All Forum Posts by: Steve Wilcox

You need to decide what is important and talk to whoever you plan on using for financing. Many lenders will not lend if the property is held in LLC, or might require a commercial loan which will have much higher fees associated with underwriting, as well as typically does not have the 30 year fixed rate.

Talk to a few lenders, (dont waste time with the major national banks), have a brief 1 page summary of your plan for your first purchase and a pro forma income expense sheet and some info on the property. If you have 30% down you can get commercial financing but you will need to decide if having ht property in an LLC is worth (a conversation to have with your attorney) after you find out what your actual options are from real lenders who are active in your area.

East Orange is brutal to rehab in, the town is difficult to work with compared to some of the other local areas. However if you can jump through the hoops the town is defiantly safer then Newark, however the taxes are about double what you would pay. 

Also parking in EO is a huge problem, and converting a single family to multi is a process. Regardless know that this area is trial by fire for a newbie from out of town. 

republic closing in fair lawn does investor transactions, back to back closings, ect

I would also recommend Chris Goodson law offices, you can reference me and they will take care of you. His office specializes in working with investors and can help navigate the challenges of a creative deal

I use affinity group

Almost all the time the comparable sales approach will be used. However some lenders may use an income approach/ commercial appraisal if you are getting a commercial loan even on a small 2-4 family property, especially if you are refinancing a couple of buildings into one larger loan. 

Typically on an investment property I have been asked to show proof of security deposit, leases for tenants and some lenders have asked for 3 months verification that the tenant has been paying (i.e. on the property bank statement). 

I have been asked for this on both income and comparable sales refinances, however on comparable sales it has been a criteria of the lender not a portion of the appraisal. 

You also will need to consider seasoning requirements a lender will have to allow you to use the new appraised value to refinance against. Most lenders will require you own the property for 12 months before they will allow you to use the new value to pull out cash, before that most will only recognize your purchase price even if you have done major renovations. Some lenders might recognize some level of loan to cost(+/- 80%), but you will have to verify your expenses and they will make sure you are bellow 65% of the new value by appraising.

I recommend that if you are serious you write a 1-2 page plan, put in a pro forma deal of an actual property you would buy, along with a breakdown of the rehab portion, how you plan to manage the tenants (or if you a have a professional manager), ect. Go in to a few local banks in a suit and share your plan and see what they say. Be prepared to hear alot of no's but if you have a great credit score, personally qualify for a loan with verifiable income and tax returns, you should have no problem getting a loan (it just depends what terms they will offer). I also recommend calling some of the national companies like B2R finance, First Key, ect and hear what they can offer. Odds are the rates are higher form national groups compared to local but they do offer 30 year fixed terms which many local do not on these loans. (PM me If you dont find local terms you like, I use first key and have a good contact I can put you in touch with.)

The questions you need are 

1. Seasoning, 2. LTV (based on seasoning) 3. Verification of renters 4. Appraisal methods 5. terms of the loans 6. requirements from you (tax returns, verification of income, capital reserves, credit score, ect)

Historically I have found Newark has a vacancy rate of closer to 15-20% once you factor in all collection loss. 

Also make sure you have a high expense ratio, even though it was gut renovated you do not know the quality of the workmanship and materials that were used, and in 3 years people can beat alot of stuff up. Our maintenance expense in newark historically runs about 10% 

The 6 family buildings can be the toughest to manage and fill as compared to larger 10+ units or 2-3 family homes. What is the management fee, who is managing it now? What is the breakdown of current tenants- how many of them are actually paying, what are they paying and how long have they been there? 

I am active in newark PM me if you want to touch base 

Also be aware that newark investing is a very active management game, you need strong processes and the right team on the ground to protect your investment.

I am an owner of licensed GC co that works in Union and Essex county specializing in rehabs for investors. We are not really looking to take on any new clients but I can make some recommendations to you from looking.

Decide what involvement level you want to have in the construction process. We work primarily with investors who do a certain amount of volume or do not have the time/ desire to babysit. We are not the cheapest and are not trying to be, we provide quality service, and get work done quickly and professionally. Some people see value in that, others see value in lower price even if it means more head aches, and possibly burning through more then 1 GC per job. Keep in mind that if you want professionals who have quality workers, ect, that comes at a price. 

You hear lots of horror stories on BP about bad contractors, ect, however I find that as investors we tend to be very frugal, and tend to go towards price first. Many contractors will give bids that are very low with either 1. the expectation that they will make up for it with change orders or 2. because they don't really know their costs and they will stop showing up once they realize they are going to loose money based on the quote they originally delivered. 

Make sure whoever you use can provide you with a realistic budget for the work, reasonable payment schedule (not 50% upfront), and can provide you with an organized estimate (not on the back of a napkin or 'I can fix this for $X').

Good luck and congratulations on the decision to get started. I am very invested in Newark, and warn you to be very careful about where you look, and make sure you understand the area you are going and the potential tenants you will have to manage. 

You always have to get a CO especially if you are the seller. If you presented yourself as experienced investors to the attorney odds are he didn't think he would have to tell you because this has to happen on literally every single real estate transaction. 

Next time you can try to sell the LLC and its interest in the property after you close on it and then at least there is only 1 transfer of title rather then you buy, then you sell causing 2 transfers of title and technically the need for 2 smoke certs and 2 temp CO as you are now selling the property to a new buyer who has to sign off on the temp CO that they will complete the required repairs.

Every town has its own time period and it is something you should be aware of in future deals you might do 

The key to success in marketing is to be consistent and persistent. 

Odds are you will not get many hits on your first mailer, or your second. Also you need to be realistic with response rates from these methods. 

I don't think you can actually measure with bandit signs, but on mailers I know most people expect to get between 1-3% response, meaning that if you send out 100 letters you will get 1-3 calls (NOT DEALS, CALLS).  

You need to send lots of mailers and stick with it, put adds on craigslist consistently, and hang in there. 

Once you find a good multifamily deal in Newark send it to me and I will buy it ;)