*** Official Real Estate Forum *** (1 Viewer)

[Jeff Pasquino]

We have heard through the grapevine the bank is foreclosing on a house two doors down from where I live. Similar (in structure) to this house in the area.

The house was on weichert for awhile but I can't find it now.

My question, what kind of "discount", if any, will the bank sell it for?

We are in a pretty hot market. The house needs a little work, but my interest is piqued.

ETA:

actually, the house in the picture is in another area of Randolph. Our area has the better schools, so the list price isn't necessarily indicative of my area. will look for another one.

ETA(2):

The neighborhood house was listed at $429,000 before being taken off Weichert.

The bank will likely take it back for what's owed at auction, plus fees and back payments.You can contact the bank's REO department (or contact "Loss Mitigation") to see what they would take for it. Ask if they will entertain a "short sale".

Banks don't want RE - they want $$. RE is a negative to them - they now have a bad debt on their books which hurts their lending power.

What state is this in?

awesome. Trying to pry the information from my other neighbor's grip as we speak. Sent the Mrs. over. on some recon.

The house is in Randolph, NJ. approx. 45 miles outside of NYC. suburbia

You're going to want to get this place before it's foreclosed on. Once it's been taken back by the bank, they're probably going to want to go to auction, because they know that it will go to close to market value when there's competition, and they've already had to go through the hassle and cost of the foreclosure.What you want to do is called a "short sale" where you negotiate directly with the bank before they've foreclosed on it. Many banks are a total bear to deal with, and this isn't a quick process, but it can be well worth it.

email the address of the property to masonatmasontdotcom and I'll send you a report with some pretty cool information - like who holds the loan, and how much they owe, among other things.

any chance of negotiating directly with the seller/neighbor?

Depending on where it is in the process. The VERY BEST Short Sales come when the current owner is helping you. They don't realize that the Bank can drop a 1099 on them, but they want out from under it, without taking the hit. The Very best Short Sales are where the owner will attest that the place is a dump, and worth half the current loan.Just know what you are doing here. In fact, many Realtors specialize in Short Sales as one of their services. Maybe find one?

I had one where we went to the wire. We were supposed to close a single day before the sheriff put the Owner out. It got hung up, like they always do when you really need it to happen, and my Title company had to move heaven and earth, pulling in Lawyers to keep the deal alive.

It's one of my top 5 all time deals, and was worth the heartache, but at one point when I just knew I was out a grand never to be seen again, I sure didn't feel that way.

Anyway, the earlier you can get into a short Sale, the better.

The 1099 / Deficiency Notice can be negotiated away.Also doesn't matter if they owned it for 2+ years.

 

[Mike Anderson]

Done. Thanks a bunch! 

Should be in your inbox.

Excellent. So how should I use this information in regards to possibly purchasing or not this piece of property? Do I go by the assessed value? Or the comps around it?

You should pay as little as possible. Assessed value has nothing to do with market value. Some background info on the property?

Background info I have right now:1. Room to build another smaller house out back

2. In a VERY hot area, near UT and downtown.

3. Few blocks from hike and bike trails

4. 4/2 / 1400+ sqfeet on 46x147lot size

This area is right now the hottest, lots of rehab/total overhaul going on. Strange thing is that a piece of property can go on the market for 150k (like this one) then another for 70k with nothing really different (unlike NYC).

buy the 70k one instead...

 

[BassNBrew]

Alright, here's a request of the main posters in this thread.  Jeff, Ninja, Mike, Bass...I want to become your pet project.  I'm starting the real estate classes on Monday, but since I have to finish out my current situation (working for my brother) until the end of June, I won't finish the real estate classes until the end of July.  One class in June and the other three in July.  By August 1, I'll have my license.

The thing is, I've just learned that even when you've got your RE license, you still need to work for a broker.  Crap!  Anyway, I've already got my eye on a few properties.  I want to do rehabs, be a landlord, and be a residential sales goon.  I want to do my own thing when I want and where I want.  I'm stubborn that way. 

The good thing is that my brother's best friend is a big time real estate broker here in Columbus.  The bad thing is the aforementioned tendency toward doing my own thing.

My first question, AS YOUR NEW PET PROJECT, is what do I go into the meeting with Bruce (the broker) to get him to sponsor me?  Obviously, it's going to be mainly a financial decision for him, but there's a strong personal connection there.  So I've got that going for me, which is nice. 

I don't want to be a sales monkey, so do you think it's possible that I can be affiliated with him without giving up half of everything I do?

Homer,I had the EXACT same concerns.

I had a short list of Brokers that I already worked with. I went to each of them, and laid it out like this:

I am getting my License because I want the ability to Manage property for others down the road.  I have to hang it somewhere for at least a year before I can take the brokers test.  I will not be selling any of MY property while my License is hung with you, however, if I do, I want you to list it for me, and take the commission (Selling as an Agent here requires me to provide a Year warranty, and an Agent cannot sell a property in an "As-is" condition, I would want someone else to list it anyway).  And I am busy enough will my own properties to take a listing, SHORT of it being one of my best friends, if I get one, it's yours.I already use you (Broker) to buy houses.  If you hang my License, I will run every deal I do through you.  I want to be added to your E&O insurance (the cost is MUCH less than having your own policy), I understand that I will pay dues, and the MLS fees.I am in this for myself, to build my company, and not be a working agent.  You don't have to train me, I will not be selling or buying for other people, I will only buy, and everything will be run through you/your office so you can sign off that everything is correct in my dealings.Think of it as free money that you are not going to be getting if I end up with this deal at another brokerage.I will do no assigned floor time, however, I will be happy to answer the phones when I am already on property doing research for me.  Everyone of those phone ups will be passed to you personally.  I will not pay a desk rental, however I want the ability to access the MLS from a computer.  My "footprint" on your office will be next to nothing.I will pay you nothing directly ever, no monthly fee, anything.  When I buy, if it is a repo where a buying agent earns no commission, you are my agent, and you take all of the buyers commission, and work the deal.  When I can earn a commission, I will work the deal, run it through your office, and give you 30% of the buyers commission.  It's free money with zero additional work on your end, and I am 100% exclusive to you.I was prepared to give up 40% of the buyers commission on my deals. I figure that getting anything is better than the nothing I get now. Even 3 OF MY OWN deals a year where I only get a share of the buyers commission more than paid for any costs I would have in a structure like this.At the end of the day, 3 Brokers jumped at the chance. One of the brokers that jumped I had never spoken to before in my life.

You can't get what you don't ask for.

Couldn't you just pay a broker under the table to get your RE license and cut the year time table out? Probably not but I remember someone telling that they did something like that where they didn't want to be a RE Agent, just buy properties for themselves and rehab and sell..

Not unless you want the state real estate comission to send you to real estate jail. Generally the state issues the licensee and although it is the gummit, they can tell 2006 from 2007.

Is this done a lot in the biz for people who simply want to buy/sell their own properties and not want to wait a whole year?

I supposed anythings possible as there's four pages in out state's quarterly magazine devoted solely to people who have been suspended, reprimanded, revoked license, and surrendered licensee. I'm not sure how things are in other states, but the industry here is moderately policed. I think it's enough to keep the crooks slightly below the level of crooks in the general population.

I don't have a RE license nor if I was to get one would I want to risk breaking the law but I don't see how older people who simply want to buy and sell their own properties waiting a year and/or having to sell a certain amount of properties until they get their license. Am I wrong about this? Probably, that's why I posted it, hopefully can get the info on this.

RK...We likely have or will have a disconnect here as each state has different requirements to get a broker's licensee. Here in NC, the rules were totally revamped. What we had was a three tier system of salesperson, broker, and broker in charge. We are moving towards a broker and broker in charge system. Basically to get the broker in charger designation you will need to demonstrate basic compentence to the state whereas before it was just a class or two. Basically the year requirement may or may not be important in your state. Likely it's a hurdle towards starting your own firm, but I don't know for sure.

 

[JerseyToughGuys]

So I called the owner. Not a very happy camper. Guess that is to be expected when the bank comes in and changes your locks. 1st call = "I will get back to you". Did't sound promising.

Next, called the bank to get more info. They were extremely vague, but essentially said they won't allow short sales in cases where there is a decent amount of equity.

Sum total= property likely to hit auction.

Hmm. Should have mentioned this earlier. This guy has probably been called by many people looking to make a buck off him. If he's your neighbor, I'd just go over and say hi, tell him you heard about the circumstances, and you'd love to chat about a couple options and invite him and his family over for dinner. At dinner, don't talk about the house right away - just get to know the family. Grab a beer, if you talk about the house you talk about the house, just let him know that you're worth trusting. Then sit down with him and ask him questions - "What's gonna happen?" "What do you want to happen" and let him open up and talk. He'll tell you what you need to do. Then do that, and the best part is, he already told you it's what he wanted.If you don't want to get the family involved, which may be a bit embarassing for him, take him out for a beer, or tell him you've got some good beer and are going to be by the bbq for a few minutes, and you'd love to chat. Be more than a money grubber - if you're sincerely interested in helping him out of his situation, he'll tell you what he needs.

