Hi I’m currently looking to by my first home which is a multi family and I don’t know what I’m doing at all but I do have a real estate agent and I’ve been pre approved for an fha loan I just would like tips on dos and don’t s so I don’t fall flap on my face and any general advice would be greatly appreciated and accepted thanks in advance

@Marcele Johnson is this home you’re buying for you to live in? Is the realtor you are using your agent, or the sellers agent? Who is helping you finding tenants? Or does the property already have tenants in place? If so, are those tenants staying? Are you utilizing a real estate attorney to represent your interests in this transaction?

@Dan Barli I actually have only been looking and I just made an offer on one building and yes it’s my agent and yes I will be staying there and a tenant is in the one I just put the offer on which was full price and seller pays 3% closing and he countered back he will be willing to pay 1% and no attorney as of yet

@Marcele Johnson How many properties did you look at before making this offer?

@Marcele Johnson that’s good. Is it a duplex? I would recommend you line up an attorney to make sure you’re protected. Sounds like you’re on a good track

@Jaron Walling I looked at a few but some of them I looked at wouldn't pass the FHA inspection like they said they would and I made an offer on another property before hand but I was out bid

@Dan Barli cool thanks for the advice

Originally posted by @Marcele Johnson :

Hi I’m currently looking to by my first home which is a multi family and I don’t know what I’m doing at all but I do have a real estate agent and I’ve been pre approved for an fha loan I just would like tips on dos and don’t s so I don’t fall flap on my face and any general advice would be greatly appreciated and accepted thanks in advance

Have you considered the HomePossible loan? You can eventually cancel the PMI with this loan versus the FHA. I originally thought FHA too until someone told me about it. Its worth checking out and could put more money in your pocket!

@Bailey A. No I never heard of this loan do they do it anywhere in the United States?

@Marcele Johnson If the numbers look good compared to sold comps go for it. That's the only way to know if it's a DEAL or not. Sounds like you're not in rush which is really smart. You could be living nearly for free and paying down the mortgage. 

Because 1/2 of the property is rented you'll get some tax benefits and deprecation. If you move out (after 12 months), rent both sides, it changes to the whole property. It's a win-win. 

Originally posted by @Marcele Johnson :

@Bailey A. No I never heard of this loan do they do it anywhere in the United States?

I believe it is, its actually offered by Freddie Mac! You can do the 3% down with this one, its very similar to the FHA. They also offer the HomeStyle loan too (similar to the FHA 203k rehab loan but you can do more than 35k in repairs).

@Jaron Walling I’m a little ignorant to the lingo but deprecation? What does that mean?

@Bailey A. Thank you for the info

Depreciation is essentially a non-cash deduction that reduces the investor’s taxable income. You will divide your building value by 27.5 and long story short take that off your taxes. When you sell (never sell) Uncle Sam will try to recapture that $$$. House hacking is a great spring board for real estate investing. Good luck man. 

@Jaron Walling oh I know what that means I guess it was spelled wrong lol gotcha thanks for the info

@Marcele Johnson

Goodluck on your search, be patient and wait for the right deal!

@Brandon Brador thanks

Marcele, I would say that you want to make sure that the average rent in the area that you are looking will cover your mortgage or at least a good percentage of it on a duplex.  I usually recommend starting with a 3 or 4 family, that way the mortgage can be covered even if one unit sits vacant but this is contingent upon you having 3 to 6 months cash reserve saved.  

Here are my do's and don'ts:

DO look at market rents in your area

DO be patient (patience is a virtue)

DO factor in any work the property may need after purchase such as (roof, plumbing, electrical).  If you know these things need updating prior to your offer, have your agent either negotiate price or request the seller to update.

DO think about maintenance and up keep of the property (Snow removal, Lawn care, etc.)

DO research the tenant even if they are already in the unit.  Perhaps the seller can provide information on whether they have ever been late or if they damage things in the property a lot.

DO obtain an attorney as soon as possible

DO think about liability insurance for your tenant's property in case anything happens

DO NOT overbid (I have seen first time buyers get so excited that they offer 10, 20 even $30K over asking and then realize that it will not appraise for that price.

DO NOT neglect to run numbers and make sure it makes financial sense

AND DO NOT forget you will be a landlord

Hopefully some of this helps and I wish you good luck.

Hey @Marcele Johnson , I saw in one of your responses that you might be concerned with the property passing FHA requirements.
If that is the case, you might want to look into using a business purpose bridge lender who would be willing to lend a certain % of purchase price and include a renovation portion in the loan to make all of the necessary repairs. The rate and origination will definitely be higher than an FHA, but you'll be able to take the property down and have a budget to be reimbursed for repairs.
Once renovated, you can then look to refinance with the FHA loan for a better long term rate. Keep in mind this is outside of your normal due diligence on the deal, more so an investment tool you can use if it's a deal you designate as a good one.

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