All Forum Posts by: Tamara Deering

I don't know where you are purchasing but my market has really strong tenant laws. So the first thing I would do is make sure that you have reviewed the lease that is in place between the sellers and the month to month tenants.  Make sure that you know exactly how to provide notice, personally if it were possible I would have the seller's notice the tenants and schedule the closing to coincide with the end of the lease term.  You may need to revise the earnest money agreement to pay 1 month's rent if the deal doesn't close in time as an incentive to reassure the owner that you are actually going through with the deal.  How long do the other tenants have on their lease?  Make sure you know all of the laws on proper notice, rule violations, return of security deposit, that the current owner has an escrow for the security deposit that they are turning over, etc.  

@Dominique Long

It's time to look into other financing options, is there a conventional program that you can get into?  Do you qualify for any down payment assistance programs that will bring your mortgage down?  Will an small second from the owner get you there?  Are the units vacant and that is why you had to use an appraisal for rent rates?  Can you get a lease signed for a tenant that is $150 a month more than what the appraisal came back? Will a break from your Realtor on commissions help make the deal work, what about seller concessions? A lot of people have a lot riding on getting this deal closed so start asking them for their thoughts. The seller, your Realtor, the seller's Realtor, and the mortgage broker don't get paid unless this deal closes so don't be afraid to reach out.

The other thing you need to question is whether this deal still makes sense if the appraiser's numbers are more accurate than yours.  Are you going to be able to swing the payments if the rent is $150 a month less?  Will you still cash flow?  This would be a great time to evaluate all of your assumptions and make sure that the purchase of this property is your best move.

@Vincent Pirrone

So you are in the same spot as many people on BP, you want to get into a property with no money down.  So you can investigate the typical strategies, owner finance, sub tos, partners, etc.  But...given that you own a property and all but $200 a month is covered, I would actually spend some time working on gathering your down payment funds.  Start figuring out how you can save as much as possible as quickly as possible, maybe a side hustle or second job?  Check your expenses and get them in line, with virtually no housing expenses you should be able to save the down payment very quickly.  The importance of cash reserves is under-represented on BP but it is really a crucial piece of the investing strategy.  You are well on your way. Keep up the good work.

Welcome to Texas, I don't know much about South Texas, I am in Austin but I've been hearing a lot about people being interested in El Paso and McAllen. I know El Paso is booming but I've heard that getting financing in McAllen is difficult.  Best of luck to you.

Kirk,

I think you will need to talk to a tax professional about whether or not a 1031 exchange makes the most sense.  You need to consider how much it will cost you in capital gains tax and depreciation recapture taxes vs. the price and difficulty of a 1031 exchange, these are not questions that can be answered on this forum without you providing a whole lot of personal information that you are better off not sharing.

Generally, no you can't have two FHA loans at the same time. There are exceptions to the rule but they are hard to qualify for. You can keep your FHA loan in place and qualify for a new home loan as an owner/occupant, just not FHA or a first time buyer's program.

A heloc is a good way to free up cash for your down payments, etc. However, keep in mind that you will need to be able to cover the loan payments on the heloc and it is your personal residence at risk if you default rather than your investment property. I wish that I had used my HELOC for a down payment when I was starting out and then used hard money to finance the remainder of the loan and the rehab. I used all cash and my heloc to start and ended up cash strapped and had difficulty recovering in time for the next deal. My first investment property was purchased in 2008 right before the major market crash so my situation was a little different but I still think using as much of other people's money tied to the asset that you are borrowing against is a good strategy.

I do use fliers on my rental properties, I fill a box when I put my sign in the yard.  I do this mostly to help people who are driving by the property self-qualify.  The self-qualification process weeds out a lot of phone calls from people just wanting to know how much the rent is, how big the property is, etc.  I am not a rental agent per se, so capturing phone calls from prospective tenants is not part of my business model.  If you are a rental agent, the phone calls are probably worth more to you because you can collect the lead and steer them into a better property if the one you are listing is not a fit.

When I used this technique on a listed property I wrote two separate offers. I am a Realtor and it made sense to me to have the offers separate so the seller could look at a stack of offers and pick the best one rather than try to decipher a complicated offer. If the property has been on the market for a long time without any interest you could ask your Realtor to draw up a letter of intent detailing the three scenarios but truthfully if you don't have a track record with your agent this strategy will work better on off market deals. See if your Realtor is willing to send you a list of expired properties everyday and you can try and talk to the seller directly if they remain off the market. The biggest problem with the expired listings is they are usually put back on the market before you get the chance to call. You can also look at FSBO's to practice your technique. Finally, if your Realtor is open to it, they can send you the offer form and you can fill out all of the information and they can submit it, saving them from having to do a whole bunch of work on a hail mary.

I suppose it depends on your market.  Real estate attorneys in my area go from $200 to $500 an hour depending on whether they litigate or not.