Not necessarily real estate related, just people managment 101.

two major obstacles: We have never met these people and they are now locked out of their house and living somewhere else.I took a gentle approach and only started to feel things out when I got the "I will get back to you" response.

I will let you guys know if I make any progress.

Thanks again for the help.

So the property has been foreclosed on then? Do you know where they're living now? How'd you get the phone #?

The original listing contained what must be their cell phone number. Didn't get a chance to ask where they are living now. Delicate subject.

 

[BassNBrew]

Bass, in your opinion, what's the future for the Raleigh market? I have a couple of my best friends who have purchased ~ 750,000 in property over the past 2 years and are currently leasing them to own to folks with credit problems. This works out for everyone if the tenants pay rent, maintain the property, and the property appreciates.

Has the Raleigh market seen a large runup like we've seen on the coasts, or has the market been slow and steady growth that will likely continue over the next 4-5 years?

I'm curious b/c where I live, the market has reversed and we're looking at price reductions and declines for a couple of years - but I have no idea what the market is in the capital city of NC.

Tommy...I can't speak to the Reliegh market as it's 2-3 hours away. If it's similiar to the Charlotte market, the run up has just begun. People are flocking here from the NE and Fla. New home costs have gone up to $100 / sf due to gas prices and hurricanes. Last year $80 / sf new home construction was available. Our market was relatively flat over the 5-8 years prior. My gut feeling is that it would be safe, but I'd definately put no weight into my gut opinion for any serious decision.Leasing to people with credit problems is the quickest ticket to diaster. IMO you're taking a 1 in 4 chance of owning a huge headache (and that's with marginal credit, not bad credit).

 

[BassNBrew]

One piece of caution on distress sales. I recently got stuck for $1200 in expenses on a deal initiated by the seller. I knew the asswipe and he e-mailed me about buying his property for what he owed to get out from under it. We got to closing and he refused to sign the HUD and come up with the money he owed. Basically said he didn't expect closing costs to be that high. We tried to negoiate, but the deal was tight enough that we couldn't / wouldn't eat all his expenses. Basically we were out closing expenses, but it could have been down payment money if we had made one. These concerns also apply to FSBO sales. In my case it was just taking the bad with the good, but I wanted to caution others that a contract is only as good as the people signing it.

 

[RKMoney]

Some info on this property (it's all public record, so I don't feel bad about posting this)

Sale & Loan Information

Transfer Date : 06/05/2001 Seller : , KATHLEEN HAMMER

Transfer Value : $232,000 Document # : BK-PG: 5387- 130 Cost/Sq. Feet : N/A

First Loan Amount : $232,050 Lender : GREENWICH HOME MTG MTG

Assessment & Tax Information

Assessed Value : $220,500 Percent Improvement : 43.13% Homeowner Exemption :

Land Value : $125,400

Improvement Value : $95,100

I have a piece of property that I am looking at, would love to get some information from you if possible. MLS#: 6380783

Looks like a decent place rk. Of course I'm in the area, but I've also participated in designing a couple of the lofts being built in East Austin. If I had the cash flow I'd be looking to do what you are. I'm currently remodeling a foreclosure in Taylor for myself and I'm continuing to look for rental property in this area since it's 1/3 of the price. Good luck. If you need to bounce ideas of of me, I'd love to participate. Would also welcome any questions having to do with remodeling. My degree is in architeture, but I also have a decent amount of construction experience.

Thanks buddy for the reply. Would love to bounce some stuff off ya, if you want, I can PM you.FYI: My dad, grandfather and uncle are architects so I feel like I am eventhough I didn't get a degree in it.

 

[Mike Anderson]

Strange thing is that a piece of property can go on the market for 150k (like this one) then another for 70k with nothing really different (unlike NYC).

Explain to me why you're buying the $150k one instead of waiting around for a better deal?

No promises I guess. I could wait and wait and wait and that shipped has passed plus this piece of property I may have more to work with. Looking back, most in the 70k range is more complete tear down.checked on zillow and it reports a total sq foot lot of 6785 with 1 bedroom so this information is a bit out of date but their estimate is at 105k, about 45k less than their asking price but also with 3 more bedrooms added on since.

Please, pay absolutely no attention to Zillow's value.

VERY

 

[Mike Anderson]

Another question for my new mentors.

As of right now, I've got a good credit score--740 or so--but I'll officially be unemployed right after July 4th.  But I'll actually be working for my brother under the table at half salary, which combined with a company car and unemployment compensation should leave me okay for a few months.  There's a duplex that I want to buy, listing at 120k with both sides rented for $575 per month.  That's $1150 income on a payment of about $850...looks like a good deal.  Anyway, I'm thinking about grabbing this (pending inspection and appraisal) while my financial situation still looks good to the lender. 

I'm cashing out my 401k (around 12,000) and have over 10,000 in available credit, so I can withstand a few months without renters, or even move in myself.  Plus, I have siblings and parents that would help at the drop of a hat.  The only thing I don't have is a sizable down payment.

Here's the listing (I hope you can get there from this link).

MLS Listing

It was listed for a couple of months, then showed up as "sale pending".  Now it's back as available.  Not sure what that's all about, but I'm seriously thinking about buying this in the next few weeks.

First thought: With a 740 and no job, you can still go no Doc, and make it work. You WILL pay a higher interest rate if you play it straight. I am a big believer in playing it straight and sleeping well at night. Surely at least on Mortgage broker will suggest other ways of structuring your information when the time comes and they see your set up. It's done all the time, and no one ever seems to get caught, but I like sleeping my my home, not one with lots of roommates that is federally owned. Someone will likely try and steer you a wrong way with a great score and no documented income. Don't be that guy who's brother creates the VOE.The only way I see a $850 a month payment is with nothing down at 7% or so, or 10% down at 9% or so. How are you seeing this?

At 10% down, or $12K, you are eating into your reserves pretty hard, and may struggle on the back side.

Pro Ninja would have to answer this, but a No Doc, with Zero down may be doable with a 740 score???? I don't know. 2 Years ago, absolutely, but lenders are tightening up.

Now, take the $850 a month (Will you have PMI?), I can't seem to pull up the listing (Please post the MLS number so I can find it another way, I already know you are in C-Bus), but if it is out by say Dublin, your Taxes will be OUTRAGEOUS. I don't know what part of the city, so lets just assume say 1,800 in taxes???? Like I said, don't know, but I remember that C-Bus was higher than my market. (I have a best friend who is an investor in Columbus, and works at OSU, I have helped him in the past)

So, 1,800 is another $150 a month. Then FIRE insurance, that is what you want, not replacement cost, or you will have zero chance of making this work. So Insurance of another $900 a year, or $75 a month. Might be as low as $600.00 or $50 a month, I don't remember your area?

That would be $850 + $150 + $75 = $1,075 outgoing a month.

Now, Incoming, $1,150 fully rented out with no expenses or down time.

Really, you have already stated that you will take the place empty, and will have no income. Lets assume this as a BEST CASE. You get it rented out ASAP (not going to happen), but in a best case, you rent it out fast, and year after year you have a total of one month down time per unit. Some years going forward, you have zero down time, and some years going forward you have a few months between renters. Anyway, assuming each unit has a vacancy for one single month a year while you clean, advertise, fix, etc. That drops the monthly incoming to $1,055.00

At this point, you are losing $20.00 a month for the privilege of dealing with renters.

But we haven't looked at repairs. Water heater goes down, Furnace needs repair, roof gets a leak, how is the wiring? Up to code? Basement in good shape?

Start up costs: Every little thing to get a renter costs money every time you have turn over. From the littlest things like a new battery for the smoke detector, window repair, screens, Cleaning costs, or at least cleaning supplies if you do the work, paint when needed, carpet replacement and cleaning, advertising, and it costs to run an add in the newspaper, more than you would think it should. These costs can spiral out if you don't know what you are doing.

Sure, some repair costs can be put back on the tenant's deposit, but one professional tenant can cost you a grand or more over the deposit, and force you to evict them with more down time.

I know I went into some detail here, but this looks like a huge dog to me. Just quick and easy math, Based on it's potential as a rental, I would say it's overpriced by $25K.

That is the way a rental oriented mind like me or Bass is going to look at it.

Perhaps Jeff or certainly ProNinja can look at the different ways to buy this property and see a deal? You make your money when you buy, and I can't see a good way to buy this property at it's current cost.

I wouldn't be as quick to pass this by as Mike. I know in my market, I'd be all over this. If this is the best deal around, I suspect the financials will improve as mortgages rates drift higher via rent increases. If you don't own a home, I'd consider making this my primary residence for a brief period of time to capitalize on lower interest rates and less money down. Appreciation really is something you need to attempt to figure in. Most of my investors last year were flat on the income side, but knocked out 1%+ a month returns on the appreciation side. My point is that sometimes you have to take what's available and there are no universial rules as each market is it's own entity. That side, Mike laid out all the questions you need to ask before proceeding forward. Have you comped this deal to the last dozen or so in the market that closed?

