Realtor for First Time Purchase, FHA Financing?
I’m a first time homebuyer looking for a good buyer’s agent, and would love recommendations. Here’s my situation: Looking to buy a two family townhouse/brownstone in the $200,000-$500,000 range, and rent out the other unit. I don’t have close to 20% down but I have near perfect credit, no debt and a solid income. I…
I’m a first time homebuyer looking for a good buyer’s agent, and would love recommendations.
Here’s my situation: Looking to buy a two family townhouse/brownstone in the $200,000-$500,000 range, and rent out the other unit. I don’t have close to 20% down but I have near perfect credit, no debt and a solid income. I have about $15,000 for a DP and want to keep rest of my cash for unexpected things coming up (another $15,000) so I’ll have to get an FHA or FHA 203(k) loan.
Thanks!
When i started my my real estate adventure a few years back, I knew i couldn’t afford “surprises” so i started from a newly constructed 3 family in Bedstuy.
These recently built 3 family in bedstuy are truly ugly, but rent easily and won’t surprise you with big repairs bills for many years. The best part is that are good cash cows. On the down side, this kind of new construction doesn’t appreciate much over time.
If you are not horrified by these new constructions, as someone who wants to be a first time landlord i would recommend you to look into the option. It’s the perfect training ground for a first time landlord. BS/CHN (and don’t forget Bushwick) have quite a few of these up for sale: built during the gold rush, are now selling at very decent prices (in relation to the rent that you can get from them) and rent easily. You might even find some with 25 years tax abatement (just beware that tax abatement = rent stabilized rent apartments). Also, if you find something you like, make sure to hire a good inspector as well.
As for how to choose the right block read and follow all the suggestions that greenbrownstone listed above.
Good luck.
I’ve been lurking for a long time. Having been exactly where you are right now 6 months ago, I decided to register an account just to share a bit of what I wish I knew when I started searching for a 203k property in BS/CHN.
(The caveat is, of course, this is my own perspective on my own experience. Take my advice, like all advice, with a grain of salt.)
Do’s
-Do go out and see properties in your price range.
-Do search Zillow, Trulia, Streeteasy and whatever other online resources you can to find them.
-Do go to properties that seem like they might be what you are looking for just to check out the neighborhood. Walk around. Talk to people. (I can’t emphasize this enough.)
-Do go out at 11pm-1am to that same neighborhood on a weekday night. (Do yourself a huge favor and do this. A place can look pretty quiet during the day. That says nothing of its nightlife.)
-Do talk to the police in the precinct that serves the neighborhoods you are considering. (DO NOT CALL. Go there and speak with multiple officers about the BLOCKS you are considering. Remember, these parts of BK are really block by block right now, and you want all the info you can get.)
-Do talk to people in the renovation business after seeing a few of the houses in your price range to get an idea of the affordability of the renovations you are looking at. I saw a lot of shells and guts for 300-400k in BS/CHN in some ugly areas. New windows can cost you 20-25k alone on a brownstone. Need a new roof? Boiler? Plumbing? Electrical? Gut reno’s come in all over the place, but you could be talking 100k a floor, easily throwing your budget out the window.
-Do realize that you will have to factor in your mortgage, taxes, and insurance during your 203k loan for as many months as your property is not habitable. You can put 6 months into the 203k escrow as part of the mortgage, but above and beyond, you are responsible for.
-Do realize that there is a contingency built into the 203k of 15%(?) of the total cost of the renovation.
-Do remember that you will have architectural fees and city fees to deal with.
-Do remember that eviction (should the property come with tenants) is a long and expensive process made even longer and more expensive by our current economic problems.
-Do remember that you will likely have lead paint and asbestos abatement.
-Do realize there are ALOT of investors out there with cash who are buying the properties you want faster than you can. Also realize that many sellers don’t know what a 203k is or how it works and may write you off because you are trying to finance an “unfinanceable” property. Some of these people you can reason with. Some you can’t.
-Do order an engineer’s report before you sign anything. Even though this is a 203k, you can’t afford major structural work and it will be money well spent.
-Do line up all of the people you need for your 203k (broker, attorney, FHA auditor/assessor, contractor, engineer, architect, expediter etc) so you can execute quickly.
