All Forum Posts by: P.J. Bremner

So I want to bump this topic to see if anyone could help me out some... 

I've literally called 30+ banks in the Cleveland and Lakewood area and found one that offers portfolio loans, but they do not lend to out of state investors.  It's against their guidelines apparently lol never heard of that one before.  I have heard from one person that can do a portfolio loan, but the numbers were way higher than what I'm hearing from others.  He was talking about 3 - 4 points to get 8 - 9% for 30 years.

Does anyone know of a portfolio lender that they use that lends in Cleveland/Lakewood?  I would love to speak to a bank or two that actually has a viable portfolio product for a well-experienced and well-capitalized investor.

@Charles Young

You can petition the county where the property is located to have the assessed value brought down to a realistic number.  What ends up happening is the county will use either the new purchase price or the previous purchase price (or assessed value if they do that in that area) WHICHEVER IS GREATER.  Basically, they are counting on the fact that most people are ignorant or lazy and won't fight the value, bend over and pay the higher taxes.  It's actually quite reasonable to do if your petition is built off of logic.  An example of this is a property I just recently purchased: Bought for $84k, previous purchase price was $150k so property taxes are sky high right now.  I am petitioning their assessed value because they will NOT use the purchase price of $84k unless I go through the process.  I present my numbers, show that the property was distressed and (hopefully) get the value lowered.  If the city were to raise the assessed value to a number that doesn't make sense (say they peg your home to be $150k but all local comps suggest it should be $100k) then you can submit a petition with comps for them to review.  I've heard most people that approach it systematically often win their petitions.  Don't just pull stuff out of your rear and you'll be fine.

@Dustin Davis

For small businesses doing the work themselves, not usually.  When you deal with government funded programs or with huge companies that need to fulfill their "quotas" then often times it can be beneficial.  A real life example of this: SoCal Gas company will contract out tons of work for their projects.  If the company is owned by a minority (female, non-white, etc.) then they will often times go with their bid regardless of how good the work is or competitive the price is simply because they need to show the public that they are "equal opportunity" and must hit their quota.  For flipping single family residential properties, there are no government programs that I am aware of that would give you an edge due to female ownership, but then again I certainly have not looked into that given my own gender lol... If you start doing projects for the government, then certainly it will help you a bunch!

@Sage Balakrishnan

The room specs will be a little different depending on your local building codes, but I can tell you from personal experience that you should read up on the code for what makes a legit room before you do anything else.  Some general things to keep in mind:

- Rooms need 2 forms of ingress and egress (doorway and a window are pretty typical, but a sliding balcony door will work or a door to the outside, etc.)

- You will need enough window square footage depending on the square footage of the room.  If I recall, my local code was 8% of the square footage of the room had to be the square footage of the window - example: 200 sqft of room you would need 16 sqft of window or a 4x4 window.  I could be off on that percentage, maybe it was 10% but it was around there.  They also had minimum requirements for the size of the windows.

- Had to have at least 1 outlet per wall at least every 4' or 8', something like that.  The logic was that you should be able to plug something in from anywhere in the room with a 4' electric cord...  Again something you want to check with local building codes.  It's easy to get these numbers mixed up if you don't build rooms frequently.

- Had to have a light switch near the doorway that worked with an overhead light or an outlet somewhere in the room so that light can be turned on easily upon entry.

Most things they require are legit and things you would want in the room anyways.  Some things are really tacky and a waste of time/money.  Just part of dealing with government I guess.

Quick question - Are you trying to add more rooms so that the house will rent for more?  Are you trying to rent rooms out individually and get more rent?

If you're trying to add more rooms so that they are legal additions, you can often sell the house for more and legally advertise it as a bigger house, but keep in mind that MOST places will levy a higher property tax assessment as soon as you finish the addition.  If you plan to sell it soon after, might not be a big deal, but if you plan to keep the property long term, that tax increase might offset a good chunk of the benefits so keep that in mind.

If you're just trying to add another room to rent out in your house-hack, you might want to look at other ways of getting more bedrooms in there.  You can easily convert a spare room into a bedroom by simply adding a wardrobe ($100 or so at Ikea) and a keyed door for privacy.  Just know the risk you run when doing this.  I've converted a dining room and a den in a property I lived in for a few years and rented extra bedrooms out, never had any issues and also didn't have to ruin the house with a senseless rehab to add a "legal bedroom".  However, if someone were to get injured on the property and they find your janky bedroom to be at fault, you open yourself to extra liability.  Just something to consider!

@Andrew Postell

I'm aware of DFE, but not interested in taking a chance on a low appraisal or having all of my rehab budget sunk into these properties.  I would rather take a portfolio loan at 75% at a higher cost for a year or so, then rate/term refi out OR wait the full 6 months and get everything back out.  I originally was looking into DFE, but decided it wasn't a good fit because the cash out was very limited and the amount of cost added by taking an extra loan within the 6 months period was cost-prohibitive.  If it was in my local area (Los Angeles) then the loan amounts would be big enough to get lender credit to cover, but at $100k it makes far less sense to do so.

What I am trying to do now is determine if it makes sense to take the higher costs with a portfolio lender or wait 6 months.  I know what I can get with DFE and I know roughly what I can get 6 months from now (obviously the market can change between now and then).