I'm with Bass. It boils down to what makes sense in your market, and what your goal with the property is. I hear these guys talk about the 1% rule, and not buying a rental unless it has positive cash flow, and not banking on appreciation, which is great advice...for their market.In my market, it is very difficult if not impossible to get a SFR or a Duplex to cash flow with less than 20% down unless you use a neg am loan. Cash flow is for people who have had their rentals for over five years and are letting their equity sit dormant in the property. For example, a home that is totally beat to hell on a decent lot a little ways down my street just sold for $309k - I'm not kidding when I say beat to hell, either. Floor isn't close to level, water stains all over the ceiling - this place is a tear down. Oh yeah - at $309k, it's about $25k cheaper than anything else in the area. Cash flow will not happen.

However, what we have had good luck with around here is appreciation, and according to the experts, my market is expected to be one of the hottest around in the next couple years. Why would I not wager on appreciation, in that case? In your situation, if you're buying the property for less than market value, why not take a slight monthly hit to make $20k instantly, and more if the area does what you expect. Who cares if you've got to fund it $50/month?

The bottom line is, you have to know why you want to invest in each individual property and have an exit stratgey and a very, very good idea of how much money you're going to make in whatever your specific timeline is.

As far as buying now vs buying later - buy it now. You'll save a ton of money going with a loan now vs. a no doc later. Also, for the next two years, you're going to be pretty stuck putting money down on investment property, because you're not going to have two years of being self employed. It's hard to buy investment real estate when you're self employed for under two years.

You can do a zero down no doc loan because of your credit score...but you're looking at about 8% on the 1st and 14% on the second, off the top of my head.

Normally I might not have been so adamant about it.In this case, I knew Homer was in Columbus from his first post. I've got a Best friend that operates as a LL in Columbus, did a bunch of research in the Columbus area a few years ago as I considered moving there. Granted, that was a few years ago before I really took off.

Out of everyone that has posted in this thread to date, Homer was really the first one that I could start to answer having a clue about his market. I could most likely be on his doorstep inside 4 hours. That can seem huge out on the east coast as you go through multiple states, but there is not much difference in Indiana and Ohio in the overall scheme of RE.

In posting on MrLandLord, I see OH LLs posting about there market all the time, there are deals to be made in C-Bus. Just a quick search of Homer's 43203 Zip code quickly comes up with $60K three-bedroom a side duplex less than a Half mile from the house he was asking about. I just found a 2 bedroom townhouse (I am sure in poor shape) for $17.9K.

One of my Early on ratios was that I wanted to pay $10K a bedroom. My Market can support that with minimal rehab. Homer's can as well.

What I didn't know about Homer's Market was what area of the City he was operating in?? Out in Dublin, or really anything on the west side of the city outside the loop north of 70 is high end stuff, and the taxes will crush you. Infact, in the NW out around Dublin, ProNinja could have a better handle on that market.

As it turns out, Homer's market is most likely a mirror image of my market. Now obviously, Columbus has a greater population, but there are also more properties that fall into this category. It's all going to depend on where Columbus is in the Gentrification process. That I don't know.

The only appreciation in my market is the kind you create. Take an Ugly house downtown, make it a pretty house downtown that an entirely different class of renter/buyer would be interested in, and double it's value. It isn't very difficult, and can certainly be done, but you can't wait for the market to make you any money, you are almost as likely that the house value goes down slightly.

 

[Mike Anderson]

One piece of caution on distress sales. I recently got stuck for $1200 in expenses on a deal initiated by the seller. I knew the asswipe and he e-mailed me about buying his property for what he owed to get out from under it. We got to closing and he refused to sign the HUD and come up with the money he owed. Basically said he didn't expect closing costs to be that high. We tried to negoiate, but the deal was tight enough that we couldn't / wouldn't eat all his expenses. Basically we were out closing expenses, but it could have been down payment money if we had made one. These concerns also apply to FSBO sales. In my case it was just taking the bad with the good, but I wanted to caution others that a contract is only as good as the people signing it.

I have twice had to cut a check at the closing table where the FSBO wouldn't sign the Hud. Both times were less than a grand. Once the FSBO wanted me to write out a letter clearing him for all time of any unforeseen encumbrances that might come down the road. No one is legally able to do that (can't sign away the rights of others), but he has a nice hand written letter to that effect. I had title insurance, I'm covered.

 

[Random]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

 

[Jeff Pasquino]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

84K x 87% = 73Kish.73K + closing costs = 76K, say.

76K+15K repairs =91K.

Selling for 125K, less closing costs (I use 3%) is 118K. This seems like a decent deal. Use a realtor and 7-10K more is gone.

Money for the house and repairs? Interest? Taxes? Chews at the profits. Be careful. Once you're under 10K of potential profit - not worth it.

FSBO isn't so bad. Just tell the title company you use when you buy the place that you intend to sell it inside of 6 months and keep the file warm. They'll be happy to do it again.

Good luck.

 

[Random]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

84K x 87% = 73Kish.73K + closing costs = 76K, say.

76K+15K repairs =91K.

Selling for 125K, less closing costs (I use 3%) is 118K. This seems like a decent deal. Use a realtor and 7-10K more is gone.

Money for the house and repairs? Interest? Taxes? Chews at the profits. Be careful. Once you're under 10K of potential profit - not worth it.

FSBO isn't so bad. Just tell the title company you use when you buy the place that you intend to sell it inside of 6 months and keep the file warm. They'll be happy to do it again.

Good luck.

You are on like donkey kong!Anyway here's how we've got it broken down

Not sure what the bid should be, my realtor and mortgage lender think I should offer low 70's (only because its a HUD and say they hate holding onto these) and have never heard of the 87% rule. Anyway lets use 77K for the purchase price.

My brother is in construction and will be doing most of the labor.

Repairs (let me know if anything seems off or if we may have overlooked something):

Windows - $2500 self installed

landscaping - $1000 back yard is a little low and was very wet yesterday. We've had ALOT of rain this week.

New carpet - $3000. 2200sqft house and we've got a guy that will install really cheap.

Bathroom - $1500. One of the bathrooms needs gutted. The other one only needs paint.

Kitchen Cabinets - $3000. Not alot of cabinets but they are horrible.

Misc (paint, faucets, ect) $4000. Hopefully we dont come across anything else major.

Does anything look off?

 

[Jeff Pasquino]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

84K x 87% = 73Kish.73K + closing costs = 76K, say.

76K+15K repairs =91K.

Selling for 125K, less closing costs (I use 3%) is 118K. This seems like a decent deal. Use a realtor and 7-10K more is gone.

Money for the house and repairs? Interest? Taxes? Chews at the profits. Be careful. Once you're under 10K of potential profit - not worth it.

FSBO isn't so bad. Just tell the title company you use when you buy the place that you intend to sell it inside of 6 months and keep the file warm. They'll be happy to do it again.

Good luck.

You are on like donkey kong!Anyway here's how we've got it broken down

Not sure what the bid should be, my realtor and mortgage lender think I should offer low 70's (only because its a HUD and say they hate holding onto these) and have never heard of the 87% rule. Anyway lets use 77K for the purchase price.

My brother is in construction and will be doing most of the labor.

Repairs (let me know if anything seems off or if we may have overlooked something):

Windows - $2500 self installed

landscaping - $1000 back yard is a little low and was very wet yesterday. We've had ALOT of rain this week.

New carpet - $3000. 2200sqft house and we've got a guy that will install really cheap.

Bathroom - $1500. One of the bathrooms needs gutted. The other one only needs paint.

Kitchen Cabinets - $3000. Not alot of cabinets but they are horrible.

Misc (paint, faucets, ect) $4000. Hopefully we dont come across anything else major.

Does anything look off?

Looks pretty good - but the cabinets may be lower grade. Probably ok in a $100-135K house (builder grade).I just dropped 6K on cabinets, but I'm going higher end ($275-300K townhouse).

The rest looks ok. Sounds pretty easy - be careful.

Paint???

 

[Random]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

84K x 87% = 73Kish.73K + closing costs = 76K, say.

76K+15K repairs =91K.

Selling for 125K, less closing costs (I use 3%) is 118K. This seems like a decent deal. Use a realtor and 7-10K more is gone.

Money for the house and repairs? Interest? Taxes? Chews at the profits. Be careful. Once you're under 10K of potential profit - not worth it.

FSBO isn't so bad. Just tell the title company you use when you buy the place that you intend to sell it inside of 6 months and keep the file warm. They'll be happy to do it again.

Good luck.

You are on like donkey kong!Anyway here's how we've got it broken down

Not sure what the bid should be, my realtor and mortgage lender think I should offer low 70's (only because its a HUD and say they hate holding onto these) and have never heard of the 87% rule. Anyway lets use 77K for the purchase price.

My brother is in construction and will be doing most of the labor.

Repairs (let me know if anything seems off or if we may have overlooked something):

Windows - $2500 self installed

landscaping - $1000 back yard is a little low and was very wet yesterday. We've had ALOT of rain this week.

New carpet - $3000. 2200sqft house and we've got a guy that will install really cheap.

Bathroom - $1500. One of the bathrooms needs gutted. The other one only needs paint.

Kitchen Cabinets - $3000. Not alot of cabinets but they are horrible.

Misc (paint, faucets, ect) $4000. Hopefully we dont come across anything else major.

Does anything look off?

