Newbie - Urban Transportation Planner - Bay Area & Stockton, CA

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Newbie - Urban Transportation Planner - Bay Area & Stockton, CA

Leslie B.
San Francisco, CA · Member since 2015 · 16 posts · 2 votes

Hello! I am interested in owning rental properties in the Bay Area and Stockton areas of California. I live in San Francisco and have a goal of owning my own home (SFH or multifamily) in San Francisco, Oakland, or nearby.

Currently considering different strategies for my first purchase -- use first time home buyer benefits to purchase a Bay Area, live-in multifamily first, or start with steps toward that purchase by investing in more affordable rental-only multifamilies in an area like Stockton (and foregoing the first time home buyer benefits).

Am looking to connect with folks who could be part of my team for my first purchase and additional purchases down the line. 

Am also looking for mentors and peers nearby. 

I don't have much money, but I do know about urban and regional planning, transportation, municipal government, facility management (capital infrastructure), Bay Area culture and politics, data analysis, and computer programming.

Happy to meet in person over coffee or over skype.

Currently reading: Loopholes in Real Estate

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  • Linval T.
    Investor · Bay Shore, NY · Member since 2014 · 1k+ posts · 688 votes
    10y

    @Leslie B.

    Welcome to the vibrant BP community. Your time here will be well spent.

    Since your desire is to own SFH and MFH, I added the below links for your review.

    https://www.biggerpockets.com/renewsblog/2015/03/27/financing-options-rental-property-guide/ (financing options for rentals)

    http://www.biggerpockets.com/renewsblog/2013/01/04/how-to-rent-your-house/ (house rental guide)

    http://www.biggerpockets.com/renewsblog/2013/02/22/buying-rental-property/ (how to buy a rental property)

    http://www.biggerpockets.com/renewsblog/2014/07/19/how-to-buy-a-duplex/ (guide to buying a duplex)

    https://www.biggerpockets.com/renewsblog/2015/11/16/how-to-choose-areas-multifamily-deals/ (Choosing multi-family deals)

    Now that you have made the move, below are some links that will help with the navigation of the site.

    https://www.biggerpockets.com/courses/a-beginners-introduction-to-real-estate-investing (video courses)

    https://www.biggerpockets.com/real-estate-investing (Ultimate beginner's guide to REI)

    Before your 1st purchase, please ensure you visit the below link for some tips.

    https://www.biggerpockets.com/renewsblog/2014/12/19/real-estate-investing-success-smart-tips/

    REI books suggested by BPers

    https://www.biggerpockets.com/renewsblog/2015/11/13/7-real-estate-books-beginner-investors/ (7 absolute must read books for beginner REIs)

    http://www.biggerpockets.com/renewsblog/2013/04/14/best-real-estate-books/?utm_source=search&utm_medium=internal&utm_campaign=books (books recommended by BPers)

    Simply, bone up on the areas that you need to expand knowledge in such as, Forums, Marketplace, Learn, Network, Analyze and Resources.

    Feast on the Podcasts, #askbp Podcasts, blogs and webinars

    Lastly, this site thrives on interactions and as such we encourage two way exchanges and look forward to educational, thought provoking ideas relevant to REI.

    0Reply
  • Leslie B.
    OP
    San Francisco, CA · Member since 2015 · 16 posts · 2 votes
    10y

    Hi @Linval T.. Thank you for all of the resources. :) Happy new year!

    0Reply
  • Marlon Wilson
    Houston, TX · Member since 2013 · 1k+ posts · 114 votes
    10y

    Welcome to Biggerpockets @Leslie B.!

    0Reply
  • Account Closed
    Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
    10y

    Most of us got started by "house hacking" - buy a 4 unit building and live in one unit. Live for free while you pay down the mortgage pretty fast. Or use the cash flow to save and buy a 2nd property within just a few years. 

    I did this by getting an FHA loan on a $400K 4unit in Oakland. I had to put down roughly $20K including closing costs. I now cash flow over $2,000/month and am using that to build a down payment for more.

    Try to save roughly $20-30K and you'll be able to get started right away. 

