Buying 1st CHFA loan property. What makes a better future rental?

Question

Hello guys!

I’m buying my first real estate property in the grand junction, Colorado area. It’s a CHFA loan and I’m very excited, however I’m trying to make the best decision to set myself up for a rental portfolio.

My plan is to live in it for about a year then rent it out and refi and pull some equity out.

Which would yield the best benefits for the future, SFR, Townhome, apt, condo?

Trying to way out the pros and cons of buying cheaper or turn key as well.

Teri Feeney Styers · Answer

@Luis Arevalo @Ben Rhodin is correct. CHFA won't lend on a multi-family property; but there is nothing to prevent a conversion after the fact. I see properties all the time that are good candidates without tons of additional dollars needed.

Ben Rhodin · Answer

Hey @Luis Arevalo! Congratulations on taking your first step, and the CHFA loan is a great product! In terms of your question, it will come to your own situation, goals, and the amount you can qualify for. Overall, I would say a single family would be the best investment from a long-term standpoint, as you won't be dealing with an HOA that can change its rules, or force an assessment. and typically SFRs appreciate at a better rate than attached properties. No, if you are stretching yourself trying to get an SFR or the SFRs you can get are in bad areas or need lots of work that you can't complete then I wouldn't recommend it. But if you can get an SFR that has a basement or separate part of the house that you can separate off into a second unit, that would be the winner, as it will operate as a duplex.At the end of the day, definitely run your numbers as if you didn't live there, and make sure it will be a worthwhile asset in the long run.

Teri Feeney Styers · Answer

@Luis Arevalo start with cashflow - so many properties won't make a profit. Then you can look at other details like location, type of tenant it will attract, property condition, etc.

Teri Feeney Styers · Answer

@Luis Arevalo CHFA loans are a great way to get into a property with only $1000 down, but you better talk with your lender about your plan. Generally there is a second mortgage for that down payment assistance. If you refinance you will be on the hook for both the first and second mortgage (you need to own for a longer period of time before that second mortgage is forgiven). It is hard to imagine that you will have created enough equity to pay for the refinance fees, both mortgages, and still have cash to move on to the next purchase anytime soon. It sounds as if you already have this property under contract? If so, then the decision is already made. If not, then you need your Realtor to help you find rental comps and help you figure out what will work for your plan down the road. In the future, you need to assess each property independently when it comes to determining if it will cashflow, etc. I think you are asking your question way too early...

@hamp

Hamp Lee III · Answer

The goal would be finding a multifamily property you can purchase below market value and force equity through repairs.

If not (or in any case), run the numbers to purchase a solid property that can yield a great return as a long term rental. You should know this prior to offering on the house.

Find out where you want to live and the rents in that area. Use the BP rent estimator tool to help.

Purchasing a SFH is still a win because it’s one step closer to your goal.

I wish you all the best. Keep us posted on your progress.

Luis Arevalo · Answer

@Teri Feeney Styers @Ben Rhodin

Gotcha gotcha. Yeah this first one I’m looking at will cash flow about $100 once I refi it after the first year of living in it. It’s not a grand slam but I think it’s a very first solid first step to building my rental portfolio.

Thank you guys for all the insight!

Luis Arevalo · Answer

@Hamp Lee III Thank you for the advice!

Will definitely keep you guys updated!

Luis Arevalo · Answer

@Teri Feeney Styers  Thank you for your feedback! So your recommendation would be to narrow down my search to specific properties and then run numbers and make sure they cash flow?

It sounds like no matter what type of property I purchase (SFH, Townhome, condo, etc) as long ad it cash flows it’ll be a good investment?

Buying 1st CHFA loan property. What makes a better future rental?

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