Looks pretty good - but the cabinets may be lower grade. Probably ok in a $100-135K house (builder grade).I just dropped 6K on cabinets, but I'm going higher end ($275-300K townhouse).

The rest looks ok. Sounds pretty easy - be careful.

Paint???

Yes, I've been through probably 20 or so houses over the past year and this one looks by far the best. All cosmetic stuff. Really hope our bid gets accepted. Have you done a HUD before? Should I go with the 87% or with what the realtor and mortgage lady said (lowball in the low 70's)?

 

[Jeff Pasquino]

1000 posts. Pretty cool.

Haven't done HUD, but not afraid to. Good luck!

 

[Mike Anderson]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

I am not sure where you are, but I've gone as low as 70% on HUD properties as long as there are 3 offers.

 

[Random]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

I am not sure where you are, but I've gone as low as 70% on HUD properties as long as there are 3 offers.

What do you mean by this? They need three offers to accept one?

 

[Mike Anderson]

Hey guys,

Im getting closer to joining the club here.  Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K).  Called my realtor, who called the HUD realtor and they verified the cheaper price.  The house needs appx 10-15K put into it.  It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that.  I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need.  Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO?  Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

I am not sure where you are, but I've gone as low as 70% on HUD properties as long as there are 3 offers.

What do you mean by this? They need three offers to accept one?

3 different parties bidding on the property at the same time. I have seen lower offers than what seems normal accepted when this happens.

 

[Random]

Hey guys,

Im getting closer to joining the club here. Found a HUD house thats listed on realtor.com 20K higher than its listed on the HUD website (84K). Called my realtor, who called the HUD realtor and they verified the cheaper price. The house needs appx 10-15K put into it. It should sell in the 125k range.

I've read HUD needs to net 87% of the asking price so I'm going to structure my bid on that. I've gone to my mortgage company to try to get it bought on my HELOC but need to get reappraised to get the line I need. Hopefully I'll be able to make my bid next week.

Biggest question I have is should I list this place when we are ready to sell or go FSBO? Selling through an agent would eat up a good chunk of profit, but I've never FSBO'd before.

TIA

I am not sure where you are, but I've gone as low as 70% on HUD properties as long as there are 3 offers.

What do you mean by this? They need three offers to accept one?

3 different parties bidding on the property at the same time. I have seen lower offers than what seems normal accepted when this happens.

Bid submitted. 73,500. Should know Monday.

 

[RKMoney]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

 

[RKMoney]

Some info on this property (it's all public record, so I don't feel bad about posting this)

Sale & Loan Information

Transfer Date : 06/05/2001 Seller : , KATHLEEN HAMMER

Transfer Value : $232,000 Document # : BK-PG: 5387- 130 Cost/Sq. Feet : N/A

First Loan Amount : $232,050 Lender : GREENWICH HOME MTG MTG

Assessment & Tax Information

Assessed Value : $220,500 Percent Improvement : 43.13% Homeowner Exemption :

Land Value : $125,400

Improvement Value : $95,100

I have a piece of property that I am looking at, would love to get some information from you if possible. MLS#: 6380783

Looks like a decent place rk. Of course I'm in the area, but I've also participated in designing a couple of the lofts being built in East Austin. If I had the cash flow I'd be looking to do what you are. I'm currently remodeling a foreclosure in Taylor for myself and I'm continuing to look for rental property in this area since it's 1/3 of the price. Good luck. If you need to bounce ideas of of me, I'd love to participate. Would also welcome any questions having to do with remodeling. My degree is in architeture, but I also have a decent amount of construction experience.

Drove by the place today and it's a bit to far East for me. I am focusing off I35 to Chacon street from 1st to about 13th street so since you live around there, a nice little area.Do you live near Willow street? VERY nice with a few houses nicely redone. I really like the historical looking houses that needs to be redone.

Are you involved with designing those lofts around 9th street a few blocks East of I35?

 

[Jeff Pasquino]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

GET AWAY FROM BROKERS.Construction loans are banks realm. Find a local bank, whip up a biz plan, and get going.

Brokers, for the most part, suck. Nothing personal, but they do. They are middle men, if that. They try and sell a loan product and make $ on the transactions.

Banks are far better. DO NOT FEAR BANKS. Think of banks as a place that they sell money. It makes far better sense that way. Knowing other peoples' motivations helps everyone get deals done. I don't care if the other guy makes a profit - in fact, I suspect I'm getting screwed if I think he isn't - so I lay cards on the table and ask them to do the same. It may not be every card, but it helps move things along.

I have a few VPs and Prez's of banks on speed dial. They are people and many enjoy lending money for good projects, and they LOVE when people actually talk to them and show that they know what they are doing. No one loves it when you run to them and say I need $$ now and I have no track record. I don't have time to write my idea down, just give me $. Good luck with that.

Back on track - go to a local bank (or 2). Find a sign on a construction site and see who funded the project. 9 out of 10 - local banks.

 

[RKMoney]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

GET AWAY FROM BROKERS.Construction loans are banks realm. Find a local bank, whip up a biz plan, and get going.

Brokers, for the most part, suck. Nothing personal, but they do. They are middle men, if that. They try and sell a loan product and make $ on the transactions.

Banks are far better. DO NOT FEAR BANKS. Think of banks as a place that they sell money. It makes far better sense that way. Knowing other peoples' motivations helps everyone get deals done. I don't care if the other guy makes a profit - in fact, I suspect I'm getting screwed if I think he isn't - so I lay cards on the table and ask them to do the same. It may not be every card, but it helps move things along.

I have a few VPs and Prez's of banks on speed dial. They are people and many enjoy lending money for good projects, and they LOVE when people actually talk to them and show that they know what they are doing. No one loves it when you run to them and say I need $$ now and I have no track record. I don't have time to write my idea down, just give me $. Good luck with that.

Back on track - go to a local bank (or 2). Find a sign on a construction site and see who funded the project. 9 out of 10 - local banks.

Thanks Jeff. This whole situation has been a freaking mess. We have ALL the docs, plans, builders lined up, just need the money. Perhaps will scour more banks but originally the typically reply was "Put down 500k and we'll loan you the money". Don't have that much cash. MIL and wife have 5 properties in NY but as you know, banks want liquid assets and while they are fine with putting up a piece of property as collateral, they want more cake at the table.Like the drive by other construction sites to see who funded the project then go that direction.

 

[Mike Anderson]

I have ALWAYS gotten lower rates with a Broker.

I have ALWAYS been much happier with the final result working with a Bank.

 

[RKMoney]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

The reason the broker didn't tell you that is because he probably didn't know. This is reason #1A why I don't do commercial lending. The guidelines are different, the banks want different items, and my guess is that the broker said "yes, absolutely!" because he wanted to do the loan, then he submitted the loan without knowing what he was doing, and the bank comes back and says "uh, no, for this loan we need X, Y, and Z." See, the first time he asks you for documents he's asking you for what he thinks the bank will want. The second time he asks you for documents he's asking you for what the bank actually wanted. Those are called "conditions" of loan approval.

Jeff's right, but I'd add one thing to it. Jeff goes straight to the VP of the banks he works with. These guys know what time it is. If you go in and talk to a personal banker, they're probably going to have less of a clue than that broker you're talking to, and you'll be doing the exact same thing in a different building.

Broker or bank, what matters most is the person you're dealing with for this kind of transaction. Here's what I'd do.

#1 - Tell the guy you're working with that you're very dissatisfied with the process thus far, lay out your frustrations, and tell him that, if they aren't resolved, you're going to go elsewhere. Don't be scared of telling him you're not satisfied - if it were me on that end, I'd want to know if and why my customer was frustrated.

#2 - If you do shop to other banks/brokers, don't just walk in to one. Contact someone at your local Master Builder's Association. Find out who does these kinds of projects, and find out who they use for lenders. You're going to want to find a lender who's very experienced in commercial construction lending - it's a totally different animal than traditional residential lending.

It doesn't sound like you're getting screwed. It sounds like you're working with a lender who didn't do his homework, and didn't communicate to you what the process was going to look like.

My $.02

Unfortuntely, we're talking NYC here so unless you are a big time player, you aren't going to have a life line directly into the VP or Pres of a bank. Most places else that's not a problem but NYC is a completely different bag unfortunately.The problem with most lenders in this city is that they have no reason to be upfront with you if they can't get it done. Who knows what they can do a few months down the line? If they can keep that carrot in front of you then worst case is you get pissed and move on down the road.

Thanks for the advice here by the way and #2 is something they haven't thought about, will definitely pass it along! I agree and that's why I didn't get involved at the beginning with my wife and MIL, commercial lending in NYC is a total cluster####.

 

[RKMoney]

I have ALWAYS gotten lower rates with a Broker.

I have ALWAYS been much happier with the final result working with a Bank.

Can't disagree with you on that.

 

[RKMoney]

Thanks Jeff. This whole situation has been a freaking mess. We have ALL the docs, plans, builders lined up, just need the money. Perhaps will scour more banks but originally the typically reply was "Put down 500k and we'll loan you the money". Don't have that much cash. MIL and wife have 5 properties in NY but as you know, banks want liquid assets and while they are fine with putting up a piece of property as collateral, they want more cake at the table.

