All Forum Posts by: Scott Warhol

Awesome, thanks Brandon! I didn't even consider a DSCR for a SFR but now that John and you mentioned it that is a fun option to explore once everything is in place.

Thanks Paul, that was the first thing that I did actually. They weren't interested in allowing us to assume the mortgage unfortunately. That would have made this whole thing a lot easier. We are going to try and use a HELOC from another property to cash purchase the property and then we can refi later. If that doesn't work we will explore the hard money options out there. I appreciate your reply!

 Thanks Marty, I have heard Waterstone was an investor friendly bank.  I appreciate the insight into the seasoning.  I have been contacting quite a few different lenders as well who can confirm that.  Great information. 

 John, thank you.  That is exactly what I was assuming as well.  I'll send you a private message and we can discuss further.  Thanks! 

Ok, long story short. A seller lead came to us (business partner and I) 2 days before their house was to go on Sheriff's Sale. We negotiated with them that we would pay the arrears and then purchase the house from them for $150,000. The current market value of the property is $230,000-$250,000. I would like to finance it and use it as a rental property. Aside from a hard money loan to purchase and then a conventional refinance... is there any way to approach a lender with this? I know you can't do a gift of equity for an investment property according to the couple lenders I've talked to already. We are also working on getting HELOC's in place to fund this deal and then do a conventional refinance. I just didn't know if anyone on here had done something similar or had any advice to share. It's backward from how I would have normally done it with more time on my side. This was all dropped in my lap so quickly I sort of slapped it all together more to save the house and seller's from getting kicked to the curb. Thanks!

Thanks for the advice Frank. All good points and I'll have to think on some of that. I appreciate your input. 

 Yep... Tried that, he is a good friend of mine and explained how all of this could help them in the future but they are pretty focused in the now. I even explained what I intend to do with the property and how it will make me more money and launch my investing career... For now it's more of a burden to him. Oh well. I can't say I'm not trying. 

Well, good morning BP,

I have been gathering more information on this property and figured I would keep this discussion rolling.  I appreciate everyone who has commented so far.  Your wisdom is keeping me grounded. 

First, we had two separate listing agents (that we knew) run through the property so we could get an idea of what the market would handle price-wise for this property. The listing prices both came in around $195,000. This is due to a foundation problem that needs to get fixed. We have had 3 contractors come and bid on that job and it is around $15,000.  This fix alone would bump the value to in the $230,000 range (again this is from the listing agents so I'm taking it as a grain of salt). 

Finally, after reviewing the financials of the property over the last year it is cash-flowing at just over $100/mo. This includes PITI, vacancy over the last year (and on average for that area of the city which is currently at 4% so I used 8%) Maintenance costs have generally been pretty low but it is an old house and is obviously starting to have issues arise.

After working my own numbers on the property as it currently sits its yielding a Cap Rate of 5.2% generating an NOI of around $11,700/yr.

Now, here is where I see improvement and some of my concerns:

- After surveying rents in the area I have found that current rent of $1950 is $250 low and they haven't been raised because of the relationship of the tenants to the landlord (not a business decision).  

- Taxes haven't been reassessed on the property in 7 years and have only steadily increased even though the property, in its current condition, has decreased. 

- Insurance price was not shopped around for and hasn't been re-evaluated in 7 years. 

- Certain expense costs are being paid by the landlord and not passed to the tenants which is cutting into the cash flow.  

- no updates have been done to the property to increase value in the last 7 years. 

- mortgage is 7 years old and if refinanced would allow for a lower interest rate and lower payments. 

Now, if you are still hanging in there with me... I am obviously apprehensive about acquiring a property that needs a new foundation unless I'm getting a real great deal. He has mentioned selling the property for what he currently owes (about $175,000) on a Sub to with no money out of my pocket if am willing to take care of the repairs. 

At this point my next logical step will be to have an inspector go through and assess the rest of the property for other maintenance items. I can see the immediate value in the equity I could force and the improvements to cash flow potential. Downside is the maintenance stuff and can of worms I could potentially be opening. 

If anyone is still with me and has the time I would appreciate the feedback to my research so far.  Thank you all in advance! 

@Bill Jacobsen, Great list and great thoughts!  I am definitely considering assuming the mortgage (if that is even possible) or a subject to transaction.  He is very willing to work with me as I learn the process and figure out financing.  I'm also trying to learn how to assess value in a property... I'm just trying to find a baseline to work with for other properties in the area.  Thanks for the great value in your comment, I appreciate it! 

@Steve Vaughan: I'm not sure what the purchase price will be yet or how much is left on the mortgage.  It sounds like he wants to see if I can take over the property (which would be great if a Sub to would work).  I like your "100x rent" figure.  that makes sense.  The other very similar properties in the area are renting for $1,000-$1,300 per unit.  The current tenants have been in the property for years (the upper for 4 years and lower for 2 years) and have seemingly been model tenants from talking with this guy over the years.  I will for sure post again tonight with an update! Thanks for your comment!