All Forum Posts by: Steven Goldman

@Sydney Brisco   Manufactured homes are tricky from an appraisal standpoint. I would be careful to check that their are other manufactured home within the required distance for an appraisal. Many lenders will not lend on manufactured homes. Here is a blurb about manufactured homes:

Appraisals

Appraisals of manufactured homes must contain at least two comparable sales that are also manufactured homes.

This is often one of the most difficult requirements because manufactured-home-comps are few and far between in many areas – frequently making such homes very difficult if not nearly impossible to appraise.

In our experience, manufactured homes tend to appraise for far less than standard homes because the appraisals are so difficult, because financing is more difficult to obtain, and because of a stigma that seems to be attached to manufactured homes (justified or not).

As an investor I would stay away from manufactured homes unless you are planning to buy in cash and hold long term. Just saying.....Good luck.

Hi Chad:  You should be aware that a budget of $37,500.00 for a full gut rehab including all wiring plumbing and systems is completely unrealistic. In my experience as a fix and flip broker and a rehabber, you should take the square footage and multiply by at least $60.00 per square foot in order to estimate the cost of rehab. If it is rental grade you might be able to get away with a little less. If you are using a general contractor more. Any fix and flip broker or lender will review your scope of work or accuracy and cost. Before you enter into an agreement of sale get a mentor and a agent and broker or lender to review your current value, after repair value and cost of repairs.

@Zeliang Zheng

You have three options:

1. Investor home equity loan: At the moment you can take a investment HELOC out on your property in order to draw equity out up to 80 percent depending on your D.T.I. and credit score.

2. Bank refinance. Banks are in some cases refinancing investment properties at 4.99 for a 10-20. Ten years fixed that 10 arm. Full document, full vet.

3. Funding companies: Hard money lenders will lend up to 75 percent of the current value for 30 years. Range 6.5 to 7.75 30 years depending on your credit score and the debt service coverage ratio.

In choosing between the bank and a funding company you need to consider the following. Are you going to hold the property more than 10 years? If you are not than the bank is the better choice. If you are, you run the risk of increases in interest rates in year 11 and beyond. The monthly payments are very similar due to the difference in the amortization period.

Many of our seasoned investors choose to take the thirty year loan despite the higher interest rate because they hold long term and want certainty of payment. If rates fall they can always refinance. I hope this helps you make a informed decision. Good luck!

@Kailas Tare    As a rehabber and lender I would suggest that on your first full gut rehab. you use a contractor. If you have some experience in some of the trades that do not require a license you may be able to get the contractor to allow you to do some of the work and draw some of the funds thus paying yourself. It is my experience that a contractor with an established crew can complete the rehab in much shorter a period of time than you can. For instance he may regularly use electricians and plumbers who will more easily make themselves available on his schedule but, would not be as responsive to you. Time is money in a rehab. so the longer it takes the more it costs. 

Many hard money rehab lenders will not let you be your own contractor unless you have a track record. If you can spend time at the property you will be able to get all of the subcontractors cards and observe the order of construction and get a valuable learning experience. Good luck. 

@Gina Shumway You create a LLC for each property and include the investors as a member. You create a operating agreement which dictates the division of expenses or contributions or any other issue germane to your partnership. Than you file a partnership return(for the LLC) with your income tax return which divides the profits and losses between the partners in their respective shares. Many DSCR lenders will not require every member of the LLC to be a guarantor. The member with the highest mid-score can be the guarantor which may allow you to obtain a better rate. A good broker can do deal analysis and may be able to suggest the best way to structure your LLC or, give you the name of lawyer who can. After you have the first operating agreement you can use it together with the first LLC as a template for all future deals.

Quote from @David Burgraff:

My question is how much preparation should be done prior to looking for residential deals.  Should I look for deals, THEN find all the players, or should I have ALL my ducks in a row prior to looking?

Examples: Hard money lenders, private lenders, property managers, general contractors, buyers for wholesale deals, creating an LLC, etc....

How many of these should I have locked-in prior to searching??

thanks all!!

Hi Dave, before you start looking for your deal you need to line up a realtor, banker or broker and, contractor. In the current competitive environment you will not have time to assemble that team after you find a property. In most cases in order to make an offer you will need a realtor to help evaluate the current and after repair values. You will also need a  pre-qualification letter. In order to obtain financing you will need a scope of work. All of those things require a knowledgeable team so that you can move expeditiously and have some comfort level that the deal makes sense. A good broker will have experience in the BRRRR arena and should be willing to analyze your deal before you make the offer. A good broker will be able to review your figures to make sure the deal makes sense from a lending perspective. Good luck.

@James French I am not sure the advice I am going to give is real estate related. As a divorced grandfather with five children I have significant personal experience with the impact a divorce can have on your children. So, if your children are your first priority than I would sell the property and use the money to move on to a new deal. Whatever financial value gained by staying in the house will be severely outweighed by the chaos it is likely to create in you and your children's lives. If your wife was reasonable and you could cooperate, she would not be taking the position she is taking regarding the ownership of your house. 

My divorce occurred when I was married for 20 years and had three children. My x-wife had similar views to your x and the additional damage which would have been caused by arguing with her over assets, was not worth the pain it would have inflicted on my children. Why pay lawyers and fuel the already tense situation over a piece of real estate? You can buy another piece of real estate but can not repair the damage that a fight over your home will cause you and your children. Good luck and God bless. 

@Chris Momongan  Georgia is a really hot market. @Andrew Postell is accurate when he advises you to talk to lenders before you make a purchase. Most rehab lenders want to do a all in one loan. It is hard to find a ender who will give you a second on a rehab. property. I always advise that you assemble your team before you start your rehab business. Among others you need a good real estate agent,(helps with values) lender, contractor and property manager as you go forward. Good luck.

@Jay Smith Jay you will need to be in title for a minimum of six months to use the appreciated value of the property. Have you had it that long? A DSCR lender will have higher rates, longer term and faster processing. Good luck.

What you are trying to do is  an end run around the banks down payment requirement. You can not do through the back door what you can not do through the front door. Let me explain. So the value is 1.1 million why would the seller sell the property to you for $825,000.00? Second, where is your skin in the game. 36K on 1.1 million. I think not. So you can buy the property for $825,00.00 and they will lend you 75 to 80 percent of the purchase price at that number. Otherwise where is your contribution. They are not going to consider the artificially created equity using 36k as your down payment. Looks like buyer seller collusion to the bank. If only it was that easy.