Like the drive by other construction sites to see who funded the project then go that direction.

RK - another idea. One think a bank can do that I cannot is called "cross collateralization." They use the equity in your other properties to protect the interest in the new purchase. Essentially, they put a lien for $0 on the other properties you're using, and if you default on the new purchase, they can take the other property too. What this does is it allows you to get past the putting money down hurdle, because the bank has another asset they can tie it to.Also, realize that construction financing in general is a total cluster you-know-what, and chances are, no matter which direction you go, your headache is far from over. :(

We are way past "cross collateraliazation" and the "do you guys have additonal assets" bit from our broker came after we agreed to put it up now we are asked to give up more after making demands every step of the way.

 

[Homer J Simpson]

Starting my first licensing class tomorrow.

It's amazing how clueless I feel when I read some of the stuff in here. Oh well, gotta learn sometime. I'm downright excited.

 

[Jeff Pasquino]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

The reason the broker didn't tell you that is because he probably didn't know. This is reason #1A why I don't do commercial lending. The guidelines are different, the banks want different items, and my guess is that the broker said "yes, absolutely!" because he wanted to do the loan, then he submitted the loan without knowing what he was doing, and the bank comes back and says "uh, no, for this loan we need X, Y, and Z." See, the first time he asks you for documents he's asking you for what he thinks the bank will want. The second time he asks you for documents he's asking you for what the bank actually wanted. Those are called "conditions" of loan approval.

Jeff's right, but I'd add one thing to it. Jeff goes straight to the VP of the banks he works with. These guys know what time it is. If you go in and talk to a personal banker, they're probably going to have less of a clue than that broker you're talking to, and you'll be doing the exact same thing in a different building.

Broker or bank, what matters most is the person you're dealing with for this kind of transaction. Here's what I'd do.

#1 - Tell the guy you're working with that you're very dissatisfied with the process thus far, lay out your frustrations, and tell him that, if they aren't resolved, you're going to go elsewhere. Don't be scared of telling him you're not satisfied - if it were me on that end, I'd want to know if and why my customer was frustrated.

#2 - If you do shop to other banks/brokers, don't just walk in to one. Contact someone at your local Master Builder's Association. Find out who does these kinds of projects, and find out who they use for lenders. You're going to want to find a lender who's very experienced in commercial construction lending - it's a totally different animal than traditional residential lending.

It doesn't sound like you're getting screwed. It sounds like you're working with a lender who didn't do his homework, and didn't communicate to you what the process was going to look like.

My $.02

Unfortuntely, we're talking NYC here so unless you are a big time player, you aren't going to have a life line directly into the VP or Pres of a bank. Most places else that's not a problem but NYC is a completely different bag unfortunately.The problem with most lenders in this city is that they have no reason to be upfront with you if they can't get it done. Who knows what they can do a few months down the line? If they can keep that carrot in front of you then worst case is you get pissed and move on down the road.

Thanks for the advice here by the way and #2 is something they haven't thought about, will definitely pass it along! I agree and that's why I didn't get involved at the beginning with my wife and MIL, commercial lending in NYC is a total cluster####.

Call local banks - LOCAL - and ask if they are Portfolio lenders. That's the key phrase. That means they are in the community to lend right at home and keep their mortgages in house.NYC may not have the local banks in Manhattan, but I bet the Bronx or Queens does.

Like I said - find out who funded the local construction projects.

I've found good banks are at Real Estate clubs. If you had something to sell, wouldn't you go where the buyers are? Banks sell $. RE investors buy it.

 

[JerseyToughGuys]

I am now under the assumption the property I mentioned last week is going to auction. A few questions:

Will the value be destroyed? Will the auction push the price up to market? (the house needs some work, so there still may be some limited value).

How does the auction (and financing) work? Do you need a letter of credit from a bank to bid?

 

[Battles]

Some info on this property (it's all public record, so I don't feel bad about posting this)

Sale & Loan Information

Transfer Date : 06/05/2001 Seller : , KATHLEEN HAMMER

Transfer Value : $232,000 Document # : BK-PG: 5387- 130 Cost/Sq. Feet : N/A

First Loan Amount : $232,050 Lender : GREENWICH HOME MTG MTG

Assessment & Tax Information

Assessed Value : $220,500 Percent Improvement : 43.13% Homeowner Exemption :

Land Value : $125,400

Improvement Value : $95,100

I have a piece of property that I am looking at, would love to get some information from you if possible. MLS#: 6380783

Looks like a decent place rk. Of course I'm in the area, but I've also participated in designing a couple of the lofts being built in East Austin. If I had the cash flow I'd be looking to do what you are. I'm currently remodeling a foreclosure in Taylor for myself and I'm continuing to look for rental property in this area since it's 1/3 of the price. Good luck. If you need to bounce ideas of of me, I'd love to participate. Would also welcome any questions having to do with remodeling. My degree is in architeture, but I also have a decent amount of construction experience.

Drove by the place today and it's a bit to far East for me. I am focusing off I35 to Chacon street from 1st to about 13th street so since you live around there, a nice little area.Do you live near Willow street? VERY nice with a few houses nicely redone. I really like the historical looking houses that needs to be redone.

Are you involved with designing those lofts around 9th street a few blocks East of I35?

rk-I actually live in Taylor, Tx. It's 45 minutes northeast of dowtown. The reason I know the area is that I worked for the firm that designed Saltillo Lofts and Waterstreet Lofts.

http://www.waterstreetlofts.com/home.php

http://www.saltillolofts.com/

I only worked at the architecture firm for a short time before moving on, but do know what's going on in that area.

 

[Battles]

My latest prospect as a rental property

HUD

I just walked around the outside. Looks like an automatic 10-15k rehab. I'll have to get inside in the next couple days. Would probably bring about $850 on the rent in this area.

Any thouhts?

 

[Mike Anderson]

My latest prospect as a rental property

HUD

I just walked around the outside.  Looks like an automatic 10-15k rehab.  I'll have to get inside in the next couple days.  Would probably bring about $850 on the rent in this area.

Any thoughts?

$50K. LOWEST you could humanly get HUD to take is High 30's. Really, in a slow market, they are going to want mid 40's.One thing about HUD, you will have to use a Realtor, there is no other way. I once got beat on a HUD property where I had the Highest bid, but another bidder got their Agent to slash their fee to almost nothing, and the Net to HUD was better than my Net. HUD only looks at Net. Just a little piece of knowledge that I thought I would pass along. That's why a Realtor has a greater shot at a HUD house. HUD won't pay a buying Realtor a commission, but they can reduce their price by the commission they would have received, and still beat you with a greater Net offer. Just something to know.

Let's say $45K. Now, if you are in a Sellers market, you could very likely have to over bid the $50K asking price. I have Paid more than asking on HUD properties in the past, but it is no longer really the case in my market.

Another thing with HUD, no seller concessions. If you have a rehab, look into:

Section 203(k)

I have never used the program, but I have researched it. I would LOVE anyone who has walked this path to post some info.

So lets say $45K, and you do $15K in rehab out of your pocket. I am just winging it here, as I don't know your credit score, or what rate you could get. I'll assume good (you are a FBG afterall), and that you put down 10% at say 8% interest as an investment property??? On a 30 year fixed (That's what I use, ProNinja and maybe Jeff might call that insane, and provide better alternatives?) you are looking at 297 a month.

I've got your taxes at 150 a month, and FIRE insurance at say 50 a month (Probably lower in the $30's, but lets play it safe).

That's 497.00

Now, you have to rent it, there are expenses, the works.

Take the $850 a month in rent and take it out 11 months (11 months because you can assume one down month a year to re-rent and clean, fix, etc.) Really, you are going to have times where the rental is out of commission for 3 months, but I am off setting that with the fact that SFHs attract longer term renters. Anyway, 11 Months.

That's $9,350 a year. Assume that you will get a good deposit, and with the longer term renters, maybe you have $200 a year over the say $800 deposit you will charge. That knocks you down to $8,600 a year.

Now, lets take out a Major repair a year at say $300.00 (It will OFTEN almost ALWAYS be alot lower than this, certainly if you put in $15K up front to rehab), but let's play it safe again. Let's lose another $200 a year to advertise. Drops you down to $8K a year.

Take that back out over 12 months. That's $720 a month. Take the $497 away, and you are looking at $224 a month.

I would carry a $40.5K Mortgage for $224 a month. Absolutely. And remember that we beat this up pretty good, and the return will likely be greater.

Looks like your Market in TX works for rentals. Take $20-25K off the purchase price, and that EXACT home (In style and everything) is available all day long in Rural IN. Only you'd be lucky to rent it out for $475 a month.

Side-note: Here is the COOLEST thing about buying a HUD property: Once you buy it, you will have the Keys to the Property given to you at the closing table. Take the key to the local Locksmith, and tell them you want a "Master" to the key that you have. They Will cut you a Master override key for every key in the series of the key you received/gave them to cut. What you end up with is a MASTER HUD key for every HUD home in your market. Don't get caught, or at least have a great cover story worked up like you are the structural engineer looking at the place, or something if you are caught on any given property, but you will get a Master key that will open any HUD house in your market. Even if you don't buy a HUD house, find someone who has, and ask them for/Buy the Locks and key off the HUD house they just got (They will be changing the key anyway, and they won't have a clue how valuable it it). Anyway, if you can get a key from any HUD house, you can get a master created that will get you in any HUD house in your market where you can come and go as you please. If anyone asks, you heard this from some guy named BassNBrew.

