Posted by Jimmy (NH) on April 01, 2005 at 13:19:51:
Yes, you are right about the fixed note…but I couldnt qualify for it. The bank wanted an additional 5% down. My ARM is 7/1 so i think i might sell after 7 yrs if rates are too high. Your question about FMV…im not sure i quite understand the term. I think it’s a “Fair” Market Value…considering the monthly rent vs. the Purchase price, based on the many other multi properties ive looked at. This is the closest ive seen to the (1% rule) and the Home inspection passed with flying colors. Never needed an appraisal.
I dont understand why the value of the property will not incease if cosmetic fix-up are done to the 2 bdrm. Mainly bathroom, kitchen, flooring, walls and ceiling.
Posted by Jimmy (NH) on March 31, 2005 at 21:13:39:
I have a deal in the works…closing next thurs… I am purchasing a rental (255k) 1,2bdrm-1,4bdrm…with a Owner Occupied loan 80/15/5 ARM with 5.375 and 6.5 intrest. My plan is to gain some sweat equity with 2bdrm makover and adding curb appeal. Ill be OO for 6 mnths while fixing, than move on to new deal and rent this 2bdrm out. My FICO is mid 700, My PITI is about $1750.00 while aquiring $1300.00 mnth rental (tenant located in 4 bdrm) and once i rent out the 2 bdrm it will be $2300.00. My question is… are there any issues getting a HEL or HELOC while im already in a (80% 1st…15% 2nd). Also, is it likely to put 5k in ‘needed renovation’ to beef up equity along with 6 mnth appreciation very appreciatable area and be able to pull substantial (worth while/effort) equity out to purchase next deal? Another words can I count on getting this money out (since i already have 1st and 2nd) and will it be more than 5k plus appreciation?
You might want to inquire in the banks locally about getting a HELOC on a 6 month old loan. You may find that you will need to hold it longer than 6 months to qualify for the HELOC.
Next, I don’t think you can get a higher appraisal by improving the appearance of the building. You could get that only if the current valuation includes a “ding” for a defect that you’ll be fixing. BTW, what is the market value of the place and how does it compare to the purchase price?
Lastly, don’t let me discourage you. The deal sounds like a decent candidate for a buy and hold strategy. However, if you’re going to do that, I strongly suggest you consider making the 80% 1st mortgage a 30 year fixed note. The price difference isn’t that great, and it will minimize your potential future losses.