I currently live in St. Louis, Missouri but will be moving to Rhode Island to be with my girlfriend in 2018. I really want to house hack a 2-4 unit home in Rhode Island. Therefore, I need to secure a loan and purchase said property prior to moving in July 2018. I have never done a deal before so I am brand new to real estate and real estate investing but with the help of Bigger Pockets I have gained confidence and even met with an Agent in Rhode Island last week. I am learning about the area and actively looking for deals. After looking at renting in different areas, I am confident one unit or 1.5 units can cover the mortgage.
I do not have a ton of capital, and that is also why I am against throwing money away and paying rent to some landlord that is not named Quinton Slay (me).
My girlfriend and I have determined it is best (if possible) that my name and my name alone go on the loan as she is tied up with stuff at the moment AND in the future, we could use her name to fund a second FHA at 3.5% down.
1. How do I secure an FHA loan for a Rhode Island property when I will not be moving until July? -How long after purchase do you typically need to move in?
2. I won't have income in RI until July 2018 either. Won't that create a roadblock? - How do I over come this?
3. Might it be wise to look into Hard Money Lending or Private Lending to help fund a deal due to my situation?
4. I understand Private and Hard Money Lending is usually used for short term projects like BRRRR or fix and flip. Is it crazy to try this form of funding on a house hack and refinancing to a 30-year mortgage a year or two in, or is it smart/creative?
5. How would a brand new investor go about finding a PL or HML? Is that even possible?
As always, any and all advice is welcome. I love to learn new things in real estate so I would love to hear from several people experienced or not.
Thanks for your time and consideration.
I would start looking sometime in the spring of 2018 as there is no obstacle that would stop you from getting into an FHA loan. The only thing that may hinder your plans is having to quit your current employer if you do not have employment already lined up in RI.
For owner occ, they will want you to move to the property within 3 months of COE. The lender will probably also want a letter from your employer confirming a transfer or an executed offer letter from your new employer. It may be possible without this if you find a smoking deal with 3 units already occupied in leases that cover the PITI, but that will be dependent on the lender and how they analyze and count income.
Thanks, @Jeffrey Bibby
Do you have tips for lining up a job a few months in advance?
Do you believe FHA is the best route to take based on the situation?
Thanks, @Sandra B. Do you have tips for securing a job a few months in advance?
@Quinton Slay You're on the right track... great that you're thinking this far ahead. Leaving your job and not having income in RI will be a challenge; is there any way you can stay on your current job and work remotely from RI for a few months? You'd just need to do it long enough until you complete the purchase, and then you could leave the job and look for something locally.
@quinton slay i was in your shoes at the beginning of this year. To be closer to family, my wife and I decided to move to philly from D.C. so I needed a new job and we wanted to house hack. Fast forward to now, we live in philly, I have a full time job working from home at the same salary from D.C., and I just closed on a duplex to house hack. And we did all this with two little kids, it was stressful and exhausting but I think it's going to be worth it for financial freedom. Wish you the best and just take it one step at a time.
@quinton slay I suggest you get your job straightened out in RI first. It's unlikely you'll get a mortgage without stable income.
Hey, @James Marshall thanks for the response.
I plan to complete the purchase first, then find a RI job, then make the move. Is that what you're asking? If so, that's exactly what I am planning to do. As far as living in RI and working the current job remotely, probably not doable or ideal for the owner. I could travel (which is expensive and possibly raise more questions for the lender) though. Do you have tips for securing a job a few months in advance in another state?
@Sung Park This is great! Could you expand on this so I get an idea how you did it? How did you find a job, and get the banks approval? did you have to rent for a period of time or did you buy the house hack before moving? This is interesting. Congrats!
I got my job first before getting mortgage and moving. I found it on flexjobs, google it and it might be worth checking out. The new job was in the same industry and similar role so I think the lender had no qualms about it. I forwarded him my offer letter, started the job and sent him a month of pay statements while house was under contract. My lease was up end of august and closing was 9/8 so my landlord allowed my family to extend about a week after lease to transition out.
Thanks! Ill be sure to check out flexjobs today!
@Sung Park is right; you need to focus on getting the employment lined up first. Projected or hypothetical income is typically not considered as qualifying income unless:
- In the same industry and/or job responsibilities as previous employment
- Guaranteed and non-contingent contract in place
- Set to being within 60 days of loan application
Thanks @Michael Cohen
@Sung Park where do you live in Philly? Nice work on the hack.
@Quinton Slay There are HMLs who have longer term rental products if you can't get a conventional loan. They look at straight rent to interest payment, as long as the rent is 125% the interest only payment, you can get a loan for a house, then refi after a number of months.
@David Weintraub this is great information! Thanks! What do they require from the borrower?
One example, borrower would be into a property 20% with HML covering 80% purchase of the "as is" value of a property. Rental income would have to be 125% of the interest payment, and you'd need it rented in 2-3 months time. Interest only loans for 2-5 years, depending on product, with a 6mos minimum. Credit driven, with interest rate between 7.5-9%. I've seen these types of loans. And then you can refinance it into better rate at some point.
@david weintraub thanks, found on MLS, lower merion township close to I-76 and manayunk station. Do u know of any BP meet ups in the area? I'd like to start attending when I can.
Contact RI Housing and go over all of this with them. You would like to be an investor, but right now, you are essentially a first time homebuyer. We have all been there ourselves, and it is not a knock. Identifying what the reality of your situation is and utilizing the resources that are pertinent to your current situation will be helpful if you wish to invest in the future. Right now, your job is to get the first one, and this will most likely be your best avenue, especially if you are unfamiliar with this state.
Thanks @Brandon Ingegneri
This is possibly the most helpful comment so far.
I've been told by my agent that I need to be a current resident of Rhode Island to receive their assistance. Would you still suggest I reach out and see what they can do or even open the door to a job so that I can qualify for a loan? Also, am I starting too early? I don't plan to move until July 2018 and when I spoke with a lender yesterday, he was questioning me as to why I'm doing this now and wasn't very nice about the situation at all so I kind of stepped back today and just practiced analyzing deals.
Thanks for your time!
I'll put you in touch with the right people. Take a look at my phone number in the signature or PM me. Were going to do 2 things.
1. Drop that agent and get you a good one.
2. Get you hooked up with a lender that will know exactly how to navigate RI Housing.
These two people will get everything T'd up and narrow the gap as much as possible so that when you are ready to pull the trigger here, the ground work is laid out. Worst case, you may need to grab a month to month lease for a few months when you move here to establish residency, and then you can get right into a house.
Even better... I may have a house that you can rent to establish residency and then buy pretty quickly. Grab your first multi-family investment, house hack it, the whole 9. We can go over the details when you like.