COVID 19-Buying a duplex in Southern California
Civil Engineer 路 Thousand Oaks 路 Member since 2016 路 42 posts 路 10 votes
I've been saving up to make my first deal. I would like to purchase a duplex (Two-Unit) in Los Angeles-CA. However, I'm aware that due to COVID-19 some banks have changed their regulations. For example, Chase has changed their minimum requirements to a min. down payment of 20% and at least a 700 FICO score.
What is my best option as far as a loan, I have great credit with decent income, therefore, I would want to put as little as possible down.
In addition, when would be the best time to buy? Now, or should I wait a couple of months so price go down (if they go down).
Thank you
Hey @Marco Cruzatt, you are correct, several banking institutions have changed their lending requirements, however, there are still a lot of mortgage companies who are providing competitive programs such as FHA, VA, and low down payment Conventional loans.
FHA loans are good, but there are conventional loans out there right now that you could take advantage of that are better and have a similar minimum down payment structure, it just depends on if your credit is good enough. With a conventional loan, you can typically still get a fixer upper property and get a good deal. Definitely something to explore, especially in this current market.
As of right now, I have several client's looking for investment property all over Southern California, but the numbers have to work. Any time is the right time to buy real estate, especially if you can find a good deal. As of right now, housing prices have stayed pretty steady in the Southern California market due to the high demand and limited supply available. It may make sense to wait a little while before you pull the trigger on your first investment property, but now would be the perfect time to start getting all of your loan docs in, getting pre-approved, and start looking for something. Just because you're looking, does not mean you need to buy right away. But if you have everything ready to go, once you do find that deal, you can pull the trigger and get exactly what you want!
You and I should have a chat about getting everything in line for you so that when the time does come for you to invest in a small multi-family property, you're ready to go!
You may want to look into an FHA loans. They haven't changed their 3.5% down, but the bank that you are getting the loan from may have their own restrictions.
Hey @Marco Cruzatt, you are correct, several banking institutions have changed their lending requirements, however, there are still a lot of mortgage companies who are providing competitive programs such as FHA, VA, and low down payment Conventional loans.
FHA loans are good, but there are conventional loans out there right now that you could take advantage of that are better and have a similar minimum down payment structure, it just depends on if your credit is good enough. With a conventional loan, you can typically still get a fixer upper property and get a good deal. Definitely something to explore, especially in this current market.
As of right now, I have several client's looking for investment property all over Southern California, but the numbers have to work. Any time is the right time to buy real estate, especially if you can find a good deal. As of right now, housing prices have stayed pretty steady in the Southern California market due to the high demand and limited supply available. It may make sense to wait a little while before you pull the trigger on your first investment property, but now would be the perfect time to start getting all of your loan docs in, getting pre-approved, and start looking for something. Just because you're looking, does not mean you need to buy right away. But if you have everything ready to go, once you do find that deal, you can pull the trigger and get exactly what you want!
You and I should have a chat about getting everything in line for you so that when the time does come for you to invest in a small multi-family property, you're ready to go!
Some of this depends on--what are you trying to accomplish with the duplex specifically? House-hack, fix it up, rent out both units, cash flow, etc. Outside of that, your best bet is to work with an investor-friendly lender, of which the big banks are not in that category. I know a guy who can do LA and works primarily with investors. Those will be your best bet to get the best rates, less runaround, and most options.
@Marco Cruzatt I would avoid the big banks even if they didn't raise their requirements. The overlays and lender experience/motivation can be a problem if the transaction is not a slam dunk. I would suggest an FHA loan for a duplex if it is in LA. There are conventional programs, however the conventional options that I'm aware of have challenges in our market (income restrictions that contradict what is needed to be approved for the amount of the property), that may not exist in lower price points. The best time is always now, though I would avoid showings if properties are occupied and specifically target fully vacant properties for the moment. I say the time is now because there is less competition and your ready to strike if opportunity presents itself, otherwise you can passively shop (approvals don't expire if your situation is the same) until opportunity presents itself.
@Marco Cruzatt I agree with @Clarence Johnson. I would avoid the big banks. FHA would be the way to go because the barrier to entry would require less cash on your end. Any additional cash you have can be applied to renovations. You will have PMI, which can add to your overall monthly expense.
Happy Investing
I'm jumping in here with layered curiosity and time sensitive URGENCY. Stepping right into a few things that I've read in this thread that may help others while I am seeking knowledgeable resources in return as well. First, I am a newbie so, please excuse my lack terminology and possible redundancy.
