All Forum Posts by: Anthony Thompson

Sam, it's hard to know the details from the outside, as far as who's paying for the appraisal, choosing the appraiser, actually (boots on the ground) doing it, whether that person is an employee or independent contractor, etc.

Also you don't know if RI Housing resells that loan on a secondary market (I don't think they do but I really don't know to be honest), or if the money that funds the program you're applying under, comes with conditions RI Housing has to fulfill, etc.

It comes down to the old "he [or she] who has the gold, makes the rules".

I don't think it's useful for you to spend time second guessing Rhode Island housing's motives or methodology re: the appraisal or deal. However, on the previous point, I will recommend reading any loan documents with a fine-toothed comb - not a summary of the loan/program, but the actual loan/program documents.

There may be additional conditions in the program (e.g., never being allowed to rent it even after 5 years are up, or only being allowed to rent it to low income people even after 5 years, etc.) and you don't want to be at the closing table (or later) and find something you object to.

Free money is great, but you may find (as I've found) that it usually comes with some pretty specific conditions.

@Russell Brazil is exactly right, in a traditional transaction the role of the appraiser is simply "make sure the buyer isn't paying over market value and thus, that the lender's LTV is higher than it wants".

You should actually be thankful that the appraisal came in where it did - if it came in a lot higher, it might make the bank rethink the sale and want to pull it and relist it at the higher amount.

As far as your desired equity/debt ratio, 1) go by your own comps (or your agent's if you can't do comps yourself) for the value, and 2) you're going to have to wait a long time to find a 50K equity position on a retail purchase - if I were you I'd be very happy with the 26K. Many people, including investors, would be thrilled to have built-in at-closing 26K equity on their primary residence.

The bigger question is... do you want to live in this house for 5 years? Do you like the neighborhood? If you have kids (or might possibly have any in the next 5 years), do you like the schools? If you rent out the property in 6 years is it going to be an easy rent or a hard one (e.g., unusual layout, not-great neighborhood, bad/no parking, etc.)? Is the neighborhood stable or trending in a good direction?

Sometimes you have to step away from the spreadsheet formulas and think about the bigger picture.

Sam, I'm confused. Is the problem that the appraisal won't let you get the loan and thus buy the property at all, or that the appraisal is coming up with a # you don't expect and that therefore makes you think it doesn't have the right equity/debt ratio for your investment plan?

Those are good points, @Brandon Ingegneri. I'd also add, there are a lot of advantages to picking property that is close to where you live, or where you spend a lot of time (e.g., your office).

Besides the obvious comfort factor, there's a big convenience factor - if you're going to hold onto the property, you'll need to be over there every so often for one thing or another.

It really helps reduce the "mental barrier" when the property is close by; it changes it from "on my way home" to "something that's out of my way, when can I fit that into my schedule this week?"

Jerry, congratulations on your first purchase! I think a 2-family is a great introduction to the world of rental real estate. It's a bona fide multi-family but I still think usually a better tenant mindset than 3 or 4 family. I'm sure it will be a great education & experience for you, and welcome to Bigger Pockets as well :)

@Stephen Torti bidding wars and #s that don't make sense? Sounds like history repeating itself...

Actually Bryan, if I recall correctly the Realtor P&S has that section specifically because the next part says that it's assignable UNLESS the seller is providing financing to the buyer, which makes sense because borrowers are not interchangeable.

If you're an agent, you probably should (may actually need to) use the Realtor P&S, but you cannot use the Realtor P&S if you are not an agent or an agent isn't directly involved with the transaction because it is copyrighted by the RI Association of Realtors (look at the bottom of every page). If there is any doubt whether you can use it for a given transaction, the agent should check with her/his broker, and if there is no agent to check with their broker, the answer is no :)

My recommendation - and I am not a lawyer, this isn't legal advice, all of my info in this post could be wrong, etc. - would be to take a purchase & sales contract from a wholesaling course/guru (there may even be something here on BP, I don't know) and bring it to a Rhode Island attorney who specializes in real estate, and ask them to "bless" it as acceptable or modify it as necessary, or just give you something that will work for your situation/intention.

It's dangerous to just take a contract from a course/guru/website and use it in RI (or any state) without review by an attorney, because real estate law is very state-specific. Something which is fine in one state, or even a majority of states, may not be fine in Rhode Island at all. (For example, just ask any title company in RI how they feel about land trusts, lol.)

Generally speaking, with the I-am-not-a-lawyer disclaimer, my understanding is that a contract is assignable unless it explicitly states otherwise in the contract. However, I do think "and/or assigns" is better to have in the contract because it shows clearer "intent".

I also have to strongly recommend you take a look at something an Ohio real estate attorney posted about wholesaling about 6-12 months ago - http://watsoninvested.com/wholesaling/ - because if you do not do things right you may be breaking Rhode Island real estate licensing law.

Donald, there's a lot of information here on Bigger Pockets, welcome to BP!

Alexander, take lots of pictures if the owner/agent lets you, then use the pictures later to jog your memory as you work up the #s.

There are lots of sources online including here on BP for estimating repair #s; I think BP has a book (or several) on the subject. But the general idea is you want to do what everyone else does, which is look for the "big ticket" items, like the roof, the boiler, hot water tank(s), plumbing (was it vacant last winter?) and electric (fuses? enough breakers? etc.).

You also want to try to develop, over time, a sense for what's missing. It's a lot easier to notice something that looks wrong/bad and make a note or take a pic. For example water stains on the ceiling.

However it's tougher, and this comes with experience, to notice what you don't see. For example, missing hand rails, or missing downspouts (my favorite, lol).

No, I don't have a comprehensive list of that stuff unfortunately, but it's good you're getting out there and starting to get in houses. The more you go through, the more you'll notice any aberrations (weird layouts are another subtle gotcha for newer folks, easy to overlook in the shuffle but comes back to bite you later when you go to sell or rent).

Years ago when I was in a real estate class at NYU the teacher said, "You can't buy dinner with equity" - or, for that matter, squirt