All Forum Posts by: Tim Delaney

The refinancing generally comes from a bank because they will have the best rates. You buy the property with private lender money or your own cash and then rehab it and get renters in. Now the property should be worth more than what you originally paid for it, so you go to the bank and tell them you would like to refinance the property and take out a 30 year mortgage. If you had a private lender they bank will pay them directly so they remove any rights to the property and then give you any additional cash up to about 75-80% of the new value of the home. Essentially refinancing is just like going out and buying a house with a mortgage from the bank, except in this case you already own the property.

I found Crushing It in Apartments and Commercial Real Estate: How a Small Investor Can Make it Big by Brian Murray very useful.

Just to echo some of the other posters: wires, pipes and fixtures are likely gone, so be prepared for that. You have to look carefully on a neighborhood by neighborhood basis because even though you are doing the work yourself the cost of materials you put into the home may still cost more than the house will appraise for when you are done. If you are keeping as a rental then it may not be a big deal, but if you are trying to flip it may not always work out.

@Sean Buchner I disagree with the others posting here, but I may be more risk tolerant. I'm not 100% sure you will qualify for an FHA or if a bank will accept a cosigner, but the only way to find that out is ask a bank - personally I like M&T a lot, but I know some smaller banks may have slightly better rates. With FHA loans you are allowed to count the future rent from the house as income, so by purchasing an investment property you are creating income for yourself. They will want to see that the Mortgage principal, interest, PMI, and taxes are less than 75-80% of the rent, so you will probably need a multi-family to make this work. You will also have to check on the legalities, but I believe you only have to live in an FHA purchased home for one year, so even if you get a job out of town you can always keep the property and continue to rent it out (make sure to factor property management in your numbers from the start).

One area I do agree with the others here though is that you need some reserves put aside for unexpected events. That is a must for older Buffalo homes. The roof can be mitigated with good inspection - you shouldn't need to unexpectedly have to redo the whole thing. But heaters, hot water tanks, windows, doors, and so much more WILL need fixing or replacing on a regular basis.

The numbers look pretty solid, but you need to verify. I purchased an 11 unit mostly commercial earlier this year and the maintenance costs are more than double what the seller presented and that doesn't even cover the major deferred maintenance and improvements that I am trying to get taken care of. I'd be happy to look over the details with you if you want - just send me a message.

A CPA or bookkeeper would be helpful if you aren't sure how to present them. You could also just format them nicely so it doesn't look like you just printed off spreadsheets. Another option is using a free bookkeeping service like Wave (waveapps.com) which you can set up separate books for each property and generate nice reports. I think Stessa is another option specifically for real estate.

Depending on your budget the Elmwood Village area or North Buffalo (close to Hertel Ave) are very hot markets right now with lots of people looking to rent. Give Dave Vari a call, he is fantastic and has experience working with out of town investors. You can find his contact info here: https://davidvari.huntrealestate.com

If the wires are all there and functioning and you can mark where the jacks would be (photo of the room with an x) saved in a file then you may as well leave the wiring just in case a potential buyer wants them.

Internet wiring if it is there could be beneficial to place boosters and or allow people to wire in smart tv's or whatever fun devices they come out with in the next decade. You also need the one coming into the house for the primary modem/router at least.

Are you asking if that interest payment is tax deductible? I would think that if you set up your ownership of the house as a business entity and are taking a commercial line of credit then yes, it would be deductible as a business expense. From my understanding the interest on a HELOC's on your primary residence is not tax deductible, but since this other home is an investment it should be. I am NOT a CPA though, so obviously cross-check my info.

I wouldn't bother. Many people that still use "landlines" are actually using the cable phones provided by their internet/cable provider and are different than old school landline.