Turning a Primary Residence into 40 Units w Amy Arata

17 Replies

Plenty of people can purchase a house to live in. But how can you leverage that single home into many more real estate deals—enough to achieve financial independence? On today’s episode of The BiggerPockets Podcast we sit down with Amy Arata, a real estate investor and former molecular geneticist who shares how she eventually turned a live-in flip into 40 rental units. Don’t miss Amy’s incredible “people boxes” advice—as it could change the direction of your real estate ambitions forever.

Listen here or on your favorite podcast app.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

This show was loaded with so much good conversation and perspective.  This is a must listen for all aspiring and current women investors.  Amy is so inspiring and well spoken.  Thanks for a great interview with an awesome female investor!  David Greene was also a fantastic co-host.    It felt like they have been doing the podcast together for years!  Loved it!

David Greene's input is amazing every time he speaks.  Hope he appears on more podcasts.

Great episode. Enjoy the information on real world experience. I would like to take on real estate investing full time. I wanted to ask: when you buy and rehab with cash...then take out mortgage to pull money back out...don't lenders care about your income? If you don't have traditional employment...how does that work? Do they just care about the value of the property itself? I have a ton of equity in my current home...and when I applied for a HELOC they said my "debt to income ratio was unfavorable". At the time I made $50K a year and had about $600K of equity in my home. I would love to keep my current home in San Jose, CA...rent it out for a sizeable rent and let the value continue to grow. Then take out a loan with my equity in order to start somewhere else where prices are more affordable. But does that mean I have to line up a job in that new location before I can secure my loan? And how does my rental income factor in?

Thanks for any advice!

Lots of great information in this podcast! Thanks for sharing.

David was very good. I very highly recommend him on the podcast. He even has the perfect voice. Make him come back.

Another Great Podcast- thank you.

It was mentioned about charging Tenants weekly rent instead of monthly.

Just thought to mention that in New Zealand and Australia it is the way tenants pay. 52 weeks in a years, resulting in extra income then pay monthly rent.

Common practice down under.

@Devon Carlock with six hundred K in equity they won't finance you?  You could buy one or more multi unit properties and have cash to spare with that much cash waiting for you

Originally posted by @Rodney Sums :

@Devon Carlock with six hundred K in equity they won't finance you?  You could buy one or more multi unit properties and have cash to spare with that much cash waiting for you

Rodney: Yeah I know! I guess I need to talk to more lenders. That HELOC was with my credit union.

Hello Everyone,

I am a listener of BiggerPockets podcast for a while and I am still new at real estate. I wanted to ask this question to get some advice. I was not sure if this is the place to post but here it is. I have a primary residence in Lowell, MA. I have a mortgage 30 fixed since 2007 I have never tap into. I had some up and downs were I had to do loan modifications and the worst of all I had to file for Chapter 13 to keep my Home. I am still on my 2yr of my 60month of my chapter. I am new to all this because I did not want to lose my home. After being in this mess of 2yr paying down + my mortgage what are my options to become an investor? I think I have some kind of equity in my home but I never wanted to use it for anything. I learned in this episode like more others but I am scared of asking this question and were to start since this is a mess I got myself into for the lack of knowledge. I hear everybody financial freedom and I want to become part of it since I have my home. Help! What advise is for me out there... and if there is hope for me...

Thank you 

Shirley 

Lowell, MA

I loved the female guest Amy Arata, as she gave the female perspectives and tips, which I always thought of and somewhat wondered about the safety aspects of letting your tenants know you are the investor. Great podcast. Thanks

I know cash flow is King... but is it common to invest just for appreciation/loan pay down? Similar to how Amy got started in her first house? My area is so damn expensive and cash flow is ALMOST non existent... I'm talking real cash flow, after setting aside %5 for vacancy, %5 cap ex, and %5 repairs. I hear so many people I've talked to in my area say that they are cash flowing, and when they tell me their numbers they are actually negative cash flowing because they aren't setting any aside for those items I listed above. However they are gaining $5,000-$15000 a year on just loan pay down, not even considering future appreciation (our market is kind of sideways at the moment). So again, Is it normal to invest for loan pay down and appreciation while breaking even or being negative on cash flow? 

@Devon Carlock Yes, you do have to qualify for the HELOC based on your debt to income ratio, credit score, and appraisal. You also get a better rate if it's your primary residence. Also, don't forget that if you rent your house for more than 3 of the last 5 years that you won't qualify for the tax exclusion available for primary residence!

