All Forum Posts by: Tyler Kress

I reached out to her a few weeks ago but we make too much money for that loan. :( I was thinking if I can't figure something out try partnering with a buyer all else fails

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Hey everyone,

My wife and I are looking to do our first owner occupied house hack in order to take advantage of a low down payment. We have our eyes on a triplex which according to the analysis/calculators checks all the boxes. We were prepared to put together an offer with our realtor when she pointed out FHA will not allow it due to the peeling paint on the exterior of the house. Conventional on a triplex according to the few lenders we've spoken to is 20-25% down. She has given us a few contacts in the area for smaller banks/lenders that may consider doing a conventional loan on owner occupied triplex at 5-10% down. One of our lenders has already offered 5% down on a duplex. The list price is only $90k (not sure if that makes a difference).

I will be reaching out to lenders in the area but not sure what our chances are of finding a lender that will do such a low down payment in this case.

My questions...

Is it better for us to make an initial offer asking the seller to put siding on the house (something we would've done in the near future anyways) and add more than enough in the offer price to cover the cost of the work?

If anyone is local to the QC area, know of any lenders who may offer this low conventional down payment on a triplex?

Any other lenders out there who may be interested in helping us out? Though I am not sure private money would be the right solution here since we are comparing this to 5% interest over 30 years (and as I understand it private money is usually shorter term, much higher interest)

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Originally posted by @Matthew Olszak:

Originally posted by @Tyler Kress:

Originally posted by @Matthew Olszak:

Originally posted by @Tyler Kress:

Originally posted by @Matthew Irish-Jones:

@Tyler Kress if I habe the option of purchasing a 100K home with leverage or a 20K home in cash...

I am going with the leverage option every time. If you do your homework there should be less Risk, it should be on a far better area, with better tenants, and more upside.

20K for a House is nothing. There are homes in and around the city where I live for 20-35K. They can be great cash flow homes.... I would never buy them.

They are in depressed areas, with high crime, and you can go months without a tenant.

May be a different situation where you live but... a 20K home is a 20K home and the issues are usually the same no matter where we are talking about.

Without any more details whatsoever on the mentor situation... sounds a tad shady. If I am going to mentor someone I am going to do it because I want to.

I don’t need them to “do a deal with me” and if there is a deal to be made I will just make it on the free market.

I don’t need to make deals and offer mentoring services and combine them into one.

Just my thoughts. Good luck.

Just to be clear, he made himself available and answered questions before talks about this deal came up and I was the one who approached him asking if he would be willing to put together a private money deal (initially I was thinking of him coming up with the extra money for a downpayment on a duplex rather than my wife and I needing to move out of current home to take advantage of an FHA downpayment) - I just know if we did the deal it would be a plus that we would be in contact all the time and I could pick his brain more, so I phrased it "I would gain a mentor" so maybe bad wording on my part to make it seem like he would only be my mentor in exchange for doing business together.

Sub-$50k properties are usually tough to make work, and the experience won't correspond to other types of properties. My main concern would be what experience you would actually gain from this "mentor-ship" arrangement. Normally a mentor would help teach you how to find deals, analyze them, negotiate them, and finally get them performing (either through self-management or hiring the right firm). In this case, it sounds like he already has the property lined up, and will be managing using his company. Which to me makes you more of the private money investor than he is because you'll be more or less just handing over the cash to be a partner with everything else already in place.

On top of this, your $10k will likely be stuck until you sell as you likely won't find a lender for a $25k property, whereas if you leverage your $20k to get a $75-100k property you can do a BRRRR play and refinance out afterward and hopefully get all your cash invested back to invest on another deal.

Thanks for the input, Matthew--are you saying it will be a challenge (if not impossible) for me to do a HELOC or other type of loan on the 20k equity I should have on this house after it's paid for?

You definitely won't get a conventional loan, maybe you could get a HELOC (but the rate will be high as the loan amt is low). My primary concerns were:

1. I don't think this "mentor" brings any value to the transaction. The BP community is here if you need brains to pick unless the mentor is going to work one-on-one with you to show you exactly what he does to get to where he is.

2. Even if you get a HELOC, you'll be taking even more meat off the already dry bone. On a $650/mo rent property, the repairs and capex can obliterate your gross income and put you into a loss for the year just in a single episode. A roof costs $X,000 regardless of if it covers a home generating $1.5k in rent or $450. Same with hvac, appliances, etc. Also check out what the market rate for management is in case your relationship with this person sours or he no longer is in the business. 5% of $650 is only $32.50/mo to the management company - that doesn't even cover the cost of an assistant's time making a single follow up call when the rent is late.

These low $ homes are good if you live nearby and can put in sweat equity (IE you are the manager, handyman, etc). OR if you go for volume. But for a single purchase, and especially as your first, I'd recommend finding something $50k+. Is there a reason this guy doesn't want to go 50/50 with you on the down payment for a more stable property around $100k?

Good points - I did not mention he offered to lend me more if the first deal went well so maybe he would be willing to agree to lend me more with better terms and use the house as collateral on the next deal. So if I went through with this one I would be asking him what the next couple of deals/loans would look like to avoid needing to wait 3+ years to get my money back from rents. I should probably go back to him and develop a road map for the next 5-10 years and explore some alternative investments outside of these specific SFH's. What do you mean by going 50/50 on a 100k prop? I only have a max of 10k to bring right now. Do you mean he covers 50% of my down payment for a conventional loan?