Owner Occupy On Single Family 3 Unit Rental

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Owner Occupy On Single Family 3 Unit Rental

Dillon Thomas
Colorado Springs, CO · Member since 2018 · 10 posts · 1 vote

Greetings fellow BiggerPocket members, a year and a half ago I came across BiggerPockets.com while looking for my fifth room-mate sharing rental house and knew that I needed to start a plan to invest in real estate. I’ve listened to a few dozen podcasts and wondered around the forums a bit but for the last year and a half I have been looking at properties, attempting to punch numbers, speaking with realtors; basically I’m very green. However, my job has been moving me around and I am finally at the point where I’m tired of renting. I was told on June 1st I will be moving to Denver, Colorado to work full time. The company will put me in a hotel for up to 4 weeks and by then they expect for me have found a place to stay. So yesterday I started clicking the contact realtor button on some of the many online websites. A few minutes later I got contacted by a realtor who was very eager to work with me. Long story short, I told her what I was looking for and we came across one property that I do not want to pass up. So I’m here asking all of you out there reading this if I’m trying to make something work for the mere excitement to start earning equity, or might these numbers actually work?

Working with my realtor and lender, we came across a single family property listed for $450,000. I'm trying to do an FHA loan. I wanted to do multi-family, but then i was informed that there is a down payment assistance program that pays around 3%-5% for those who qualify. According to my lender, for me to qualify I have one option: My parents would help cosign so that I could reach the loan amount.

Here are some numbers:

Reduced Price: $429,900

FHA Loan: 3%

Expenses

Down Payment -$12,897.00

Taxes -$1,438.54

Closing Costs $2,705.00

Water -$120.00?

Sewage -$30.00?

Electrical -$250.00?

Vacancy $0.00?

Mortgage Insurance -$201.55

Principle -$2,082.03

Cap Ex $0.00>

Insurance -$500.00?

Initial -$10,192.00

Monthly -$3,183.58

Year 1 -$61,833.50

Year 2 -$51,641.50

Now I’m not great with exact numbers, and right here is shows I’m paying $3,183.58 a month for the mortgage, utilities, and insurance. The idea of buying a place rather than renting, is so that I could put the money on rent into my own property. Planning my move, I anticipated about $2,500 a month for a decent place. What’s great about this house is that it has an RV pad that I can rent out between $600 - $1,000 a month and a guest house that I was planning on living in while renting out the main house for around $2,200. That means if I can get those two units rented out, I could be pulling in almost $3,000 a month from rental income. Thus, I would be living virtually rent free, while my tenants would help me earn equity. My biggest worry is that I wouldn’t be able to rent out enough and that I wouldn’t be able to afford to live without collecting rent. Also, I plan on moving in another 14 months once this job is done. Should I wait, or jump on this?

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  • Ryan D.
    Real Estate Broker · Spokane, WA · Member since 2019 · 21 posts · 23 votes
    7y

    @Dillon Thomas

    House hacking is the way to go! I would do it but try and save up 6+ months worth of savings to cover the 'Just in case' for the lag time from renter to renter as soon as humanly possible. Also spend lots of time screening the renters rather than taking the first one that shows up, do reference checks and background check.

    My question would be about the RV site, is it 'Full Hookups'? Water/Sewer/Electric. Is the electric a 30 or 50 amp connection? Assuming its all good, a bunch of RV parks wont let people who have RV's older than 10 years stay at their park, it's a good way to weed out people you may not want to rent to. People with older RV's will usually be able to stay 'with management approval', management just wants to make sure their RV's aren't falling apart and look ok.

    I've lived fulltime in an RV for the last year and those rates seem about right assuming it's somewhere close to population. Just make sure there are no ordinances or HOA restrictions. Ran into one near DC at an RV park, they couldn't allow people to stay more than 2 weeks at a time in the summer and 3 in the winter.

    0Reply
  • Lizzie Carver
    Rental Property Investor · Denver, CO · Member since 2017 · 51 posts · 39 votes
    7y

    Hi Dillon-

    Any of the numbers you're unsure of, I'd err on the conservative side, including rental income and vacancy. Might want to exclude the potential RV income and if you like the deal without it, have that be something you work toward better understanding/treat as an added bonus if/when you get that income.

    If this is something you really want to do, no one is stopping you but you may want to get more familiar with the area (which you may already be--just assuming not since you're moving here) to get a feel for the rental demand of that specific area and fully understand why you would/wouldn't buy there. I say this especially since you'll need your parents to cosign. The size and cost of this property and it being in an area that sounds like will be new to you is a lot for what sounds like your first property.

    Another concern is that you plan to move in 14 months--if you have issues with renting you will potentially be having to pay at least a chunk of your Denver mortgage on top of the living costs where you move to. Just make sure you are prepared to cover any downtime between renters, as well as maintaining reserves for any major appliances going out/needing repair. May want to still buy but start small.

    All the best!

    Lizzie

    0Reply
  • Dillon Thomas
    OP
    Colorado Springs, CO · Member since 2018 · 10 posts · 1 vote
    7y

    Thank you everyone for your replies.  I've looked at the house and the 100' RV pad is 5' deep, comes with full hookup, water, waste, and two separate 50 amp hookups.  I put up a scout ad on Craigslist and had to take it down after two days from the amount of people asking about it.  I drove by the area and noticed RV's parked at other houses.  The RV pad is basically in the back yard and out of the way from the curb view and the backyard has an area for a small dog to run around.  The guest house is attached to the main house but there is a separate egress to the outside.

    This house looks like an amazing deal and I'll post pictures here soon.  It's basically a turnkey house hacking property. I found out today that the owner is wanting to sell the house by Sunday or he is going to turn it into a full rental.  I talked to my realtor today and we decided to draw up a contract for the house.  Last week I spoke with another lender who managed to get me approved for the $429,000.  So tomorrow I could possibly be making an offer on the house.  I feel like I haven't had enough time to really look at the numbers or what exactly to look for because I'm so green.  I'm okay with making risks on my first property, but I don't want to go in this without looking more at the future risks.  How do I know what to look for?  The roof, guest house, appliances, and windows are all brand new.  The owner who did the work was meticulous.  The stepping stone pad in the back yard is even perfectly squared and leveled off. All the wires throughout the house are ran well and look pleasant. Updated baths and a bedroom with a walkout to the backyard.

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  • Dillon Thomas
    OP
    Colorado Springs, CO · Member since 2018 · 10 posts · 1 vote
    7y

    I got accepted for the loan! We had the inspection the other day and found the the water heater had been leaking, which caused the subfloor to start to break.  But other than that the inspection went great.  Now I just wait for my lender to send me the disclosure documents.  These documents should have been signed last monday, but I found another lender with a better deal and had to change programs when I was already on a time crunch to close on this house.

    0Reply
  • Dillon Thomas
    OP
    Colorado Springs, CO · Member since 2018 · 10 posts · 1 vote
    7y

    Here is the guest house that was added on.

    0Reply
  • Dillon Thomas
    OP
    Colorado Springs, CO · Member since 2018 · 10 posts · 1 vote
    7y

    And the backyard with the 100' RV pad.

    0Reply
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