As of today, I opened escrow for a Duplex in East Los Angeles. Things have happened quickly but we are looking forward to the potential of this first investment. I'll start with the good: We initially came into the deal with a Investor loan pre- approval (Hard"ish" money) at 70% with no contingencies. My brother is a general contractor so, we knew what we were walking into. The plan was for a flip and hold, then possible refinance into a conventional loan at a later point. In the midst of making our offer, we realized how limiting, going into an older property in need of a fair amount of rehab, a hefty down payment in cash resource would be. Luckily, on the day our offer was accepted, we were ultimately put in touch with a lender that presented what is seeming to be an amazing program, that only required 5% down, no PMI, 3.5% interest along with 2 qualifying grants of $10k provided town the down payment- and up to $7500 in closing costs. We have been approved thus far and are officially in motion. I am sharing to say, it IS definitely possible if you find the right property. The move forward is now looking much more imminent.
On the flip side, one unit is vacant and the other is occupied. Not initially an issue, as my desire is not to displace anyone during this time. However, we are now aware that the tenant has in fact exercised their right not to pay rent in compliance with city ordinance. I must mention that this property is also intended to be owner occupied. Leaving zero income revenue during the ordinance and/or rehab to the vacant unit.
From what I understand, the ordinance allows for deferment with the requirement to pay back in full within (12) months- (6 months in unincorporated east LA) after the mandate is lifted. However, the extension recently announced leaves the unknown at a much higher level than before.
Here are my questions:
Any advice on how to best approach this challenge while still in escrow?
How important are estoppel contracts?
Is it worth it/ are we able to offer relocation support to alleviate back rent debt in order to offer a release to vacate ( and if so, what amount is standard?)
What would you do? 馃ズ
Ask the lender if you can also suspend payments since you have justification with the tenant not paying rent.
@Charles
@Charles Cooper Thanks for responding. Is that something that will deter the lender in anyway? Or are you suggesting that request after close of escrow?
It may deter the lender but depends on the situation and how good the deal is. Are you able to go 6 months without that rent income? If not then you need to reconsider. If so, you will still get your money in the end, the tenant is not free from paying his rent per the lease agreement. He just has more time to pay. As for the other unit, try and get it rented asap after closing, this is going to help you with the mortgage payments. You will have a month before paying your first mortgage payment. If you have to, lower the rent for vacant unit. Good luck.
Thanks for responding. We do have a bit of rental cushion but definitely want to make sure we are as proactive as possible. We plan to occupy at least one of the units at a time.
Question for anyone: Have you heard of tenants signing any type of waiver that release their right to city ordinances? If the tenant is now agreeing to begin paying rent again in July- can we ask them to agree to maintain that agreement regardless of governed allowances馃
I'm jumping in here with layered curiosity and time sensitive URGENCY. Stepping right into a few things that I've read in this thread that may help others while I am seeking knowledgeable resources in return as well. First, I am a newbie so, please excuse my lack terminology and possible redundancy.
As of today, I opened escrow for a Duplex in East Los Angeles. Things have happened quickly but we are looking forward to the potential of this first investment. I'll start with the good: We initially came into the deal with a Investor loan pre- approval (Hard"ish" money) at 70% with no contingencies. My brother is a general contractor so, we knew what we were walking into. The plan was for a flip and hold, then possible refinance into a conventional loan at a later point. In the midst of making our offer, we realized how limiting, going into an older property in need of a fair amount of rehab, a hefty down payment in cash resource would be. Luckily, on the day our offer was accepted, we were ultimately put in touch with a lender that presented what is seeming to be an amazing program, that only required 5% down, no PMI, 3.5% interest along with 2 qualifying grants of $10k provided town the down payment- and up to $7500 in closing costs. We have been approved thus far and are officially in motion. I am sharing to say, it IS definitely possible if you find the right property. The move forward is now looking much more imminent.
On the flip side, one unit is vacant and the other is occupied. Not initially an issue, as my desire is not to displace anyone during this time. However, we are now aware that the tenant has in fact exercised their right not to pay rent in compliance with city ordinance. I must mention that this property is also intended to be owner occupied. Leaving zero income revenue during the ordinance and/or rehab to the vacant unit.
From what I understand, the ordinance allows for deferment with the requirement to pay back in full within (12) months- (6 months in unincorporated east LA) after the mandate is lifted. However, the extension recently announced leaves the unknown at a much higher level than before.
Here are my questions:
Any advice on how to best approach this challenge while still in escrow?
How important are estoppel contracts?
Is it worth it/ are we able to offer relocation support to alleviate back rent debt in order to offer a release to vacate ( and if so, what amount is standard?)
What would you do? 馃ズ