 

[RKMoney]

Some info on this property (it's all public record, so I don't feel bad about posting this)

Sale & Loan Information

Transfer Date : 06/05/2001 Seller : , KATHLEEN HAMMER

Transfer Value : $232,000 Document # : BK-PG: 5387- 130 Cost/Sq. Feet : N/A

First Loan Amount : $232,050 Lender : GREENWICH HOME MTG MTG

Assessment & Tax Information

Assessed Value : $220,500 Percent Improvement : 43.13% Homeowner Exemption :

Land Value : $125,400

Improvement Value : $95,100

I have a piece of property that I am looking at, would love to get some information from you if possible. MLS#: 6380783

Looks like a decent place rk. Of course I'm in the area, but I've also participated in designing a couple of the lofts being built in East Austin. If I had the cash flow I'd be looking to do what you are. I'm currently remodeling a foreclosure in Taylor for myself and I'm continuing to look for rental property in this area since it's 1/3 of the price. Good luck. If you need to bounce ideas of of me, I'd love to participate. Would also welcome any questions having to do with remodeling. My degree is in architeture, but I also have a decent amount of construction experience.

Drove by the place today and it's a bit to far East for me. I am focusing off I35 to Chacon street from 1st to about 13th street so since you live around there, a nice little area.Do you live near Willow street? VERY nice with a few houses nicely redone. I really like the historical looking houses that needs to be redone.

Are you involved with designing those lofts around 9th street a few blocks East of I35?

rk-I actually live in Taylor, Tx. It's 45 minutes northeast of dowtown. The reason I know the area is that I worked for the firm that designed Saltillo Lofts and Waterstreet Lofts.

http://www.waterstreetlofts.com/home.php

http://www.saltillolofts.com/

I only worked at the architecture firm for a short time before moving on, but do know what's going on in that area.

Drove by Saltillo Lofts on Sunday, nice looking place!

 

[Mike Anderson]

I am now under the assumption the property I mentioned last week is going to auction. A few questions:

Will the value be destroyed? Will the auction push the price up to market? (the house needs some work, so there still may be some limited value).

How does the auction (and financing) work? Do you need a letter of credit from a bank to bid?

The Most common Auction will call for say 10% down at the time of the Auction, with the balance due out 30 days. Really, go talk to the Auctioneer, give them the generic letter of COMMITMENT, not the generic Pre-Approved letter before the Auction starts, and tell them that you plan to bid, but if you are the winning bid, you require 45 days to close. ALWAYS ask for 45 days to close any RE transaction you ever do. If you close in 30, Great. If you hit a snag, you won't be looking at a Per Diem charge, never allow yourself to be saddled with that.A Number of the "Weasel" clauses are not available to you at an auction. Some are. (That would be a great addition to this thread - List your favorite "Weasel" Clauses)

The Auctioneer is out to get the most he can for the property. It's a Bidding process, so you can even give them the generic letter of Commitment where it shows a figure you can bid up to. You would NEVER include something like a figure you can go to for a regular sale, or you would craft one for a much lower amount. This is yet another case for the "pick one horse and ride them" line of thinking. Find a broker or a Bank, and just use them. Going to 5 Brokers on every deal shopping the rate can hurt you more than you can HUMANLY believe. (That's another great post for this thread)

Anyway, the Auctioneer will go and talk to the seller, and then come back and tell you that the 45 days is fine. You will need to put down 10% the day of the Auction. 95% of the time, you just write a check.

Then there are Auctions where the Bank is the seller. Really? Best thing you can do is get in before the Auction. Get to the Mitigation Department, and start talking. The Bank would love to avoid the Cost of an Auction and a Realtor.

If it goes to Auction from a Bank, try and get preapproved with that bank. Saves a ton of headache. If not, expect that you might need Certified funds down within 4 hours of Banking hours. So if the Auction is at say 6PM, then you need Certified funds for a down payment by 1PM the next day. If the Auction is at 9AM, you need certified funds by 1PM same day.

A Tax sale Auction would run this way.

BIGGEST thing you need to know about an auction is that you should work out where the Property is a winner before going in, and NOT BID A SINGLE PENNY MORE! DO NOT get caught up in it, that's where people destroy themselves.

 

[Mike Anderson]

One think a bank can do that I cannot is called "cross collateralization."  They use the equity in your other properties to protect the interest in the new purchase.  Essentially, they put a lien for $0 on the other properties you're using, and if you default on the new purchase, they can take the other property too.  What this does is it allows you to get past the putting money down hurdle, because the bank has another asset they can tie it to.

Another thing is that a Bank isn't going to run you at 20 different lenders, each pulling your credit, so the Broker can save you a Quarter point. That might be fine for a one time Home buyer, but not great at all for a RE Investor.BUILD A RELATIONSHIP with a LOCAL Bank is one of the better pieces of advice I know to give. I honestly use Wells Fargo for almost everything, but that Local Bank can work miracles when i need them to.I work with two Local Banks. One because they are starting out, I have a proven track record, and they can give me some silly financing when I need something crazy. The other because the President of the Bank can hold his Absolute Vodka, and although is a MUCH better golfer, lets me win every now and again. (I spent 10 years of my life running Country Clubs, and can play, this guy is an out of this world Golfer )

 

[Mike Anderson]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that  the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

GET AWAY FROM BROKERS.Construction loans are banks realm. Find a local bank, whip up a biz plan, and get going.

Brokers, for the most part, suck. Nothing personal, but they do. They are middle men, if that. They try and sell a loan product and make $ on the transactions.

Banks are far better. DO NOT FEAR BANKS. Think of banks as a place that they sell money. It makes far better sense that way. Knowing other peoples' motivations helps everyone get deals done. I don't care if the other guy makes a profit - in fact, I suspect I'm getting screwed if I think he isn't - so I lay cards on the table and ask them to do the same. It may not be every card, but it helps move things along.

I have a few VPs and Prez's of banks on speed dial. They are people and many enjoy lending money for good projects, and they LOVE when people actually talk to them and show that they know what they are doing. No one loves it when you run to them and say I need $$ now and I have no track record. I don't have time to write my idea down, just give me $. Good luck with that.

Back on track - go to a local bank (or 2). Find a sign on a construction site and see who funded the project. 9 out of 10 - local banks.

Thanks Jeff. This whole situation has been a freaking mess. We have ALL the docs, plans, builders lined up, just need the money. Perhaps will scour more banks but originally the typically reply was "Put down 500k and we'll loan you the money". Don't have that much cash. MIL and wife have 5 properties in NY but as you know, banks want liquid assets and while they are fine with putting up a piece of property as collateral, they want more cake at the table.Like the drive by other construction sites to see who funded the project then go that direction.

Maybe this is a Dumb idea? If it is, ProNinja should let me know.I don't have a clue, but ProNinja does Loans for a living. Surely, a Loan packet could be overnighted back and forth where the additional cost of the Overnight delivery both ways is a Cost that RKMoney would eat.

This is NOT an endorsement from a FBG employee, but could a Broker in another Market do your loan?

I would actually personally love to have an answer to a question like this. Lord knows Novastar (Wherever the heck they are? They are not in my local market) sends me some re-finance Mailer EVERY SINGLE WEEK WITHOUT FAIL, seriously, Every single week. If I wanted to deal with a Broker out of Market, say someone who lives in Washington State, couldn't I?

I understand that the Appraisal would have to be in market, but couldn't I give a Broker out of Market an Appraiser name and number, or a short list to work off if they balked at my hand picked appraiser, and then the Broker out of market actually order the appraisal, so they would be the customer. Understood that I would pay for the appraisal up front, and the Broker wouldn't be out, it would be my risk.

Anyway, I've wondered how this all works, and how it might play out. Lord knows I might personally trust a long time FBG over some other operation.

 

[Mike Anderson]

I have ALWAYS gotten lower rates with a Broker.

I have ALWAYS been much happier with the final result working with a Bank.

Can't disagree with you on that.

Seriously, the best deal I ever got in my life was from a Broker. The Loan is a full point lower than my very best Bank loan bought at EXACTLY the right time, and it is even .5 of a % point below my personal residence with a Bank Loan, and this was for a non owner oc. It was the Very best rate I have EVER gotten in my entire life, PERIOD.However, it was a complete nightmare, and I didn't know if it would actually close. Taxes and Insurance were not escrowed as i requested, She played with my Closing costs like a Yo-Yo, it was a roller coaster of heartache.

End of the day? I have never had a lower interest rate. She beat every other Loan Interest rate I have ever had in my life by a Country mile. Because of her ridiculously low Mortgage payment, this property has cleared $470.05 a month in actual figures for the last 18 months.

