Hi All

Conventional loans for residential property cover single family, duplex, triplex or fourplex. If I want to maximise each available loan without going into jumbo loan territory ($424k limit) it would be ideal to find a property that costs around $400k with a combined rent of at least $4000 a month to meet the 1% rule.

Where do these exist? 

I am thinking of a nice fourplex renting at $1000+ per unit. But in general more expensive areas that might have $400k fourplexes probably do not have good rent ratios.

Does anyone know of an area that satisfies this particular criteria?

cheers...phil

@Phil Mcnally You can find these if you look hard enough in Austin, but they usually take the form of a $300k 4-plex plus a $100k renovation, so I don't know if that would work with what you are trying to do.

Thanks for the reply. 

Rehabing beyond the normal 'make ready' is beyond my reach right now as I live in CA. I actually own a fourplex near Austin in Cedar Park that is at 0.8% based on current value ($420k ish). I did a cash out refi last year from my $315k purchase price back in 2009 and will hang onto it. I will take a look around Austin again.

Anyone else got ideas?

phil

Re:Austin

http://www.fathomrealty.com/listing-abor/5461508-9...

just about makes it if you get the 'market rent'

So Austin does seem to be one location.

@Phil Mcnally we still have a lot of 1% rule properties in Minneapolis. Especially in Northeast where I live. Good tenants and nice area for younger people.

I only dream of the 1% rule around here...

Originally posted by @Jordan Moorhead :

@Phil Mcnally we still have a lot of 1% rule properties in Minneapolis. Especially in Northeast where I live. Good tenants and nice area for younger people.

 In the $400k price range?

Originally posted by @Adam M. :

I only dream of the 1% rule around here...

 I rent in CA at 0.35% :-)

Originally posted by @Phil Mcnally :

Hi All

Conventional loans for residential property cover single family, duplex, triplex or fourplex. If I want to maximise each available loan without going into jumbo loan territory ($424k limit) it would be ideal to find a property that costs around $400k with a combined rent of at least $4000 a month to meet the 1% rule.

 I'll let others answer the 1% question, but I think you've been misinformed on the loan limits. You should be able to print this and use as a cheat sheet. 

Bay Area conventional loan limits, below which normal Fannie/Freddie rules can (1) apply:

- SFR: $636,150

- Duplex: $814,500

- Triplex: $984,525

- Fourplex: $1,223,475 

Counties considered Bay Area by the mortgage industry (2):

Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara

Counties that the mortgage industry does NOT consider to be part of the Bay Area, with lower loan limits (3):

Solano, Sonoma

.

(1) Sometimes, when "jumbo" is more advantageous, we will do them as "jumbo" even if below these limits. 

(2) Actually, the official terms are that these are "high cost of living" counties where "high balance" Fannie/Freddie loans are available.

(3) There are a lot of other counties with lower loan limits in California. These are simply 2 that are otherwise part of what normal people define as the 9 "Bay Area" counties. 

Thanks Chris 

I did not know the max conforming loan limits were higher in CA. 

I am looking for out of (CA) state properties as I have little hope of finding a 1% rule fourplex nearby. 

@Phil Mcnally $424k is definitely not the loan limit for many metro areas. $424k is the loan limit for a 1 unit property in non high cost areas. For instance, a 4 unit can go above 800k in the philly area and still be considered conventional per Fannie freddie rules. High cost area loan limits can go as high as 1.2M as of 2017 for a quad. You can read on the limits that apply at a county by county basis by going straight to FHFA, regulator for the GSEs.

Got it. I see now on the Fannie Mae page...

https://www.fanniemae.com/singlefamily/loan-limits

ok so anyone got any $800k four units that do 1%?

phil

Phil.

I grew up in San Mateo close to you. I’ve been investing in MFR in St. Louis and have been able to find these numbers here.

The cash flow is great and the neighborhoods were investing in are appreciating.

Originally posted by @Antoine Martel :

Phil.

I grew up in San Mateo close to you. I've been investing in MFR in St. Louis and have been able to find these numbers here.

The cash flow is great and the neighborhoods were investing in are appreciating.

 Thanks I will take a look.

@Phil Mcnally Though difficult to come by, we get 1% properties sometimes more than 1% all in (purchase and repair) in the City of Portland in Oregon and Portland metro but these are not move in ready properties... they are fixers, and most times you need to pay cash and close quickly, but they do exist.

@Phil Mcnally absolutely. There are some in even nicer neighborhoods in that price range! PM me and I can send you a few if you'd like.

This is possible in my area, but takes some work to locate.

@Phil Mcnally just curious why exactly you want a 400k/1000m quad?  There are always %1 rule quads around, might be a little cheaper than that the more out of the major city you get. Do you just prefer your rents not to drop below $1000 month?

Originally posted by @Robert E Bogino :

@Phil Mcnally just curious why exactly you want a 400k/1000m quad?  There are always %1 rule quads around, might be a little cheaper than that the more out of the major city you get. Do you just prefer your rents not to drop below $1000 month?

It is more about maximising the available conforming loans. 

I think in most second-tier markets there are still plenty of 1% rule fourplexes available in the 400k range. I own a few in Austin in the 78724 area code. Take a look there; it's an easy hop on 183 to your property in Cedar Park, and it'll be even easier once they've finished expanding it to a 12-lane highway.

A little more info on loan limits. I was told that once you get into loans 6 through 10 fannie mae does impose a lower limit according to my mortgage agent...

"with Fannie Mae's 6-10 program you'd be capped at a $424,100 loan amount ($565,467 purchase price to maintain 75% LTV)"

Two - four units would be 30% down I believe.

Thanks all for the replies. I am researching the areas.

Austin TX

Minneapolis MN

St Louis MO

Spokane Court d' Alene MSA

Originally posted by @Phil Mcnally :

Originally posted by @Antoine Martel:

Phil.

I grew up in San Mateo close to you. I've been investing in MFR in St. Louis and have been able to find these numbers here.

The cash flow is great and the neighborhoods were investing in are appreciating.

 Thanks I will take a look.

 Reach out and I can help you along the way. 

@Phil Mcnally

Per your parameters, 400k and 1% rule. How about $240k and 1% rule in Las Vegas. It is a fact, due to owning two fourplex in Las Vegas. Prices has increased steadily, but can still get at 240k.  The drawback was in BDC areas. However, found recently seller put 8 fourplexs on the market about 1.5 miles from the strip. Of course, these went quick, but all went for 225-240k, and met the 1% rule.

Terry

I've got a couple of 4 units a block apart for 160K and 170K respectively. (1.5% rule / 10% cap). Older buildings but great rental history, class B neighborhood in Waterville Maine. Feel free to PM me