    Good luck

    0Reply
  • Ofer DallalBusiness Member
    Real Estate Agent · Danville, CA · Member since 2015 · 17 posts · 3 votes
    10y

    Hi @Leslie B.,

    We're also starting out in the Bay Area. This week we made our first offer on a house and I'm hoping to get a positive reply :D

    I wanted to suggest some financing options we are going to use:
    - The City of Oakland has a first-time home buyers financing program
    - CalHFA has programs that will help with downpayment and closing costs as well.

    Please let me know if there's anything I can add about the process we are going through.

    Best of luck!

    Ofer

    0Reply
  • Leslie B.
    OP
    San Francisco, CA · Member since 2015 · 16 posts · 2 votes
    10y

    Congratulations on that step! I hope your offer is accepted. I'd love to hear more about what you are doing. I'll PM you later today. :)

    And thank you for the Oakland tips! 

    0Reply
  • Leslie B.
    OP
    San Francisco, CA · Member since 2015 · 16 posts · 2 votes
    10y

    Thanks, @Account Closed. An FHA multifamily is sounding good. Bigger Pockets seems to really like the move, and I've been convinced. Would love to hear more of your story. Will PM.

    0Reply
  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    10y

    Ho Leslie. Stockton form a price perspective is great. Stockton was hit real hard so do be careful and try and find properties near schools if possible or hosiptals. All the best.

    [email protected]
    0Reply
  • Jay Orlauski
    Realtor · Fresno, CA · Member since 2013 · 471 posts · 225 votes
    10y

    Hi Leslie - welcome to BP. I live in Fresno and also started in multifamily by living in one unit and renting the second - and subsequently purchased more multifamilies - I think it is a great start , especially if you can find someplace you are willing to live in and can get good rent for. Only problem with starting with a multifamily is it uses up most of your available cash to buy property so you have to build up your assets again before taking on another property - but this can be a good thing to as it gives you a chance to learn the ropes while managing your own unit and can keep you from getting to far ahead of yourself. Many investors I know like to buy a multifamily .. build up cash then do a flip - then use the flip money to buy another multifamily - that way you make up front cash , but also keep the income stream building up too - others prefer to do a flip first and then use that money to get a multifamily - I guess it would all depend on what your short and long term goals are - Looking forward to hearing about what you decide and how it turns out.  

    0Reply
  • Jordan Thibodeau
    Rental Property Investor · San Jose, CA · Member since 2013 · 486 posts · 170 votes
    10y

    @Leslie B. Welcome to BP. I would definitely listen to as many podcasts as you can. Feel free to reach out if you have any questions.

    0Reply
  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    10y

    @Leslie B. FHA is a great way to get started! Here is some info that you may find helpful in regards to FHA financing. You can get into a property with very little money down.

    Maximum Financed Properties

    • The maximum of four financed properties includes the subject property.

    Inducements to Purchase

    • Certain expenses, paid by the seller and/or another interested third party, on behalf of the borrower, are considered "inducements to purchase" and result in a dollar for dollar reduction to the lesser of the sales price or appraised value of the property before applying the appropriate LTV factor. These expenses include:
    • Contributions up to 6% of the sales This information is accurate as of the time of posting. Please also verify the accuracy of this information at the time you are considering these options as guidelines change.price
    • Decorating allowances
    • Repair allowances
    • Moving costs
    • Note—a dollar for dollar sales price reduction is also required for - Excess rent credit and gift funds not meeting FHA requirements Contributions exceeding the actual cost of prepaid expenses, discount points and other financing concessions

    Credit Requirements

    • Required is 600. FICOs below 620 have maximum DTI of 43% regardless of AUS approve/accept
    • Minimum of 2 trade lines are required
    • No more than $1,000 in disputed collections
    • Must be all on time payments in the past 12 months of mortgage history
    • No more than $2,000 in collections ........ Medical bills are excluded.
    • Minimum of 2 years from Chapter 7 or 13 bankruptcy discharge
    • Minimum of 3 years from Preforeclosure, short sale, deed in lieu, foreclosure from discharge date or release date.

    Down Payment Requirements

    • The borrower is required to make a minimum down payment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. The borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Gift funds are considered part of borrower’s own funds.
    • 60 day history is required to verify the source of the down payment. Down payment can not be borrowed, from any source.
    • Gifts may be funded by a family member....... But must be verified by 60 day history, and must be a gift with no requirement to pay back.

