The "Ask a Real Estate Investor" Thread

[chipwhich]

This is very intersting comment about your credit score being in the 800's. I am not try to imply you are lying but hear me out, I am a mortgage banker and I have MANY investors who need loans for investment properties. You stated you keep many of them as rentals, I am sure you know the guidelines that you can only have a maximum of 8 to 12 loans for investment properties (with the larger banks) financed.

To this day, I have never seen an investor with over 7 mortgage loans to have a fico score higher than 730 (middle score) even though all of their payments were made on time and their DTI's (debt to income ratios) were around 20%. The reason is that you are carrying too many debts, high limit debts and thus makes your score suffer, I know, Its retarded specially if you are making monthly payments on time and a mortgage should not be treated as a line of credit/credit card or used for scoring. 800 + score could only mean you have paid cash for many of your properties.

Good point, My uncle in Sarasota has 10 investment properties, all with mortgages. He claims to have a credit score near perfect in the 800's. Knowing what I do about credit scores, it's totally illogical. In his case, he carries a mortgage on every property.

Credit scores don't take into account savings, net worth, or overall ability to pay. It's all about number of loans, debt to credit ratios, late payments, length of loans, etc. Credit scores don't lend themselves to real estate investors.

[Maximus71]

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Declaring bankruptcy also makes it very hard to buy property for a few years after that as well.

You have to wait 4 years with established credit to purchase a new home after chapter 7 or 13 as a conventional loan. 2 years for FHA loans after chapter 7 or 13. Most of these loans are 417k and below, if you are buying anything above 417k Chapter 7 or 13 are not allowed and have to go as a jumbo or find a portfolio lender.

[chipwhich]

DC Market? Almost every appraisal in the DC/Old Town Alexandria area coming in higher than expected. The only reason if prices drop again in our area is due for another series of properties that hit the market is short sale or foreclosures which is a possiblity as banks are trying to work with the borrowers to keep them in their homes with the help of loan modifications or the HARP programs. Recent studies have shown that most of those borrowers end up foreclosing anyway.

I am saying I predict a big bubble in this area when interest rates rise. Appraisals are like opinions, everyone has one.

I could care less what someone appraises a house at, you don't get commission or repeat work for under-appraising a property. :cool:

That's what got us where we are....but I digress.

Did I mention my last house, homes were jumping 25-50K every three months...AND APPRAISING???? I am sure as a mortgage banker you understand what I am talking about. :cool:

[Maximus71]

I am saying I predict a big bubble in this area when interest rates rise. Appraisals are like opinions, everyone has one.

I could care less what someone appraises a house at, you don't get commission or repeat work for under-appraising a property. :cool:

That's what got us where we are....but I digress.

Did I mention my last house, homes were jumping 25-50K every three months...AND APPRAISING???? I am sure as a mortgage banker you understand what I am talking about. :cool:

I understand what you are saying but the appraisal process has changed from what it used to be 4 years ago. Its no longer that easy, you cant just go to any appraiser and say hey, I need this property to appraise for such and such and hit the price etc...

Hera/Hopa passed sometimes last year which one of their big changes were appraisal and how they are performed. I work for a very large bank, we no longer can talk or communicate with the appraiser directly, the appraisal order is placed with the appraisal company (CMA), the company then places it with the appraiser available for that area/region and the appraiser basis his value on the most 3 recent sold properties that is the closest in comparison to the subject property. His work is then checked by a board of appraisers for accuracy to make sure he used the most recent similar comps and his opinion of the price is justified and if not then the property does not appraise.

My point is, if the property is not priced right from the get go basd on the current market in the immediate area then it will not appraise.

[chipwhich]

My point is, if the property is not priced right from the get go basd on the current market in the immediate area then it will not appraise.

Yeah but STILL, the appraisal process is a CRAP SHOOT. You have to understand that.

There are less qualified buyers, less "easy" loans, and without a doubt less idea what interest rate increases will do to the housing market.

In case you don't know, rates are still artificially low. If the rates were to jump say 2-3 percent it would reek havoc on the home industry...hence why appraisals are meaningless.

[doctorshockalu]

So if I jump off the cliff and tell you that you will get rich doing it you will follow me? BS, its not the banks, I am a very successful mortgage banker and I do it honestly and ethically. Almost all lenders I know do the same, if the consumer is stupid enough not to read what the lender is offering then its their fault. In some cases, yes the lender is definitely in it to rip you off but with the new regulations and guidelines and penalties its going to be very difficult. The scum comments you are making is way out of line and trust me, many bankers and consumers look at people like you that are the same. There are many real estate investors that should be in jail for what they have done but due to a loop holes in the system they are still ripping people off.

Without overgeneralizing I would say there are bad apples in every group. I just don't find it ethical to add tons of garbage fees on top of an already pricey transaction just because you can. And the fact that we actually bailed these banks out that were gladly letting people in with no doc loans or taking a home equity loan out as a down payment is sickening. Of course it is not all the banks fault but when you take a highly leverage risk you have to be willing to fail, simple as that.

The scum comment was a little in the moment because that day I had been trying to work with the bank to help a homeowner stay in his house. He had made over 14 years of payments without ever being late, lost his job 5 months ago and is three months late on hiss payments. They absolutely refused and told me he can go into foreclosure for all they care. After my tax money just went to bailing these ****heads out I was a little more than pissed at them.

And I do agree there were a lot of investors that are ethically bankrupt as well. I don't know what you are referencing about the tax loopholes (1031s? or cash out refinances that wasn't taxed?)

