All Forum Posts by: William Morgan

I have the same question.  I am aware that I can refinance a home immediately if I paid cash on it, however I have always been limited to some fraction of the purchase price.

  @Arianne L. How were you able to get 95% of you purchase price financed within 10 weeks?  Just so I am clear, is your lender applying the exception cited below and applying a loan amount of "no more than the actual documented amount of the borrower's initial investment in purchasing" while using the appraisal amount to derive the LTV ?

@Chris M. can you weigh in?

Delayed Financing Exception

"The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value)."

Does your lease allow you to raise the rent if a pet or extra person moves in?  If not you may want to consider that adding that capability in the future.  You can probably have the lease stipulate an exorbitant increase when a person or pet not already on the lease moves in even while at the same time disallowing a 5th unrelated person -all lessees being joint and severably liable.

This will create a large financial disincentive to violating the lease (and the law) while also giving you recourse should it occur.

@Ben Leybovich

Let's remember - we are not talking so much about SFR market. This is more of a commercial/apartment conversation... Residential and commercial do not move in the same cycle necessarily, and lack of leverage / conservative underwriting doesn't necessarily translate into the other...

I would disagree with you on both points. :)

Price Trends

My position is not limited to residential real estate. The two markets (commercial/residential) might not be identical twins but they are brother and sister. This is not conjecture and primarily due to trends inherent in the national/global credit markets. Check any comparative chart and the similarities are unmistakable: Here is but one Source: (link)

Underwriting Standards

Commercial underwriting trends paralleled those in the Residential Real estate Market.  Consider Source (link)

"Our index then indicates continual and speedy loosening of [commercial] underwriting until the spring of 2007, reaching the loosest levels ever in 2005-2007 (at -0.60 in 2007:2). Once turmoil struck financial markets in 2007, underwriting tightened more and more sharply than at any time during 1990-2011. After being at historic highs in 2008-2009 (at 1.58 in 2009:1), our index suggests that much of the extreme tightening during the crisis has been removed (down to 0.50 in 2011:1). However, the level of tightness still exceeds by far any experienced before the crisis."

All Real Estate is National

I know, people love to claim "all Real Estate is local".  While there may be explanations for localities that buck the overall national trend, data clearly shows that Real Estate market trends are by and large a national phenomenon (Source: link) and heavily driven by the overall credit market.  If/when we concede that the data supports this conclusion (Real Estate Market trends are Credit Market driven) we can then look to the credit market for clues to the future.

Don't forget to show your work Ben :)

I posted this in another thread but it summarizes my view:

Better Borrowers. Loans underwritten in the past 5 years are some of the most heavily scrutinized in American history. The previously large population of sub-prime borrowers has been all but eliminated and borrowers today are of much better quality in terms of qualifying and equity (down-payment). That's not to say it's all sunshine and flowers - we may soften - but I for one do not expect a rerun of the 2008-2011 RE crash.

Negative Interest Rates.  Anyone who wants to preserve value must look somewhere besides traditional savings and investment vehicles to do so. I think Real Estate could be a beneficiary of this. 

It's doable if you could get the occupants on board. i.e. use carrot, not stick. All the hiding ownership advice, while good advice, presumes a strong-arm approach. Don't do that.

1. Shop around for an attorney, explain your issue and how you'd ideally like to proceed - Cash for Keys.
2.  Have your attorney negotiate a generous cash for keys amount with all the occupants at closing.  If successful proceed, if not stop right here.
3. The buyer is never named throughout the process, only the attorney as nominee.
4.  Offset these costs in the price and have the purchase agreement contingent upon the property being delivered vacant. I'd also make the time to close 6 months just because.
5.  If your attorney comes to an agreement with the occupants have him formalize the arrangement with the occupants so they are confident they can begin moving knowing they will be due a check at closing. If he can't get the occupant's on board pay him for his time and walk.
6.  The buyer purchases the property inside a trust with the attorney as trustee and mail delivered to his office for 1 year.

The occupants will receive a check from escrow and everyone lives happily ever after.

In 2007 I sold the last of my long-term rentals and my primary residence based in large part to economic storm clouds present then.  Today I am not selling anything (yet) and probably will continue to accumulate long term holds.  Here's two reasons why:

1. Better Borrowers. A lot of people are equating an economic downturn with a crashing Real Estate Market similar to 2008.  Something to keep in mind, residential loans underwritten in the past 5 years are some of the most heavily scrutinized in American history.  The previously large population of sub-prime borrowers has been all but eliminated and borrowers today are of much better quality in terms of qualifying and equity (down-payment). That's not to say it's all sunshine and flowers - we may soften - but I for one do not expect a rerun of the 2008-2011 RE crash.
2. Negative Interest Rates.  To understand why Japan and Europe are implementing negative interest rates and why other Western nations are contemplating it (including the Fed) is a lengthy boring discussion on the effects of credit in a Fractional Reserve banking system.  Countries are desperate to spur growth because without it they face a bad, bad deflationary future due to the large debt positions they carry. The idea is to offset deflationary forces with manageable inflation. Negative interest rates are a "hail Mary" way to force people to take money out of savings and/or take on (cheap) debt and pour it into the economy to spur growth. Anyone who wants to preserve value must look somewhere besides traditional savings to do so.  I think Real Estate could be a beneficiary of this.

@Adam Pierce  Some of the commenters are quick to scoff at you but I promise you NONE of them will help you out if you two split down the road and she claims you two were in a "Meretricious" or "Committed Intimate Relationship" and demand half the equity realized during your relationship from all the properties you acquired.  In fact they'd probably scoff at you again for being so naive!!   http://www.hansenlaw.com/committed-intimate-relati...

BTW, Another reason to have a lease is that you can document two years of landlord experience required by Fannie (or is it Freddie).

Tony, I like your pieces (and the details) are they yours?  And do you stage evey room ?

Very Nice Mackal!! They did a nice balance of making the home feel full and livable yet without clutter.  What did they charge and how long does the staging stay in the property?

This is a guilt free zone for you to unabashedly show off you staging pictures.  I'm going to be buying some Staging pieces and want to learn from the best.  So go ahead, put up your pictures!