All Forum Posts by: Brad S.

I would first get clearer on your longterm goals, or maybe you are but haven't posted them. Doing str, ltr, section 8 are not longterm goals, but a means to possibly head toward those goals. But, they may not necessarily point you in the best direction toward your specific longterm goals. 

So examples are: are you trying to build a rental income portfolio, a hospitality business (str), where do you want your RE investing business to be in 5, 10, 15 yrs, etc. Do you want to good properties in A areas which are easy to rent and sell, get good tenants, but may have a lower % return, but more appreciation and less hassle and risk. Or do you want to build a "working" portfolio of C properties which require more hands-on managing (even managing your mgrs), etc. Or maybe you want to have larger multi-unit properties where you can "print" rental income.

Also, do you need the rental income now or would you rather have more income in the future as compared to more now (i.e. appreciation now in order to get to more rental income later), etc. 

Bottomline is there is no "right" path or investment for everyone, it is specific to everyone's individual goals. 

@Phyllis Harrell Arnold  First, I am sorry for your loss. 

Both those fees sound relatively reasonable, although, I would be suspect about the one with questionable reviews. I am happy to offer any help, or advice. I am both a Broker and appraiser for many decades local to Pasadena. I'll send you a DM as well. 

You can either contact an appraiser directly and pay for an appraisal, or you can use your agent (or ask an agent) to do a CMA (Comparative Market Analysis). If you are not using an agent, you may have to pay one for the CMA. You can find an appraiser by asking a local agent or do an internet search, or post a message on here asking to be referred to one.

Sounds exciting and profitable Edgar! 

Good find and good luck!

I have 2 development projects in planning at the moment also and they have relatively similar #'s. 

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Hey @Myriam Keaton, I am a very experienced professional (Appraiser, Broker, investor, long time ago Mortgage Broker), but I have not been a hard-money lender yet. I have been a hml borrower many times though. 

Basically, my advice would be to go through a licensed mortgage broker, who is familiar with the process. I can refer you to one if you like.

But, generally:
1) Only loan on investment property and not owner-occupied properties (they are governed by different laws in CA)
2) Always get a title insurance policy and go through escrow (this typically gets charged to the borrower)
3) get an appraisal, if you are at all unsure of the value.
4) Make sure to "verify" their solid track record (check referrals, previous deals, etc)
5) Always run a credit check - They don't necessarily need great credit, but this may give you some insight into some precautionary facts. For example, if they have had recent trouble making payments on their personal home mortgage recently, then what would happen if the deal you are loaning on goes south.
6) Make sure the ltv (loan to value) is comfortably low enough for you (maybe 60% or lower). Remember if something goes south, you may have to keep paying the 1st loan and any other liens (mechanics liens, tax liens, etc) in order to take control of the property and protect your interest. Or if the market decreases in that area or if the property is demo'd and in worse shape than when you loaned on it, etc. You basically want to make sure you have enough room there to reduce your risk. One of my hml had one of their borrowers (an operator) pass away during their rehab. They had to fly out of state to the project and coordinate the completion themselves - so make sure it is worth it.
7) Provide the money in stages - purchase funds at first (through escrow) and portion any rehab funds as needed or agreed based on either predetermined completed phases or professional progress inspections. I just remembered this is a second, so this is probably not for purchase funds, but the rest of the principle may apply.
8) Have a solid agreement and note for them to sign. Typically have an attorney prepare it. This should have many provisions in it to cover you. I may be able to look up a relatively recent one i have (as a Borrower), but I'd have to see if I could blank out any specific info, before I share it.

Also, what terms are you getting/thinking of? (i.e. interest rate, up-front points, length of loan, extension time and cost, etc?)

And what general area is the project in? Are you also in that area?

That's all I have for now. Good luck

Disclaimer
....oh, and as always and the most important - NEVER make any decisions solely based on anything you read, hear, etc, on any social media sight, including BP and including me! None of this should be considered to be specific advice to your situation or otherwise.  :)

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@Account Closed  Please explain and help us understand what your objective reasoning is for blaming "realtors, lenders, and investors" for being significant part of the affordability problem? 

