Richland, WA · Member since 2016 · 35 posts · 10 votes
Hello all,
I am relatively new to the bigger pockets community. I learned about these forums from reading the bigger pockets books. I recall the author's experience being that he found a good deal on his first place, did a bit of work and was able to buy his second property using the equity from his first place as a down payment for the new one. Right now, I believe I am going through some analysis paralysis and I feel kind of stuck. I am considering FHA, but I'd like to know what to be on the lookout for. I am looking to find someone in the PNW or close to the central Washington area that can give me some tips on where to find a good deal using FHA and how to pull some equity out of within a year in order to move onto my new investment. My long term goal is to start a small real estate company to where I don't have to work for wages anymore. Any help would be greatly appreciated.
Saginaw, MI · Member since 2016 · 161 posts · 67 votes
10y
One of the best ways to be able to pull out equity within a year of buying the property is by using forced equity(appreciation) which means getting a house that needs a little work and doing the research to find the ARV(after repair value) so if you buy a fixer upper for 100k and its worth 170k after you fix it that would mean that you would be able to refinance for around 80% of what your home is worth(170,000x80%) That would be the best way. OR the BRRR method which is buy rehab refinance rent repeat for more info on this look to read the book on rental property investing by brandon turner
Saginaw, MI · Member since 2016 · 161 posts · 67 votes
10y
One of the best ways to be able to pull out equity within a year of buying the property is by using forced equity(appreciation) which means getting a house that needs a little work and doing the research to find the ARV(after repair value) so if you buy a fixer upper for 100k and its worth 170k after you fix it that would mean that you would be able to refinance for around 80% of what your home is worth(170,000x80%) That would be the best way. OR the BRRR method which is buy rehab refinance rent repeat for more info on this look to read the book on rental property investing by brandon turner
If you are considering an FHA loan does this mean that you will be living in one of the units? That is what my Fiance and I are planning on doing. We have a similar plan. We intend to FHA on a 3 unit or 4 unit and rent out the others to offset our mortgage. In an ideal scenario we will be able to make a bit of money (not assuming CAPEX and all those deductions). In general home prices have been increasing over the past 4 years and I am not sure if it is sustainable, but if it does continue you could have a bit of equity. In my area I think we will see a correction over the next few years in prices just because home prices are out pacing income growth. Its not sustainable. So purchasing a Multi Family is a good way to protect yourself from a potential market correction.
As @Corey Woodruff stated the forced equity scenario might be something you would look into. If you do, maybe you can consider the 203K loan option. You can roll the cost of rehab into the initial loan. That could generate some equity for you.
This is part of the Life Cycle Cost Analysis I did on the two scenarios. The end result is easy to see. House Hacking can really help start your investment career.
Thank you both for the replies. I spoke to a gal that works in the credit union in my office building. She handles mortgages and she says that she can get me pre-approved for FHA and that there is even a chance of being able to go in with 0% down. I am not sure what terms the mortgage entails, but it sure sounds enticing. I'm not sure what I will be approved for, but is it imperative that I have a pre-approval ahead of time, so that I know what range I am looking at?
Getting pre approved is good to do. But know that when you are looking for multi family units you can use rents from the other units to help you qualify for the loan. For instance in my county FHA limits are $356K, I am pre approved for $250K. But if I use the rents from the other units I can purchase a house for $365K.
Actually its kind of funny you ask. My fiance recently found out she got into UW for her PHD. So we are moving to washington in September lol. We are still wanting to house hack, but with the move, a wedding in november, and all the misc charges associated with those things, we aren't sure if we can buy right away. We may have to rent short term and save up for the required down payment.
Congratulations to her. Washington is a beautiful place. We're almost in the same boat. My fiance just got her Master's from Penn State, I'm working on my Master's now and we're getting married July of next year. So, I can both empathize and sympathize. Keep me posted on how you're doing and any progress. I kept telling myself that I was going to give myself another week to try to get my credit score closer to the 800's, but who knows what that entails. Nonetheless, I think that I am going to apply for FHA mortgage this week sometime. I scrapped the idea of doing a multi-family out here because the competition is so fierce. Everything I was looking at was super beat up and would have 6 offers already at asking price, so i knew that I wouldn't stand a chance. I'm thinking of going brrrrr with a single family for now until I can get some cash together. Now I just have to find a deal.