-Do realize that if it seems too good to be true, it very well may be. Always do your due diligence.
-Do learn absolutely everything you can about the 203k process.
-Do consider the advice of picking up a condo/coop to generate equity.
Don’ts
-Don’t give up but be prepared to expand your search area or make concessions if you find you can’t find/afford what you are looking for.
-Don’t rely solely on an agent to find you properties at this price range in those locations.
-Don’t underestimate the ability of a property to surprise you with BIG expenses during a renovation.
-Don’t trust those who appear to be shady characters, as 9/10 times, they are.
-Don’t fool yourself into believing that because a block is beautiful, it is safe.
Best of luck. Just remember to be flexible and persistent.
Try to find a place in move-in condition. Keep in mind that merely painting and refinishing the floors could easily run $10,000. You don’t need a buyer’s broker. Don’t sign anything. Check NYT, MSL (realtor.com), Corley Realty Co., Corcoran.
Also, I just bought a brand new 3 fam, and even brand new I’m shelling out a lot of cash here and there on repairs! I know the 230K is tempting, but it’s a big, big gamble… If you’ve never done a renovation before, don’t do it. It will take longer and more money than anyone will tell you. Good luck!
a buyers broker will do more harm than good in brooklyn, where many firms are non rebny and will not call you back if they are not absolutely desperate. not only will you will be dead last on their list because they don’t want to split their commission with a buyers broker, they will most likely ignore you.
don’t sign anything with any broker, just get a mortgage person.
now where does one actually find a 2-family for $200k in an area that does not require a bullet-proof vest?
Your first “investment” might be a condo apartment that you will be able to RENT out if you want/have to in order to make the shift to a multi-family property. If you buy in a co-op, you will not have the flexibility to sublet to cover your costs or while waiting to sell to free up your capital.
<– Agent at Fillmore Real Estate
Check http://www.fillmore.com
Do a search for homes under 500K, and you will see a large selection of homes, in many different parts of Brooklyn.. Im sure there are a few “winners” in the lot.
Buy now, while rates are so low.. (should be 5% or UNDER)
GOOD LUCK!
Howard Witz
Thanks Hoffster
I talked to a guy who specializes in FHA/203(k) loans at Wells Fargo, and based on my income, credit, monthly payments including insurance, FHA PHI, taxes, and factoring in a conservative estimate of rental income, he gave me the $500,000 upper bound figure, minus around $30K for financing closing costs. I don’t think I’d be comfortable taking on more than $450K total though, based on what the monthly payments would be – which is what I could handle without any rental income. I’m definitely conservative and agree that I don’t want to get in over my head. However, I also factor in the fact that I’m single, no partner, no kids, and that I’m willing to also live with roommate(s) in the owners unit to bring in extra income for at least another 4-5 years. If I was able to find a brownstone in a, as you put it, shitty neighborhood and fix it up, I’d want to stay in it long term, so I’d be willing to put in some sweat and harder times for a while – with the hopes that if I chose the location well, that that neighborhood would improve (I’m thinking Bed-Stuy/Crown Heights). I’m seeing listings between $200- $350K that need at least another $100K of work. But I don’t have to make it perfect right now, just livable and rentable.
What worries me are the unknowns, like how much it costs per year to maintain a brownstone (before or after putting in about $100K or so in renovations), so I can make sure to budget for that. How much cash on hand would most people want to have right after purchase for dealing with anything from losing your job to the roof caving in to the tenants getting bedbugs, etc.? My minimum comfort level would be $15K but maybe that’s too little? Or how fast do taxes rise? I’ve been doing a lot of research on buying and renovating, but these last questions never have hard and fast answers that allow me to budget as accurately as I’d like.
Agreed, you should probably talk to some mortgage brokers first. Adam Dahill is usually on the boards, and frequently gives good advice. If you want to talk to a bank, I recommend Brian Scott Cohen at Wells Fargo, who is also very helpful.
That being said, you are indeed cutting it mighty close financially. You’re probably better off saving some more of your “solid income” for a while, and getting a nice cash cushion. Even if you can work the FHA angle and the seller covered all of your closing costs (which frankly is a surer bet in a new development condo than in a house), that extra $15k you have isn’t going to go far at all.