All Forum Posts by: Tanner Sherman

 Will you be subletting the offices out or occupying the whole building? Also curious how you structured the ownership of the building vs the ownership of the business. 

Most people that are building these barndominiums are building them as a primary residence, so I don't know that there is enough data as to whether or not they would be successful as investments. I would suggest talking to community banks about how they will estimate the value. If your lender will be using the comparable approach, it might be difficult to get a loan as there probably isn't a whole of comparable sales since they are really new to the market. If they will be using the income approach, then all you are doing is putting together a business plan for the lender showing them how your project will more than support the debt service and be a viable investment for the bank. 

I would expect rental rates to be comparable, I think this a really good idea and one I have definitely considered myself! Get really good at estimating build cost, rental rates and be ready to pivot constantly as you enter into the development world! 

Have you thought about posting something like this to your local REIA/Meetup facebook pages? That is a great way to meet motivated investors looking to learn. If your area doesn't have one, maybe you should be the one to start it!

To answer your question, yes, you can purchase a home using an FHA loan and the assistance program for the down payment, but there are some important points to consider. First, with an FHA loan, you are required to "have the intention to live in the property as your primary residence for at least one year". Anything other intention at the time of purchase is mortgage fraud. After that initial year, you have the option to rent it out.

However, before you decide to rent it out, be sure to check with your specific FHA loan terms and local regulations to ensure compliance. Some areas may have additional restrictions or requirements related to converting a primary residence into a rental property.

Regarding refinancing, if you decide to convert the property into a rental after living in it for the minimum required time, you can potentially refinance later. Building equity is crucial for refinancing, as the lender will likely require you to be at least at an 80% Loan-to-Value (LTV) ratio, and that's where adding value comes into play.

When you invest in a property and make improvements, the property's value can increase over time. This increase in value can be represented as equity. To refinance at 80% LTV, you would need the property's appraised value to be high enough that the new loan amount is only 80% of that value. When you first purchase using the FHA 96.5% LTV plus the down payment assistance, you will be essentially at 100% LTV. Your first year will be mostly interest payments so you won't have much equity through debt paydown for a few years. By adding value through renovations or natural appreciation, you increase your chances of meeting that 80% LTV requirement when you refinance.

So, in summary, yes, you can live in the property for 1 year, and then rent it out after fulfilling the FHA's residency requirement. And if you add value to the property during your ownership, it can potentially help you refinance at a favorable LTV ratio in the future. You are more likely to want to stay in this loan as it is fixed rate for 30 years and you won't have any need to refinance for quite a few years unless interest rates go down. (Don't hold your breath)

 Mobile home parks are a very niche area, so start consuming every piece of information you can about them. While you are self educating, you can start to research all the mobile home parks in your area and expand out. Start writing letters to the owners explaining that you are local investor that would love to talk to them about how they got started. If you can get a sit down conversation and fluff their feathers a little bit, they will love it. The real value is when you can find a way to add value to them. Maybe it's marketing, cleaning out some trashed units, etc. Work on building the relationships so you can learn first hand and when they are ready to sell you will be front and center, and they already know, like and trust you. 

You should start by taking commercial loan officers from your local community banks and credit unions out to coffee. Building relationships here is the absolute best way to get a deal done. In the meantime, get really good at estimating ARV and running pro formas. You will have to sell the banks on your stabilized projections for a property in order to obtain a loan on it. These lenders will be underwriting the property's ability to service the debt.

Talking to a residential broker/loan officer to get a pre approval can be a good start for new investors. Their terms are typically going to be 25% down, with strict underwriting criteria and they care less about how the property will perform as a rental, they want to see debt to income and the borrowers ability to repay the loan. 

First recommendation would be to talk to multiple agents/brokers to get a BOV/BPO. You are interviewing them as they bid on listing your package for you. You could also entertain some type of Open Listing arrangement. An open listing is a real estate agreement where a property owner allows multiple agents to market the property for sale, without exclusive representation. Multiple agents compete to find a buyer, and the agent who successfully sells the property earns the commission. While it provides broader exposure, an open listing may lead to reduced dedication from agents and potential communication challenges.

Hope this helps!

Congratulations on a great deal. Did the HOA have any issues with you renting the property?

I would recommend calling absentee owners in your area and ask who they use for property management. This will give you good first hand experiences and you can judge the quality a little better than Google reviews will show. Most property managers have terrible reviews, as it is a tough industry to be in. 

I think these are great tips- I'll add one more. Get really good at estimating ARV and analyzing deals. If you don't know what a good deal looks like you're not going to make money if it slapped you in the face.