannot do anything here. Your only hope is asking for documentation that the pet is an ESA. That being said, this documentation is easy to obtain on short notice. I would recommend taking this up with legal counsel though, as you can get in a lot of trouble very fast here. 

Unless you believe the animal is going to do serve damage to the property, it is probably cheaper to just let it be than to fight it. 

You also need to make sure that you do not do anything such as not renewing the lease because of the person's emotional support animal. You are playing with the Federal Fair Housing Act which protects people, including those who need a service animal (considering a reasonable accommodation for a disability legally). Regardless of how we feel about this loophole, behavior that could be considered discriminatory against this tenant is legally on the same level of having a "white only" or "no wheelchair access" in your advertisements. 

First off, thank you for your service. 

As @Malcomb Stapel said, us getting data on your current loan would be very helpful. I believe you can get 100LTV VA refi's which is very helpful. I would generally advise against 100% leverage, because if anything goes wrong, you have very little margin. That being said, if you have a sub 300k house, it is probably in a market where the cashflow could support the higher loan, and if you are cashflow positive, it allows you to carry it through a correction, even if you go negative on your equity.

Depending on how good your rate is for your current mortgage, another option is a 90% HELOC. Currently Quorum Credit Union has a 90LTV HELOC that's rate is 0.99% plus prime. To put numbers to this, if you bought your house with a $0 down VA Loan and have not made any payments yet, you could pull out an additional 25k. Your monthly interest only payment would be $93 at the current prime rate. This is not a fixed rate product so if the fed raises rates another 2%, the payment then would go up to $135 per month.

The other advantages to the HELOC is you can borrow and repay it as you go, and do not need to take all the money out. You also maintain your current amortization schedule. One thing people do not realize is that as interest rates go up, and their payment goes up, the portion of their monthly payment that goes to principle goes down. You make this up on the back end of your mortgage. On a 235k 30 year mortgage at 3%, in your first month you pay $403 towards principle of the 990 principle and interest payment. If that rate goes up to 5.5%, your monthly principle payment falls to $257 of the $1334.

If you were to refi and go from a 235k 30 year at 3% to a 5.5% 30 year with 287k borrowed, your monthly payment will increase by about $650 a month. That sounds like a lot of money and depending on your situation it is. You are getting $50,000+ of dry powder. That really is a life altering amount of money as a young investor. If you couple that with your access to 0% down VA loans and are strategic with how you deploy the money, that could be completely worth it.

I would look into startvirtual.com. It was started by Pace Morby who is the master of creative finance and is very active in the Phoenix flip scene. 

I am not a lawyer and this is not legal advice. 

The goal of earnest money is that if the buyer fails to perform the seller can keep it. If you had an appraisal contingency, and you backed out of the deal before the contingency deadline, you would be entitled to the earnest money. If you did not extend that part of the contract(in writing), you do not have recourse based off the appraisal. 

If the seller backed out of the deal before the contractual closing date, you would also have a right to get the earnest money back, but it sounds like you failed to close on the closing date. If you had the closing date extended in writing, and it was before that date that the seller backed out, you have recourse to get the earnest money back. If this was a verbal agreement to extend, this would not be enforceable in most situations. 

If you think about it from the seller's side, and without knowing what was amended to the contract in writing, this seems like a legitimate situation for them to keep earnest money. Even though it was your bank that failed to perform, it was someone representing you, and in the transaction, your earnest money is the damages of that. 

Furthermore, wholesalers that are not brokers are not required to act as a fiduciary in transactions, meaning that they can get away with a lot more than brokers can. 

My property manager uses Buildium and I have been very happy with it as an owner they represent. 

Actually lenders will do this. Even on a convention loan you can have a lender that takes 75% of the rent, and counts it towards the mortgage cost. Lenders that I have worked with prefer leases in place over having to pull an automatic rent estimate for this. It just takes a lender that is willing to be a little creative, but I actually think you could fit this into a conforming loan. This is house hacking 101, and just because the living spaces are separated, doesn't mean that they are not all producing income to service the loan on your "SFR".

If you think it will appraise high enough as a SFR, then you are especially in great shape. That would be my primary concern, that the house as a SFR would not appraise high enough.