@Mike M.

I own several properties that I personally manage, so I have a separate account for each as well as a savings account.  The CPA recommended this so that expenses are easily tracked (tied to the individual homes) and Wells Fargo has pretty easy minimum requirements to keep them for free (without monthly fees).  I will generally keep a set amount in each account for reserves and put the balance into my main investing account.  Once the deposit exceed the reserve amount, I skim the rest off the top.

I also have an Amazon store that pulls in a ton of revenue, which is kept that in a separate account and I transfer profits to my main investing account on a monthly basis with a set reserve for inventory needs.

Currently, I am purchasing out of state rentals that will all be tied to a single checking account.  I close on 2 duplexes this coming week and the CPA has already advised me a single account will be fine since the property manager will be itemizing everything for me.  I will keep a set amount per unit in that checking and transfer everything above that into my main investing account.

I do not personally invest in any stock markets, bonds, mutual funds, etc. because for me, it would be a waste of time and money.  I'm not knocking anyone who does, everyone has different needs and experience levels.  Just for me, I know I can get a return that will far exceed anything an "advisor" could get me.  Even when I was a W-2 employee, I stashed everything I had and saved up so that I could build my businesses and get out from under my employer's thumb : )

I don't exactly have a process map/tree like you posted, but I had some general guidelines that I followed:

- Keep personal expenses under $1,500 per month ALL IN.  I was generally around $1,000 or less.

- Earn at least $8,333.33 per month on average (I worked in the car business, not hard to do if you put the time and effort in).

- Buy as many properties as I could without regard for my bank account balance.  I remember on more than one occasion, i dropped down below $3k at the tail end of my first ever purchase and rehab.  On my 3rd, I underestimated my rehab by about $60k LOL so I had to go into debt to cover it.  Paid that off in a year and was still able to buy another property in that same time span.

It all comes down to what you want and how bad you want it.  Most people kind-of want it, but definitely don't want to give up certain things along the way.  As a recent college grad (2011) I was making 6-figures my first year out and still drove a 15 year old Toyota Camry.  Hell, I even had a 1996 Toyota Pickup with no radio and no AC after my Camry died because I needed a truck to haul furniture around for my business.  I went to work in a $1,000 suit and $500 shoes (was pretty much a requirement, was in senior management) and still pulled up in a truck I bought for less than $1,000.  I showed up to a date once in my little "gardener truck" which was a hoot lol.

Anyhow, I guess to sum it all up, my general strategy is to set your personal reserves for yourself (I keep about $10,000 separate for myself that I don't touch), reserves for any business or rental (Don't ever touch them for anything other than that business or rental, no matter what), and then save save save.  The key is to be VERY conservative with your reserve money (don't ever bend the rules on those) and be VERY VERY aggressive with all of your other money.  If you lose all the risky investments, but keep sufficient reserves, you'll be fine.  If you're smart about your investing and have persistence, you'll always come out ahead in the long run.

*Edit* I totally forgot to mention the lending side of things. I always try to max out my credit any chance I get. I have a business line of $90k at 6%, I have a HELOC of $110k at 4.25%, personal line of credit at $25k at some stupid rate above 10%, etc. etc. etc. Get as much as you can. I almost never use them, but the one time you DO need them, you will be SO thankful that you got them ahead of time. A very famous quote, "Only borrow money when you don't need it". I will follow that advice to the grave : )

@Andrew Postell

Yes, we purchased each property with cash and will fund the rehab with cash (actual cash, not HML or loan of any sort).

So i'm at the beginning stages of two duplex BRRRRs in the Cleveland Ohio area and evaluating my options on the finance side. I've already done plenty of research on the conventional, Fannie/Freddie side of things (couple grand in closing costs and rate between 4.5 - 5 with no points) but noticed quite a bit more variance with the portfolio lending side of things. I've seen some pretty crazy numbers, almost like HML and I'm curious to know what others are actually getting.

My biggest dilemma is deciding between waiting the full 6 months before pulling equity back out, or pulling it all out within a month or so of close, pay a higher price (APR and points) but have access to the cash again with the option to do a rate/term refi down the road. The cost of a portfolio loan seem to make the question easier to answer, but there may be some lower costs stuff out there that I have not come across. This is why BP is so amazing : ) Thank you in advance!

@Deandre P.

I had a similar discussion, read through this post.  Make sure you read all of Chris Mason's info, he answered the same questions you had:

https://www.biggerpockets.com/forums/49/topics/481411-brrrr-ohio-lenders-or-credit-unions-or-brokers-oh-my

@Michael Plante

You can actually claim a house with Zillow and update the stats. I was getting a HELOC earlier in the year and found out that they weigh heavily on the Zillow zestimate, so I claimed my house and updated the info that they use to compute value. You can change bedrooms, bathrooms, livable square footage, date of most recent remodel, etc. I believe @Anthony Dooley is correct for the homes that do not get claimed and updated, they will use the county tax assessor data as default values until someone claims and updates the data.

I actually exaggerated some stats on my property in order to get a higher value.  If the bank is too lazy to do an actual appraisal, then I will take advantage and make my asset look even better (on paper).  See the attached pictures - one shows the screen where you will find the "Edit Facts" button and the other shows the screen where you actually edit the stats.