All Forum Posts by: Cynthia Hartley

Thank you for your replies. I had a fence installed at a property. I called several fence companies to ask if they install fences in Baltimore City. Several did. I selected one to install a fence, but I did not know a permit was required and he did not tell me either. So I now have to remove the fence, get a permit and reinstall the fence. I think the fencing company, having the experience of working in Baltimore City, should have known and told me about this requirement. Do I withhold final payment or chalk this up to an expensive lesson learned?

Hi there,

Baltiimore city has a lot of permit requirements, regulations and restrictions for work done in historic neighborhoods. Generally speaking who is responsible for ensuring compliance with the permits and regulations? Is it the contractor or the home owner? 

Hi Peter,

I bought a semi-detached in Deanwood. No, not the same as Crestwood, but it's still greater DC. I converted the basement to an accessory dwelling unit. The ceiling height was 6'9; requirement was 7'. While I too would have liked to have gone to 8', the rent would not have warranted the extra expense and going to 7'2 was good enough. Sq Ft was approx 600.

In addition I gutted the entire house and did all plumbing, electrical, gas (all separately metered). I budgeted $150k, but in reality it was closer to $185K. 

I think you should ask yourself if the ROI is worth the addition investment to go to 8' high ceilings, if you are not living there. Most renters don't care. If you can make your money back in 5 - 6 years, then OK.

Also keep in mind that if there are no other houses with accessory dwelling units in the basement, it is going to be difficult to get comps for a refi. 

I would love to hear what you decide to do. Please keep me posted.

When my sister and I were in the process of buying our first house everything was fine and dandy with the lender. We were preparing for a 30 yr fixed and all was going well. When we filled out the paper work indicating our race as Black/Hispanic, he then tried to persuade us to go to a 5 yr ARM. Fortunately, we knew better. However, whenever I am asked to identify race or ethnicity on applications, I now decline to do so. That said, in the years since, neither I nor my sister have had any issues getting a mortgage from any lender.

I first heard of this story on Democracy Now. I have always been a HUGE fan and supporter of that news program, but in listening to the broadcast, they did not deliver all the facts, which was disappointing and disconcerting. They did not disclose the debt to income ratio of of Farroul, her mother, or her partner. They only revealed the FICO score (707) of the partner, which while it is not bad, it is not great either. They mentioned Farroul's mothers ability to get loans for Farroul's and her siblings' education, which implies that while the mother may make a good salary in the education field, she may also be deeply in debt paying for her children's education too. 

The long and short of it is this was poor journalism. We cannot make a determination without all of the facts. Even the guy who did the analysis said he excluded debt to income ratio and FICO score, which are the two primary factors in lending. If I had a renter with high debt and a low FICO score, I would not rent to them regardless of their race or ethnicity. The same holds true for lenders.

Hi Zach,

I presume you have a salary and your sole source of income is not the mobile home. 

My first question is do you have another credit card onto which you could transfer the $30K in existing debt at 0% or even 1% or 2%. If so, I would a balance transfer and keep the mobile home and collecting rent. Setup your bank accounts so that the rent is automatically deposited to a bank account each month and the credit card is automatically paid from that bank account each month - whether the bank pays the card or the card pulls from the bank, whichever will allow you to pay more than the minimum. From the current rent set aside a certain amount each month for those capital expenditures that you mentioned - roof, water heater, furnace, AC, etc. - and put the balance, less the PM fee to the credit card. You should have the card paid off in 3 years. If you make additional payments to the card from your salary even better.

If you do not have a card to which you could transfer the $30K balance and the interest rate is going to go up into the double digits, which may make you feel uncomfortable, then sell the land and mobile home. If you sell it for $180K, you will walk away with $170K more or less (closing costs, etc.). Then pay off the $30K, which leaves you with $140K. Put away $30K in an emergency fund, which leaves you with $110K. Pay whatever amount you feel comfortable with towards the principal on your house and use the rest to invest in another property. 

That said, get advice with someone who is knowledgeable about 1031 exchanges. They could give you better advice as to what to do with the $170K so that you minimize or eliminate capital gains tax. 

I personally would go with option #1 as I don't believe in selling property, especially one that is generating cash flow.

Good luck. Let me know how it turns out.

If all I had was $20K, I would buy a SFH and get housemates to fully or partially pay the mortgage. That is what I did. I lucked out with market appreciation, which then allowed me to refi or get a HELOC to purchase another property as an investment.

I've heard a lot of BP podcasts with people in a similar position. From what i've heard, wholesaling is the best approach for people who have little money to put down, but they want to work hard and hustle for the business. Everyone is different. There is no one size fits all approach. 

I am not a finance person, Jacob, so I suggest you reach out to your local bank to see how much you would pre-qualify for. The difference in interest rate could be as much as 1.5 points, which on a $100K loan would be about $90 per month. That could definitely impact your net income. You will absolutely need two years tax returns to prove income. With a bank, there is no way around it. Bryce lists the items for which you would need to save in order to purchase the property. At best you are looking at $20K down payment, $7K closing costs (depending on bank, state, county taxes, etc), $1K insurance, $2K for month rehab holding costs (assuming as a newbie it will take 3 months to do the rehab), the last three items are impossible for anyone to answer based on a hypothetical analysis. Finally, getting things done fast is the surest way to throw money out the window. Nothing worth doing, is ever done quickly.

The second question is easier. Yes, your aunt can sell the property to an LLC. She can sell the property to anyone or any entity she wishes. The question is how are you financing the purchase. If through a bank, an LLC will need a minimum of 20% down. If as an individual, you can finance for as little as 3.5% down.

The first question is more complicated. You cannot refinance a home in an LLC. It is easier to refinance if it is in an individual's name. You can get a portfolio loan for properties in an LLC, but that presumes you have a portfolio of homes i.e. several homes that can be used as collateral for the portfolio loan.

Alternatively, your aunt can hold the note and you pay her directly. If you go that route, once the deed is in your name, you can go to a bank for refinancing of up to 80% of the appraised value, pay your aunt back, and use the rest for your flip. You can then quit claim the property to the LLC. However, your bank may call the note due since you no longer hold the deed to the property.

There are advantages and pitfalls to whichever approach you take. I suggest you speak with a real estate attorney. The title company you select for the transaction should have an attorney on staff.

Final consideration is that it is always risky to go into business with family. I did it once with my sister and we got into the biggest argument. Fortunately, we got past it and found other ways to collaborate in real estate. 

Good luck.

That is too broad of a question. However to start, I suggested you go to the business licensing office in your city and find out the rules related to contractors. For example, in some cities, contractors cannot ask for a deposit of more than 15%, in other cities it is 30%. Find out those guidelines and include them in your contract. Next read the various forum posts and look in the files. There has been a significant amount of discussion on this topic.