It was actually a slam dunk, but the pain, suffering, and heartache of dealing with a broker flying by the seat of their pants was gut wrenching. The damage from running me at some 23 Lenders where each one pulled me wasn't a walk in the park either.

One of my better deals, seriously wasn't worth it when everything is accounted for.

 

[Mike Anderson]

Starting my first licensing class tomorrow.

It's amazing how clueless I feel when I read some of the stuff in here. Oh well, gotta learn sometime. I'm downright excited.

Homer, I felt a little overwhelmed at first. At the end of the day, (At least for the IN test) make every class, pay attention, Study some the day of the test as you drive 2.5 hours to the testing site, and pass with a SLAM DUNK, Monster Slam dunk.I never studied, and got one of the High Honors Certificates for ending up with a 94% in the class. Just be in class, and listen.

Here in IN, it was all about a few terms, it was just like any Freshman class in College. Memorize the terms, and don't worry about it. Remember Psyche 101, or your 113 History class, or Economics 104, or any low level college class? All you need to fly through is route memorization of terms.

Go at it like you would a freshman class in College, it's all about the terms.

 

[Mike Anderson]

Homer,

Since you and I have an almost identical market, I thought you might appreciate some of the numbers I ran tonight on my properties.

My worst cash flow worked out to be $29.51 a month for 2005. I made some changes, and it is clipping along at about $140 a month this year so far.

My two best are working out at $658.33 and $651.83 a month so far this year (2006).

There is a TON of money to be made in Historic Properties, and VERY few realize the potential. I am Ecstatic that another FBG understands the Value in these neighborhoods, as they are my bread and butter, and I now have someone to talk to about them

VERY FEW people take the time to understand the older neighborhoods, what they can offer, and how valuable they are. The average investor looks for the three bedroom ranch on a cul-de-sac, accepts the 10% gain, and doesn't begin to understand the 50% gain in a downtown Historic Neighborhood. I just couldn't be more excited for Homer in what he is working with. If it works like my market, you will make Thousands and thousands, without anyone even realizing what you are doing. Downtown Historic areas are the very best money I know.

I have a number of buddies in C-Bus that I visit, I would LOVE to come over and look at a few properties with you. At some point, we need to schedule this.

 

[Jeff Pasquino]

GET AWAY FROM BROKERS.

Construction loans are banks realm. Find a local bank, whip up a biz plan, and get going.

Brokers, for the most part, suck. Nothing personal, but they do. They are middle men, if that. They try and sell a loan product and make $ on the transactions.

Banks are far better. DO NOT FEAR BANKS.

You knew I was going to take issue with this, didn't you? (I'm ignoring the fact that this is commercial construction financing, and I'll concede that, if you don't have a broker you trust, you should probably hit up a bank for commercial construction financing.)If I'm a bank, and I want to lend money, I have two options.

#1 - Buy a piece of land, put a structure on it, buy computers, heaters furniture, etc. I then have to hire front desk people, security, management, as well as a loan officer to sit in the back and write loans. I have to pay salaries, property taxes - my overhead is high.

#2 - Tell a broker - "these are our rates" and hire one building and one set of staff to deal with all the brokers in a given state/region.

Which sounds more expensive? Since rate is just a function of cost, who do you think gets offered the lower rates?

Bingo. The brokers. Every customer of mine gets a lower rate than they can get walking into any bank in the area. Now, I could charge more, and many brokers do. For example, I work with a hispanic loan officer who only lends to other hispanics. Since she speaks their language, they trust her implicitly, and she charges the crap out of them, makes three times as much money as I do per transaction, taking advantage of their trust.

So, after all this, which is the way to go? Well, there is no right answer. The key difference between brokers and banks is flexibility.

I can do many times more with financing than any bank you'll ever walk into. If you're interested in looking at the proper mortgage for your specific scenario, I'm going to have a whole lot more options for you to chew on, and my rates are going to be better.

However, if you go to the loan officer I work with, you'll probably get fewer options (because she's not that thorough) and you'll end up paying a whole lot more.

How's that for clearing things right up?

Proninja,Nothing personal. I should qualify this.

Brokers have their place, no question. However, banks do too.

Banks are best for cross-collateralization, lines of credit, and local commercial deals.

Brokers are best for residential loans.

Mixed usage? Probably a bank.

5+ unit apartment building? Probably a bank.

4 unit rental? Consider a broker.

NOTE - There are commercial brokers. The PROBLEM with MANY brokers is that they only regurgitate what they know - which is usually less than anyone who has read this thread. Same is true for realtors. Sad, but true. Many just push what they know. For brokers, this could be 5-20 loan packages that they have to offer. Which one is best for the investor? Some would answer the one that pays the broker the best (ugly).

There are good brokers, and I believe Proninja is one of those (which are rare, but a gold mine if you find one). They can not only get you a loan, but also help you in structuring a deal to get it (A) closed and (B) the best rate / payment / costs for you. Everyone makes $. BTW - the key is (A) - I want loans that close.

Realtors - many don't understand what we do. They sell (or worse, just list) easy houses to sell. Anyone can sell a 4 bedroom house on half an acre with nothing wrong with it. Negotiate? Knock 2-5% off and that's a "deal" for them. Ugh.

Like any industry - 10% or less are the "elite" in the field. This thread is "blessed" with more than a few of these.

Mike Anderson

BassNBrew

Proninja

Listen to these guys. They know stuff.

 

[Jeff Pasquino]

I am now under the assumption the property I mentioned last week is going to auction. A few questions:

Will the value be destroyed? Will the auction push the price up to market? (the house needs some work, so there still may be some limited value).

How does the auction (and financing) work? Do you need a letter of credit from a bank to bid?

The Most common Auction will call for say 10% down at the time of the Auction, with the balance due out 30 days. Really, go talk to the Auctioneer, give them the generic letter of COMMITMENT, not the generic Pre-Approved letter before the Auction starts, and tell them that you plan to bid, but if you are the winning bid, you require 45 days to close. ALWAYS ask for 45 days to close any RE transaction you ever do. If you close in 30, Great. If you hit a snag, you won't be looking at a Per Diem charge, never allow yourself to be saddled with that.A Number of the "Weasel" clauses are not available to you at an auction. Some are. (That would be a great addition to this thread - List your favorite "Weasel" Clauses)

The Auctioneer is out to get the most he can for the property. It's a Bidding process, so you can even give them the generic letter of Commitment where it shows a figure you can bid up to. You would NEVER include something like a figure you can go to for a regular sale, or you would craft one for a much lower amount. This is yet another case for the "pick one horse and ride them" line of thinking. Find a broker or a Bank, and just use them. Going to 5 Brokers on every deal shopping the rate can hurt you more than you can HUMANLY believe. (That's another great post for this thread)

Anyway, the Auctioneer will go and talk to the seller, and then come back and tell you that the 45 days is fine. You will need to put down 10% the day of the Auction. 95% of the time, you just write a check.

Then there are Auctions where the Bank is the seller. Really? Best thing you can do is get in before the Auction. Get to the Mitigation Department, and start talking. The Bank would love to avoid the Cost of an Auction and a Realtor.

If it goes to Auction from a Bank, try and get preapproved with that bank. Saves a ton of headache. If not, expect that you might need Certified funds down within 4 hours of Banking hours. So if the Auction is at say 6PM, then you need Certified funds for a down payment by 1PM the next day. If the Auction is at 9AM, you need certified funds by 1PM same day.

A Tax sale Auction would run this way.



BIGGEST thing you need to know about an auction is that you should work out where the Property is a winner before going in, and NOT BID A SINGLE PENNY MORE! DO NOT get caught up in it, that's where people destroy themselves.

Very

 

[Random]

Homer,

Since you and I have an almost identical market, I thought you might appreciate some of the numbers I ran tonight on my properties.

My worst cash flow worked out to be $29.51 a month for 2005. I made some changes, and it is clipping along at about $140 a month this year so far.

My two best are working out at $658.33 and $651.83 a month so far this year (2006).

There is a TON of money to be made in Historic Properties, and VERY few realize the potential. I am Ecstatic that another FBG understands the Value in these neighborhoods, as they are my bread and butter, and I now have someone to talk to about them

VERY FEW people take the time to understand the older neighborhoods, what they can offer, and how valuable they are. The average investor looks for the three bedroom ranch on a cul-de-sac, accepts the 10% gain, and doesn't begin to understand the 50% gain in a downtown Historic Neighborhood. I just couldn't be more excited for Homer in what he is working with. If it works like my market, you will make Thousands and thousands, without anyone even realizing what you are doing. Downtown Historic areas are the very best money I know.

I have a number of buddies in C-Bus that I visit, I would LOVE to come over and look at a few properties with you. At some point, we need to schedule this.

Are you referring to renting or flipping?

 

[RKMoney]

One think a bank can do that I cannot is called "cross collateralization." They use the equity in your other properties to protect the interest in the new purchase. Essentially, they put a lien for $0 on the other properties you're using, and if you default on the new purchase, they can take the other property too. What this does is it allows you to get past the putting money down hurdle, because the bank has another asset they can tie it to.

