All Forum Posts by: Tim G.

 Okay. I'll answer.

1. (Instant equity) It is no longer worth $530k and it needs renovations. You have NO equity. 

2. (RE benefits) Taxes yes, rents have flattened, appreciation will need to come after the market correction, and this place doesn't cash flow. 

3. (Location) Sure, it's great. That doesn't matter if you bought it wrong. 

4. (Exits) If you wanted to sell today you'd have to take a loss, You have no equity for a HELOC, Rates are higher now so there's no option to refi.

5. I see a 3/2 unit in this complex (smaller) listed for rent for $3100 a month. 

With this type of loan aren't you supposed to reside in the property? If your intent was to rent from the start, and you did a low-down owner occ loan you might also be committing mortgage fraud and publicizing it here. 

I admire your enthusiasm, but the place is no longer worth $530k and August comps are irrelevant in a market that is going down. You have multiple experienced investors trying to nicely alert you that we are concerned and it's being completely ignored... I mean it is too late though. 

A market assessment as of today, a quarter mile away. We have 5245 Reservoir Dr. a property a flipper bought for $470k in September. It's a larger townhome (not condo) 3/2 1740 sqft with a 2 car garage. They demo'd it, realized the market is in bad shape, and decided to list it. They listed at $580k and are now sitting on the market for $540k and it's not selling. This property will be a new data point soon and I wouldn't be shocked to see it sell at or near the price you paid. So in just a few months, a larger better property in need of repairs is selling near what you paid for your place. This is a declining market. 

The one upside is you used someone else's money to make this happen so it's mostly your credit and sanity on the line. 

Simple solution, pull the sales data for the last six months in your market. Now you have every company that is actively buying. Calling "buyers" in masse is a waste of the wholesaler's time and more importantly OUR time. I get dozens of these calls a week, they never have a deal or know a thing about real estate. Encouraging people to continue this is advocating for more pointless telemarketing to busy real estate professionals.

 Man this is cool data, thanks for sharing.

No deal, no check. Focus on finding deals, I am so tired of getting the "building my buyers list call". We want to look at deals. 

Sincerely, someone whose wholesaled 100's of homes in San Diego since 2012 and looks for the right buyer once I have the deal in hand. 

In my case, it was based I believe on 10% roughly of the purchase price. So by today's standards it's likely a much higher number. But I am not certain on that so I would encourage it to be researched. 

Another item I forgot to mention, I couldn't find a contractor willing to do the job and wait for payment like its setup with the 203K, they gave I think 1/3 up front and 2/3 when done. I fronted about $10k of my own cash to get things going and continue the work. Finding a capable contractor willing to do all the paperwork is tough and they will charge extra for it. At least that was my experience. I easily paid a 30-40% markup compared to my costs today on work but it had to be done that way. 

 I don't know on the full version, I was warned to do everything possible to avoid. It has many additional steps and I was glad to skip it. Some concerns of trying to pull that off are... 

1. Non streamlined, you must pay a 3rd party to monitor the process. Added cost for no value to you

2. If the place only needs cosmetic, why seek more funds? 

3. You will need to get the place at an even lower price to get these added funds as you MUST have purchase + repair funds be lower than fixed up appraised value. (in a declining market that could be additionally challenging). 

Hey Mary, my first purchase ever. It was a fourplex in San Diego with a 203k loan... this was in 2013 though. $325k purchase, $15k down, $30K in renovation money (cosmetic fixer, two units trashed, one not great, one ok) + $10k extra of my own funds to do some extras. It was a great experience. A decade later still the best move I ever made, it's a cash machine, and that $15k has had the best return on any investment I've ever made. But... I get times are different. 

Feel free to PM me, the market has shifted and prices are coming down. Investors & Speculators aren't buying as much so it allows the opportunity for folks to try and do deals like this again. But it does mean you need to be careful, lenders and realtors aren't quick to admit the new risks of a falling market as they need to earn a paycheck. This doesn't mean don't buy, but you must buy smart and be ready for all outcomes. 

You're going to want to build a team. You MUST use a contractor who has their $#@% together and you do not want to do anything but a STREAMLINED 203k this means only cosmetic repairs (no structural) and usually at or around 10% of the purchase price in repairs. The non-streamlined is not easy and can be a real pain. I've done the 203k and a conventional version. But both were a decade ago, both turned out well with some bumps along the way. Also, keep in mind the property MUST appraise for more than what you buy it + the repair funds they provide you. 

The big thing is obviously finding the deal, and the seller willing to take your more complicated offer. The multi-unit play is tough here but if you can pull it off long-term it could work. Mortgage rates are nuts right now so making sure it pencils might be a challenge. I love this loan it requires really being on top of your game and finding a deal where you can add value and solve problems. I got my deal because I'd buy it with heroin dealers in one unit, the cash investors in 2013 wouldn't take that risk. It paid off for me, that was my advantage. It takes these types of moves sometimes. 

I hope this info is helpful, I wanted to share as much here in case other folks needed this info too. I get this was nearly a decade ago so some things have changed, and others haven't. 

Want to know where this isn't the case, California. States with low to no state income tax need to get paid somehow, this is usually how.  There's data coming out that all but top 1% earners in Texas pay more in taxes than their Californian counterparts.  

In several posts you've mentioned the craftmanship being poor... have you considered fixing that? I can't imagine anyone wanting to pay a premium for a poorly assembled flip. Bad workmanship on the surface level is going to freak people out, they are going to wonder what shoddy work was done that they cannot see. 

Side note, have you hired a home inspector to check your finished product? It would be wise to get ahead of what your buyers might find and address now. Was this a flip?