    Reserve Requirements

    • 3-4 Unit owner occupied properties must have 3 months PITI

    Three (3)- and Four (4)-Unit Property

    The maximum mortgage amount for the three (3) - and four (4)-unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100%, regardless of the occupancy status.

    Livable Conditions

    1. The property must demonstrate the following characteristics:
  • A continuing and sufficient supply of safe and potable water under adequate pressure and of
    • appropriate quality for household uses.
  • Sanitary facilities and a safe method of sewage disposal. Every living unit must have at least one (1)
    • bathroom which includes a flushing toilet, lavatory/sink and a bathtub/shower.
  • A source of heat adequate for healthful living conditions.
  • Domestic hot water, and;
  • Electricity adequate for lighting and any mechanical equipment within the home.
  • Provide safe pedestrian and vehicular access from a public or private street. Streets must either be
    • devoted to public use and maintenance, or private streets protected by permanent recorded

    Easements.

  • The remaining economic life, as determined by the appraisal, must be greater than or equal to the term
    • of the proposed mortgage.
  • Be free of any encroachments.
  • Utility Service must be permanently dedicated to the local municipality or appropriate public utility entity

    • Up Front Mortgage Insurance Premium - For most of its mortgage insurance programs, FHA collects an:

    • Upfront mortgage insurance premium (UFMIP), and
    • Annual insurance premium which is collected in monthly installments

    Mortgage Insurance Premium - For 15 year and greater than 15 years.

    • 1.75% of purchase price

    Annual Insurance Premium

    • Greater than 15 years & greater than or = 95% LTV - 0.8%
    • Greater than 15 years & less than 95% LTV - 0.85%
    • Less than or = 15 years & Grester than 90% LTV - 0.7%
    • Less than or = 15 years & less than 90% LTV - 0.45%

    High Balance Loan Amounts

    • Less than or = to $625,000 & less than or = to 95% LTV - 0.8%
    • Less than or = to $625,000 & greater than 95% LTV - 0.85%
    • Greater than $625,000 & less than or = to 95% LTV - 0.1%
    • Greater than $625,000 & greater than 95% LTV - 0.105%

    INCOME—RENTAL
    Rental income from a borrower’s primary single family residence (boarder income) is not acceptable for qualifying.
    Rental Income from the subject property may be considered effective income if the subject property is a 2-4 unit dwelling. Required documentation is dependent upon the length of time the borrower has owned the property.
    Rental Income – Subject Property For FHA Mortgage

  • Limited or No History of Rental Income
  • Defined as when the borrower is purchasing or does not have a history of rental income from the subject property since the previous tax year.
  • If rental income is from other property owned other than subject, must show 25% equity in property by appraisal.
  • In order to calculate Rental Income from a 2-4 unit subject property, the following documentation must be provided:
    • �Fair Market Rent must be calculated using FNMA 1025/FHLMC 72 – Small Residential Income Property Appraisal Report; and Copies of existing or proposed leases, if available.Calculating Effective Rental Income
    � Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income by applying 75% of the lesser of;
    o Fair Market Rent reported by the appraiser; or
    oThe rent reflected on the existing or proposed lease agreement.
    History of Rental Income.
    When a borrower has a history of receiving rental income from the subject property since the previous tax year, the borrower must provide most recent Federal Tax Returns, including IRS Schedule E, covering the previous two (2) years
    Calculating Effective Rental Income
    � Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income after averaging the reported net rental income/loss reflected on Schedule E of the tax returns.
    � When calculating the average net rental income/loss, any depreciation, mortgage interest, taxes, insurance, and HOA dues reflected for the subject property may be added back to the net income/loss.
    � If the borrower has owned the subject property for less than 2 years, rental income/loss must be annualized for the length of time the property has been owned.
    FHA Rate and Term Refinance -
    Maximum LTV is 97.75%
    FHA Cash Out Refinance -
    Maximum LTV is 85% of appraised value if property has been owned 12 months or greater, and if less than 12 months from purchase than the lesser of purchase price or appraised value is used. 
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