Another thing is that a Bank isn't going to run you at 20 different lenders, each pulling your credit, so the Broker can save you a Quarter point. That might be fine for a one time Home buyer, but not great at all for a RE Investor.BUILD A RELATIONSHIP with a LOCAL Bank is one of the better pieces of advice I know to give. I honestly use Wells Fargo for almost everything, but that Local Bank can work miracles when i need them to.

I work with two Local Banks. One because they are starting out, I have a proven track record, and they can give me some silly financing when I need something crazy. The other because the President of the Bank can hold his Absolute Vodka, and although is a MUCH better golfer, lets me win every now and again. (I spent 10 years of my life running Country Clubs, and can play, this guy is an out of this world Golfer )

Thanks but this piece of property is in long island city while we live in austin so it's going to be difficult to build a relationship with a local bank on this particular situation but I like where your heads at and will start to do this now that we are in Austin. As you know, going about getting a construction loan is totally different than a loan on a house.

 

[RKMoney]

Thanks Jeff. This whole situation has been a freaking mess. We have ALL the docs, plans, builders lined up, just need the money. Perhaps will scour more banks but originally the typically reply was "Put down 500k and we'll loan you the money". Don't have that much cash. MIL and wife have 5 properties in NY but as you know, banks want liquid assets and while they are fine with putting up a piece of property as collateral, they want more cake at the table.

Like the drive by other construction sites to see who funded the project then go that direction.

RK - another idea. One think a bank can do that I cannot is called "cross collateralization." They use the equity in your other properties to protect the interest in the new purchase. Essentially, they put a lien for $0 on the other properties you're using, and if you default on the new purchase, they can take the other property too. What this does is it allows you to get past the putting money down hurdle, because the bank has another asset they can tie it to.Also, realize that construction financing in general is a total cluster you-know-what, and chances are, no matter which direction you go, your headache is far from over. :(

Contacted a local bank in Astoria Queens and could be a go by going with the cross collateralization. Will keep you updated but thanks again for the advice!

 

[RKMoney]

Anyone have experience in getting a construction loan?

Wife and MIL have been trying since last January to get a construction loan for 1.8 - 2.0 million dollars to build a 5 unit condo in Long Island City which is one stop from Grand Central and has city/waterfront views. The tear down property itself cost them about 800k alone and considered a very hot, if not one of the hottest areas in NY area.

The problem has been the brokers. We need x,y,z and when we provide it then they come back and say the bank wants something else. Why didn't you say that earlier? My take is that the longer a broker has us waiting the better chance something will come along so he can make his 20k commishion (1%) instead of being upfront and saying he can't get it done.

Case in point was that since my credit score is rock solid (760) and I have a steady income, the broker wanted me to come in and co-sign (again this was my wife's and mother in laws deal) so I said no problem...two weeks later, the broker NOW says do I have any extra assets that we can bring to the table. WTF? Why didn't you tell me two weeks ago when you wanted me to get involved that I needed extra assets?!

That said, any thoughts on this would be great. From a better suggestion on a lender or thoughts if I am right/wrong on my thinking with this current broker we are dealing with. Love this thread!

GET AWAY FROM BROKERS.Construction loans are banks realm. Find a local bank, whip up a biz plan, and get going.

Brokers, for the most part, suck. Nothing personal, but they do. They are middle men, if that. They try and sell a loan product and make $ on the transactions.

Banks are far better. DO NOT FEAR BANKS. Think of banks as a place that they sell money. It makes far better sense that way. Knowing other peoples' motivations helps everyone get deals done. I don't care if the other guy makes a profit - in fact, I suspect I'm getting screwed if I think he isn't - so I lay cards on the table and ask them to do the same. It may not be every card, but it helps move things along.

I have a few VPs and Prez's of banks on speed dial. They are people and many enjoy lending money for good projects, and they LOVE when people actually talk to them and show that they know what they are doing. No one loves it when you run to them and say I need $$ now and I have no track record. I don't have time to write my idea down, just give me $. Good luck with that.

Back on track - go to a local bank (or 2). Find a sign on a construction site and see who funded the project. 9 out of 10 - local banks.

Thanks Jeff. This whole situation has been a freaking mess. We have ALL the docs, plans, builders lined up, just need the money. Perhaps will scour more banks but originally the typically reply was "Put down 500k and we'll loan you the money". Don't have that much cash. MIL and wife have 5 properties in NY but as you know, banks want liquid assets and while they are fine with putting up a piece of property as collateral, they want more cake at the table.Like the drive by other construction sites to see who funded the project then go that direction.

Maybe this is a Dumb idea? If it is, ProNinja should let me know.I don't have a clue, but ProNinja does Loans for a living. Surely, a Loan packet could be overnighted back and forth where the additional cost of the Overnight delivery both ways is a Cost that RKMoney would eat.

This is NOT an endorsement from a FBG employee, but could a Broker in another Market do your loan?

I would actually personally love to have an answer to a question like this. Lord knows Novastar (Wherever the heck they are? They are not in my local market) sends me some re-finance Mailer EVERY SINGLE WEEK WITHOUT FAIL, seriously, Every single week. If I wanted to deal with a Broker out of Market, say someone who lives in Washington State, couldn't I?

I understand that the Appraisal would have to be in market, but couldn't I give a Broker out of Market an Appraiser name and number, or a short list to work off if they balked at my hand picked appraiser, and then the Broker out of market actually order the appraisal, so they would be the customer. Understood that I would pay for the appraisal up front, and the Broker wouldn't be out, it would be my risk.

Anyway, I've wondered how this all works, and how it might play out. Lord knows I might personally trust a long time FBG over some other operation.

I think it must be in the same state, right?

 

[Reaper]

RK - Following your story - I sent a PM but, figured I'd throw it out here - What are the long term plans for the units - Would it be possibe to get investors at preconstruction pricing... Maybe just 1 or 2 can seal the deal...

I live not too far away from the property, we're not really in a Buy situation right now being in the middle of 1 remodel and a recent purchase but, sounds like a real interesting situation.... Also sounds like a big project to be far away from?

Best of luck.

 

[JerseyToughGuys]

I am now under the assumption the property I mentioned last week is going to auction. A few questions:

Will the value be destroyed? Will the auction push the price up to market? (the house needs some work, so there still may be some limited value).

How does the auction (and financing) work? Do you need a letter of credit from a bank to bid?

The Most common Auction will call for say 10% down at the time of the Auction, with the balance due out 30 days. Really, go talk to the Auctioneer, give them the generic letter of COMMITMENT, not the generic Pre-Approved letter before the Auction starts, and tell them that you plan to bid, but if you are the winning bid, you require 45 days to close. ALWAYS ask for 45 days to close any RE transaction you ever do. If you close in 30, Great. If you hit a snag, you won't be looking at a Per Diem charge, never allow yourself to be saddled with that.A Number of the "Weasel" clauses are not available to you at an auction. Some are. (That would be a great addition to this thread - List your favorite "Weasel" Clauses)

The Auctioneer is out to get the most he can for the property. It's a Bidding process, so you can even give them the generic letter of Commitment where it shows a figure you can bid up to. You would NEVER include something like a figure you can go to for a regular sale, or you would craft one for a much lower amount. This is yet another case for the "pick one horse and ride them" line of thinking. Find a broker or a Bank, and just use them. Going to 5 Brokers on every deal shopping the rate can hurt you more than you can HUMANLY believe. (That's another great post for this thread)

Anyway, the Auctioneer will go and talk to the seller, and then come back and tell you that the 45 days is fine. You will need to put down 10% the day of the Auction. 95% of the time, you just write a check.

Then there are Auctions where the Bank is the seller. Really? Best thing you can do is get in before the Auction. Get to the Mitigation Department, and start talking. The Bank would love to avoid the Cost of an Auction and a Realtor.

If it goes to Auction from a Bank, try and get preapproved with that bank. Saves a ton of headache. If not, expect that you might need Certified funds down within 4 hours of Banking hours. So if the Auction is at say 6PM, then you need Certified funds for a down payment by 1PM the next day. If the Auction is at 9AM, you need certified funds by 1PM same day.

A Tax sale Auction would run this way.

BIGGEST thing you need to know about an auction is that you should work out where the Property is a winner before going in, and NOT BID A SINGLE PENNY MORE! DO NOT get caught up in it, that's where people destroy themselves.

Thanks.

 

[RKMoney]

RK - Following your story - I sent a PM but, figured I'd throw it out here - What are the long term plans for the units - Would it be possibe to get investors at preconstruction pricing... Maybe just 1 or 2 can seal the deal...

I live not too far away from the property, we're not really in a Buy situation right now being in the middle of 1 remodel and a recent purchase but, sounds like a real interesting situation.... Also sounds like a big project to be far away from?

Best of luck.

Saw the PM, thanks and I'll get back to you on that!As for the current situation, MIL and wife have the broker already and there will be 5 total units. We are going to keep one of them and sell the rest off.

It's actually not going to be that big, given that there will be only 5 stories and as you know, there are HUGE condo buildings being built.

Do you know the BBQ place in LIC? If so, our property is right next door to it.

Are you possibly interested in buying one of the units? If so, we can talk about that no doubt. Same with possibly looking into pre-investmenting.

But, first things first, is that we need to secure the construction loan!