So far, all I can gather from your posts is your bitterness toward ONE Agent who, based on your interpretation, tried to persuade you to complete a deal you ultimately decided did not suit your best interests. But, I don't see a reasonable argument to support any of your assertions. 

You have some good replies above, and really, there is little that can be added without knowing more specifics. Like, what were you and your agent basing the arv on? When was that? How long ago did those comps sell? Basically, WHY do you think your property is worth $340k now? ..I mean what are the verifiable "facts/data" that your opinion is based on?

Here are some things to look at in the appraisal to see if it seems reasonable.
* verify the comps are similar triplexes. This brings up some questions. Is your property zoned for 3 units, is it a legal 3 unit, is it legal non-conforming, is it an sfr + adu's or? All that might matter. If your property is a triplex, I would typically only rely heavily on similar triplex sales. If it is an sfr + adu's, that complicates things and I would try and find something similar or evidence for the market's reaction to something similar.
*Are the comps in similar condition/quality, year built, gla size/ lot size, etc to your property? If not, were those differences reasonably taken into account?
* Do the comps have similar configuration (i.e. 3 detached bungalows vs a 3 unit building)
* Are the comps in the same or similar neighborhood/market area?
* Are the comps relatively recent sales? If not, did they explain why they used them and did they analyze any market trend differences between when they sold and the appraisal effective date?

Please add more facts, if you'd like help.

Well, hopefully we have comps with similar adu's. But, in the past I have been able to find comps with guest houses and used those, since they had similar utility. But, luckily I have not had any assignments where I had absolutely no comps. I might use a duplex for an sfr + adu, but that would not be my preference and I'd have to look at the data and see if one or the other might have a different appeal. Some differences are that an adu typically are restricted from being used as str's, in some areas, so that would limit their utility. Some appraisers might rely more on the depreciated cost to value the adu or use an income approach multiplying the market rent by the average grm (gross rental multiplier). It gets to be more of an art when comps are lacking.

That's a no-brainer. YES, SPLIT THE BATHROOM for $6k!

What you describe is what we call functional obsolescence. Basically, the house has a decreased usefulness due to having only 1 bathroom and 3 bedrooms. So, if you have 3 occupants, they will be competing for the bathroom or the trees/bushes outside. But, most people prefer interior plumbing these days.

The lack of a second bathroom typically significantly reduces the appeal for both renters and potential buyers, and typically would result in less rent or value. I couldn't tell you for certainty if it would increase rent or value, because I don't know what the local comps are, etc. Your PM and Realtor is best for that. 

You will also most likely rent it quicker or sell it quicker, when the time comes.

Your house also has what is termed superadequacy with your oversized bathroom. That's a type of over-improvement and that bathroom sounds like it is over-sized for that house, as compared to similar sized houses. In my experience, a very nice large bathroom is not as appealing as 2 good size bathrooms. You can get 2 pretty good sized bathrooms with 250sf. I would also make sure you have enough storage space, maybe think about incorporating a linen closet, walk-in closet, storage closet, into that reconfiguring of the bathroom. Those are nice bonuses and you may be able to do that without sacrificing anything.

Also, keep in mind to have at least one bathtub, since young families will use it for bathing their lil ones. Typically, if you can only put one tub, it goes in the guest bath, not the master bath. Also, it is nice to have a private ensuite bathroom, connected to a master, if you can configure that. That's another nice selling point which makes your house stand out from others that don't have that feature. That feature has helped sell a couple of my houses in the past.

And it sounds like your house's issues are what we consider "curable," generally meaning easily and reasonably resolved.

SO, YES, DO 2 BATHROOMS!

https://journal.firsttuesday.us/forms-download-2/

First Tuesday
https://www.firsttuesday.us/
click on Forms tab near top right. Then RPI Forms or use the link at the top of this post. Then click on rentals and you'll see the forms. You can also download the forms library to your computer for future use.

I also used to like mrlandlord.com as a resource, although, they may not be CA specific, but still might be a good place to look.