[doctorshockalu]

Any other questions? Would prefer not to get PM'd. Thanks.

[stevenaa]

Any other questions? Would prefer not to get PM'd. Thanks.

What is the turnover rate for renters in SFH's? I'd like to start purchasing rental properties for retirement income. Do you target high maintenance items for repair/upgrade before renting out? Seems like a good way to minimize repair calls.

[doctorshockalu]

What is the turnover rate for renters in SFH's? I'd like to start purchasing rental properties for retirement income. Do you target high maintenance items for repair/upgrade before renting out? Seems like a good way to minimize repair calls.

For the SFRs that I rent they are typically on a year lease due to being close to campus. The ones that are more "retail ready" I am usually offering rent to own deals due to people just not having 20% down payment.

I try to have EVERYTHING fixed before the tenant comes in for two reasons. One is obviously so I don't get the nightmare calls at 10 at night and the other reason is if you show the tenants that you care about your properties they will go the extra mile to make sure that "their home" is in good condition. I have only had 2 deadbeat tenants in my real estate career. Make sure that you get an air tight contract and state all of the things you expect of them. Any other questions about landlording?

[MKnight82]

I am saying I predict a big bubble in this area when interest rates rise. Appraisals are like opinions, everyone has one.

I could care less what someone appraises a house at, you don't get commission or repeat work for under-appraising a property. :cool:

That's what got us where we are....but I digress.

Did I mention my last house, homes were jumping 25-50K every three months...AND APPRAISING???? I am sure as a mortgage banker you understand what I am talking about. :cool:

This is inaccurate. Appraisers dealing with mortgage work are hired by the bank and are considered a third party. The party applying for the loan cannot hire their own appraiser. Since the appraiser's client is the bank they want the most accurate appraisal possible which would gain repeat business. This is all regulated by the Uniform Standards of Professional Appraisal Practices.

If you want to argue that the appraised value of a property in a bad market is inaccurate that can be true. The problem is the banks want an "as is" value of the property but the appraisal process uses retrospective data (sales which have already closed), and most likely in a bad market there are no current market sales.

[steve09ru]

it seems to me that now is a great time to buy...i've been looking at places around the Roanoke area.

I won't get into detail but after all expenses I should have around 1100 to spare for payment on a house (per month avg.)...right now I don't have really any saved up and kinda hate to take a quick $5000-10000 loan from Discover (which the interest and terms for payment are very reasonable)

Would now be a smarter time to buy or wait a couple years not knowing what the market will do but have enough saved for a downpayment?

Also I would have 1-2 people renting off me...

[Ned Flanders]

the appraisal order is placed with the appraisal company (CMA), the company then places it with the appraiser available for that area/region and the appraiser basis his value on the most 3 recent sold properties that is the closest in comparison to the subject property. His work is then checked by a board of appraisers for accuracy to make sure he used the most recent similar comps and his opinion of the price is justified and if not then the property does not appraise.

When we purchased our home in July 2009, Wells Fargo sent their own appraiser. IMO he did a terrible job. We purchased our house for less then the current comps in our development area (60's style Ranchers from 1200-1700 Square feet), yet ours has an addition (500 Sq. Feet= total of 2200 sq ft) a two car garage (the others did not) and .5 acres (most others had .25-.4 acres)........He appraised it IN LINE with the other smaller, no garaged, less property houses.....

I'm convinced the appraisers are in cahoots with the banks, that way the banks get their Magic (Ins. premiums) for the house....We definitely have 20%+ equity with the true value vs. what we paid, but what can you do?

[doctorshockalu]

When we purchased our home in July 2009, Wells Fargo sent their own appraiser. IMO he did a terrible job. We purchased our house for less then the current comps in our development area (60's style Ranchers from 1200-1700 Square feet), yet ours has an addition (500 Sq. Feet= total of 2200 sq ft) a two car garage (the others did not) and .5 acres (most others had .25-.4 acres)........He appraised it IN LINE with the other smaller, no garaged, less property houses.....

I'm convinced the appraisers are in cahoots with the banks, that way the banks get their Magic (Ins. premiums) for the house....We definitely have 20%+ equity with the true value vs. what we paid, but what can you do?

Remember that you purchased below their comps because their prices were probably inflated. So it probably did get appraised for the correct value. If you truly believe you got screwed then I would have gotten another appraisal because if the value ended up being more than 10% higher there would have been heads rolling because they get marks on their record. The appraisers would probably then work something out on a higher price. That said, I have been burned numerous times by an appraisal as well.

[doctorshockalu]

it seems to me that now is a great time to buy...i've been looking at places around the Roanoke area.

I won't get into detail but after all expenses I should have around 1100 to spare for payment on a house (per month avg.)...right now I don't have really any saved up and kinda hate to take a quick $5000-10000 loan from Discover (which the interest and terms for payment are very reasonable)

Would now be a smarter time to buy or wait a couple years not knowing what the market will do but have enough saved for a downpayment?

Also I would have 1-2 people renting off me...

Depends how long you plan on being in the area. If you are staying more than 5 years I would definitely purchase in Roanoke/Radford area. With a FHA loan, you only need to put down roughly 3-4% down payment if it is your residence. If you have $1100 of disposable income every month this should take a couple of months to achieve the down payment.

Now this that said, I wouldn't rush into buying a property just because you want one. Are the people living with you or do you just want to treat the property as a rental?

PM'd you also.