All Forum Posts by: Patsy Waldron

Moving on to small apartment complexes is an excellent next move. It's a different beast than SFH, but opens up lots of possibilities in terms of scaling up.

You will have to put 25-30% down (either by yourself or with partners), the loan will be commercial (i.e. will take into account the income the property produces) and will be different to run than a bunch of SFH. Personally I am a fan!

Ditto what JD said. If you have good credit and are okay with carrying some credit card debt, you can get 0% on purchases and/or balance transfers. I know that Chase Slate gives the terms that he mentions- 0% interest for 18 months plus no transfer fee. Citi Simplicity gives 18 months interest free but with 3% transfer fee. Also offers 0% on purchases, though, so if you will only use one card, this is the better option. I have and use both for different purposes.

NerdWallet discusses the different cards and their pros and cons, you may want to check them out.

Second what Bram said.... DO NOT LIE about your intentions with regard to the use of the property!! The terms for the 15-yr loan sound pretty good actually, but a 30-yr would provide lower monthly payments and give you more breathing room in case of vacancy. Be prepared for a higher interest rate with a 30-yr amortized loan, though, probably mid-4. 

I would like to add two things to the helpful answers you have already received.

1) It's great that the current lender wants to keep the loan, but don't limit yourself to them. Shop around to see what else is available to you. You may find a better product elsewhere, or you may a stronger negotiating position even if you do end up going with them.

2) About those properties that you are selling to raise capital- will you be paying taxes on them? If so, it may be worth looking into doing a 1031 exchange to avoid the taxes. There are several experts who can guide you through that process on BP- @Dave Foster for example.

The first person who answered is absolutely right that true government guaranteed loans (FHA, VA, USDA) are only for personal residences and require one year of occupancy. Fannie Mae is not a government agency, although its loans are government-backed. So your calling othem "government loans" is inaccurate. That said, it is true that one person can get several FNMA loans and use them for investment properties. It's up to the bank itself how many it will allow- some banks cap at 4, while others will go up to 10.

To your initial question- yes, you can take out a mortgage in your personal name and then, separately, make a contract with another person to lease the property and pay you a pre-determines amount each month and whatever else you agree on. You could consider it a twist on subject-to or owner financing. A good real estate should have no problem drawing up a partnership contract along those lines.

If you have owned the two quads for a while and the income from them show up on your tax returns, you should be able to count the rental income. Once you rent out the unit you are currently occupying, that should help offset the new mortgage payment on the SFH (maybe even cancel it out, depending on the rent you can get and how much your new payment is?). In general, though, as Brent Coombs mentioned, chances are you will spend more (overspend?) on a personal home than you would on an investment property. So work out the math and then decide.

The best way to get the loan for longer than 6 months, perhaps up to a year, with no prepayment penalties. That would ease the pressure of having to rehab and sell within 6 months. Or- negotiate a slightly higher interest rate if sale does not happen within 6 months. But then it all starts getting pretty expensive, and eats deeply into your profits. 

It seems like you already have most of the pieces in place in your mind.

1. Find a property that needs some rehab, and buy it for a good price (ideally for BRRRR, you need to pay 70% of ARV - rehab costs).

2. It's smart to rehab one side as quickly as possible and rent that out- this will help your financial position immediately. 

3. It won't be fun living in a construction zone while you rehab your side. Not something I am up for, personally, but people do it and survive.

4. After you rehab both sides, have the property re-appraised and refinance so you can pull cash out and move on to your next property. 

5. If you will keep this as a rental, you should analyze it as an investment. If you plan to sell after rehabbing both sides, analyze as a flip. Personally, I would advise to try and keep it as an investment and use the cash you pull out at refinance to buy your next property. 

6. I read on a blog post on BP that if the property is a duplex, you can actually use part of the expected rent from the other unit as income to help you qualify for the loan (this does not apply to triplexes or quadplexes, apparently). This is a fantastic opportunity to qualify for a higher loan amount than you would based on your income alone- it may enable you to buy a bigger duplex, in a nicer location, or whatever. However, you should obviously still buy below market to maximize your built-in equity as refi.

Good luck!

Isn't the whole point of having something notarized that you sign it in front of the notary?! So weird that you can do this online! 

And personally, I would never pay $25 for one of the few things that banks still do for free.

Hi Valerie,

Here is how I would go about this...

1) Estimating rehab costs: J. Scott has an excellent book that everyone recommends (helpfully titled... The Book on estimating rehab costs! lol) If you are serious about getting into BRRRR, you'll want to buy it (o R something similar). Networking with rehabbers and investors in your area is also a good way to learn what the norm/expectations are for amenities and finishes and how costs run in your market.

2) Estimating after-repair value: The best and most accuratr way to do this is to get a good real estate agent on board and ask them to run comps on rehabbed houses just like yours. Alternatively, you can check what online sites estimate is the ARV- Zillow does that (though it can be wildly inaccurate). There is also a website called www.eppraisal.com. I have not used it and am not sure how accurate it is, but many people use it.

4) That's the simplest way, and it's pretty accurate! You can use www.rentometer.com, too- they will allow you to check 10 addresses for free.

5) Yes, it may still be worth it to refi your FHA loan. If the value of the home after you repair it jumps quite a bit, a refi allows you to pull out cash to use on your next property. After all, the last R in the BRRRR stategy is "repeat"!