I don't know if I was clear in the podcast about how I utilized HELOCs and commercial financing.  Honestly, I was expecting them to ask me more about managing rental properties and all of my crazy tenant stories!

We used the HELOC on our home exclusively for purchasing flip properties. That's because we didn't want the HELOC tied up in one property forever. The profits from the flips became the down payments for the commercial loans we used to purchase 5+ family properties. These loans are fixed for 5 years and adjustable thereafter.

Once my business was established and I had 2 years of tax returns to prove my rental income, I was able to purchase some 4 unit properties with 30 year fixed rates.   Also, keep in mind that the underwriters add depreciation back in, so even if you have a tax loss on a property they may count it as income.  If my husband or I had regular jobs, we would have qualified for 30 year fixed mortgages much sooner.

One point to keep in mind is that my husband had a good job when we qualified for the HELOC. Keep your job and save up until your real estate business is established! He had the steady job and I was able to manage our projects and find deals and tenants. Once the rental income was dependable, my husband was able to quit his very stressful job and start his own engineering consulting business. At that point, we knew we would be okay financially regardless of how his business did. The rental income gave him the freedom to take the risk.

LOL, everybody thought it was a midlife crisis when my husband quit his job!  We had actually been building up the "Free Mike" fund for some time.  It really wasn't about the money for me - it was about saving my husband's health and happiness and allowing him to enjoy our children before they grow up and move away.

Originally posted by @Amy A. :

@Devon Carlock Yes, you do have to qualify for the HELOC based on your debt to income ratio, credit score, and appraisal. You also get a better rate if it's your primary residence. Also, don't forget that if you rent your house for more than 3 of the last 5 years that you won't qualify for the tax exclusion available for primary residence!

I don't know if I was clear in the podcast about how I utilized HELOCs and commercial financing.  Honestly, I was expecting them to ask me more about managing rental properties and all of my crazy tenant stories!

We used the HELOC on our home exclusively for purchasing flip properties. That's because we didn't want the HELOC tied up in one property forever. The profits from the flips became the down payments for the commercial loans we used to purchase 5+ family properties. These loans are fixed for 5 years and adjustable thereafter.

Once my business was established and I had 2 years of tax returns to prove my rental income, I was able to purchase some 4 unit properties with 30 year fixed rates.   Also, keep in mind that the underwriters add depreciation back in, so even if you have a tax loss on a property they may count it as income.  If my husband or I had regular jobs, we would have qualified for 30 year fixed mortgages much sooner.

One point to keep in mind is that my husband had a good job when we qualified for the HELOC. Keep your job and save up until your real estate business is established! He had the steady job and I was able to manage our projects and find deals and tenants. Once the rental income was dependable, my husband was able to quit his very stressful job and start his own engineering consulting business. At that point, we knew we would be okay financially regardless of how his business did. The rental income gave him the freedom to take the risk.

LOL, everybody thought it was a midlife crisis when my husband quit his job!  We had actually been building up the "Free Mike" fund for some time.  It really wasn't about the money for me - it was about saving my husband's health and happiness and allowing him to enjoy our children before they grow up and move away.

 Amy-

Wow thanks for this reply full of so much information! I appreciate you sharing your specific details. I enjoyed your story, since I am in a similar position. I purchased a house in San Jose at the bottom of the market. I did a major remodel and am sitting on a lot of equity right now. Considering selling and moving to a more affordable area that still has potential. Was thinking I could use my capital to do some flips...save up...and then purchase rental properties. Again, it comes down to the employment question. I guess I can get a job in the place I choose to invest in...work while managing the flips. But I'm from the residential construction industry and I know how much time it takes to manage a project. Plus the type of job I'd get wouldn't pay all that much...especially when trying to get a large HELOC. Plus I'm single so no other incomes. Anyways...I have some thinking to do...and look forward to using Bigger Pockets community. Thanks again!

@Amy A Thank you for the great information and insights into your journey to 40 units. Excellent pod cast straight to the point. @David Greene You were an awesome host great questions to uncover some real nice nuggets of information thank you.

Amy 

Great Podcast , Sometimes  Road Less Traveled is the best route to take. I love your recommendation  of the John Reed book but seems his books are out of print and hard to get. None in my local Library either Seems like Brandon already swiped them already :)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.