All Forum Posts by: Tamara Deering

@Mark Wilson

You need a local real estate attorney, you need to buy the house subject to the existing mortgage or wrap the mortgage without triggering the due on sale clause, you also need to negotiate rent for the time the seller remains in the home.  You haven't said how much the seller is willing to sell it to you for and what your financial status is.  Best case scenario is to negotiate to buy the property at a price that will allow you to pay off the existing mortgage and cover your new mortgage payment with the rent that the seller is going to pay you to remain in the home.  But since you are looking at a seller finance I doubt you have the capital to do that at the moment.  You could get some long term finance from a commercial (hard money lender), the lender I work with will go up to 75% so you could offer $375,000 buy the house, the seller pays of the mortgage and you lease it back to them.  

@Jeff Thomas

This is not necessarily a great deal unless you are planning to live in it.  You haven't given enough of the financials to determine if as a rental it makes sense, run it through the BP rental calculator to see.  If you are going to use hard money to purchase it you would pay 3% in origination fees and would be able to finance about $225,000. The origination fee would be $6,750.  You would also need to cover all of the closing costs so say that your expenses to purchase including the origination fee would be about 10k that means you need to get the house for $235,000 for your $20,000 to cover your costs and the down payment and be at the common 75% loan to value. If you turned around and sold it for $300,000 you should calculate 8% in selling fees, so your maximum profit would be $31,000 which does not include the carrying costs which would include utilities and the interest payments which would be around $1,875 a month, usually with a 4 month minimum.

If you are going to occupy the property or house hack, the numbers are completely different and make a lot more sense.  

@Dustin Bradley

Your numbers are pretty conservative, rightly so, but consistent with a BRRRR deal. Realistically, you shouldn't have much maintenance or vacancy in your first year because you will have repaired it before you rented and fixed the systems, and you should have a one year lease. The PM fees are what is really hurting you, I don't have any rental properties but the real estate company I work for has 7 properties and I have taken less than 10 maintenance calls in the last 6 months. The properties are a mix of old houses that have not been rehabbed (4) and newer properties (3). 3 of the calls were plumbing related, 3 were for handyman type services, 1 was hvac and 1 was pest control, mainly I collect rent. I have heard people talking about Cozy, they seem to like it and it is free. If you are comfortable handling a rehab at a distance then vetting a handyman and a plumber should be no problem for you. I am not familiar with the market in Ohio so I don't know how often deals like this come around but my gut instinct is telling me that this is a good deal. If you can save 5k on the purchase that makes the deal almost a perfect flip.

As for other markets, San Antonio has some deals that fit your numbers but the rehab will probably be higher because properties in that price range need a lot more work.  Rents seem comparable, maybe a little higher in San Antonio, and we have a much lower unemployment rate and a growing population. But it sounds like you've got Ohio figured out so I wouldn't recommend switching horses at this point.

If you are going to build new multi-family I would consider investing in opportunity zones, there are many tax advantages, you probably won't qualify for the most generous of them because you need to have everything in place by the end of the year but the incentives are phased.  Yes, if you can pull out equity and not increase your debt load I would definitely do it now.

Go to his broker with the documentation that you have drawn up to bring to the board of Realtors.  If the original terms of the contract were not met you should be able to void the contract, however, you need to review the contract that the attorney drew up because their may be non-standard clauses in the contract.  

You send him the contract electronically, via docusign or something similar.  You receipt the contract with an Indiana title company or attorney.  The person who handles the closing for you title company or attorney would need to do a mail out to the seller in Maryland.  If you are assigning the contract then your assignment would be handled the same way with the modification of the contract being sent electronically to the seller.

Getting 80% cash out will be difficult, you would need a conventional loan and they may have seasoning requirements and may or may not allow you to refinance in the name of your LLC. Most of the loan products I'm familiar with in the commercial space are in the 65 to 70% cash out zone and they want pretty decent credit to offer that.

@Scott Chapman

I don't know the Atlanta market but in the Austin market, another booming market, homes that have an existing tenant tend to sell for slightly below market.  This is because they don't offer the immediate equity boost of being able to raise the rents and fix up the property, nor do they allow an owner occupant to move in.  If I were you I would investigate these opportunities and see if there is something like that in Atlanta that would work for you.  If most of your mortgage was covered for the first year even if your not cash flowing huge numbers the deal could make sense.

@Robert Richardson

I'm sorry I misread your question. If you have enough equity in your existing home you can refinance to a conventional loan and get rid of the PMI. Typically it is 20% in equity. And yes, you may be able to qualify for a new owner occupied FHA loan but your debt to income would need to be in line, so the rents from the duplex would probably need to cover the mortgage. I am not a residential consumer lender so I'm not well versed in the intricacies of making this work out. I would find a NMLS loan originator/broker in your market and ask them to find some loan programs that would work for you.

The numbers are tight on a flip, your cash in would be $90,000 not including closing costs and construction overruns, selling fees about 7.5% commissions, closing costs, property taxes so profit is about $21,000 less purchase costs. So some options, you can take the risk on a flip if you've got good contractors and construction experience. You can self manage and get your expenses down. You can buy it, fix it up and sell it off market as a seller finance, so you get monthly income with no repairs but all of your capital is tied up except for a down payment. Typically on a seller finance you can sell for a higher price and charge higher interest than normal say $130,000 request 10% down and 8-10% interest. You could then sell the note. You could BRRR anyway with less than optimum cash flow if you expect the area to appreciate or you could leave more money in the deal when you refinance and increase your cash flow.

Personally, I don't hate the numbers on this deal but if it doesn't meet your strategy or you are fudging the numbers to make it work I would pass.  You don't want your first deal to go south, that takes all the fun out of it.