Looking to buy my second property and renting out my first.
90039 · Member since 2022 · 22 posts · 5 votes
Looking to buy my second property and renting out my first.
Most Popular Reply
Realtor · Los Angeles · Member since 2023 · 18 posts · 15 votes
3yHi Geoff. You have a lot of different options, especially with a HELOC at your disposal. How much equity would you access with a HELOC, and would you be seeking traditional financing or creative? Are you only looking at publicly listed properties or off market opportunities as well?
What type of property are you interested in and where? Considering a multifamily property may allow you to qualify for a higher purchase price as you can factor in rental income.
Are you factoring in the various costs and responsibilities associated with renting and managing a home, let alone knowing tenant law and the time commitment? Focus on updates that will limit your liability and actually increase your rental income.
We do residential and multifamily sales in Los Angeles County as well as property management, and these are some of the question we ask out investor clients before they pull the trigger on a purchase or renting out their property. Find having a good
What type of property are you interested in and where? Considering a multifamily property may allow you to qualify for a higher purchase price as you can factor in rental income.
Are you factoring in the various costs and responsibilities associated with renting and managing a home, let alone knowing tenant law and the time commitment? Focus on updates that will limit your liability and actually increase your rental income.
We do residential and multifamily sales in Los Angeles County as well as property management, and these are some of the question we ask out investor clients before they pull the trigger on a purchase or renting out their property. Find having a good
15 Replies
- Realtor · Los Angeles · Member since 2023 · 18 posts · 15 votes3yHi Geoff. You have a lot of different options, especially with a HELOC at your disposal. How much equity would you access with a HELOC, and would you be seeking traditional financing or creative? Are you only looking at publicly listed properties or off market opportunities as well?
What type of property are you interested in and where? Considering a multifamily property may allow you to qualify for a higher purchase price as you can factor in rental income.
Are you factoring in the various costs and responsibilities associated with renting and managing a home, let alone knowing tenant law and the time commitment? Focus on updates that will limit your liability and actually increase your rental income.
We do residential and multifamily sales in Los Angeles County as well as property management, and these are some of the question we ask out investor clients before they pull the trigger on a purchase or renting out their property. Find having a good - 3yJosh YoungPro MemberRental Property Investor / REALTOR® / Property Manager · Gilbert, AZ · Member since 2023 · 387 posts · 421 votes
@Geoff Regan you need to talk to a mortgage broker as they will have access to different loan products that will help you. The HELOC will be helpful, but you might also need to use something like a bank statement loan rather than a fannie/freddie conventional. Or you could stay living where you are, still rent out your guest house, and use the HELOC and a DSCR loan to buy an investment property. Either way, a mortgage broker will be able to help you.
- 3yAllen DuanPro MemberProperty Manager · Los Angeles, CA · Member since 2022 · 590 posts · 463 votes
Are you planning on setting up your rental as a MTR? That would be the way to go to maximize your rental income. How many beds and baths is it and what part of LA is it located? I’ll get you some MTR estimates.
- 90039 · Member since 2022 · 22 posts · 5 votes3y
Quote from @Josh Young:
@Geoff Regan you need to talk to a mortgage broker as they will have access to different loan products that will help you. The HELOC will be helpful, but you might also need to use something like a bank statement loan rather than a fannie/freddie conventional. Or you could stay living where you are, still rent out your guest house, and use the HELOC and a DSCR loan to buy an investment property. Either way, a mortgage broker will be able to help you.
The current plan was to rent out the main house and stay in the guesthouse until I found a new place. I Didn't think a DSCR loan would work since my rental income wouldn't be enough to cover much a a monthly payment on a new place. My previous mortgage broker didn't really win me over, so I got my heloc from my credit union. Time to start looking for a new one. Have you ever rented out a non permitted guesthouse? Was cautioned away from it, but maybe I'm missing something. Thank you for the input.
- 90039 · Member since 2022 · 22 posts · 5 votes3y
Quote from @Allen Duan:
Are you planning on setting up your rental as a MTR? That would be the way to go to maximize your rental income. How many beds and baths is it and what part of LA is it located? I’ll get you some MTR estimates.
2 bedroom 1 bath. Guesthouse is a studio. It's in Silverlake so I was thinking about approaching Kaiser and some of the Glendale hospitals to start. The second bedroom is pretty small so I am not sure if I would leave it as an office or to put a bed in there for the MTR.
- 90039 · Member since 2022 · 22 posts · 5 votes3y
I am currently open to the type of property. As long as there is a value add opportunity with it. Completely open to off market deals, but do not really have a network finding them. I bought my first place through an auction , but it didn't hit the min value so it ended up being off market. Haven't figured out how to do that again.
- Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes3y
@Geoff Regan if the new place you are looking for will be your primary residence then a DSCR loan won't work unfortunately. That type of financing is intended for non-owner occupied/investment properties. You've still got options when it comes to financing an owner occupied purchase though.
FYI, non-permitted = illegal dwelling. You could be fined for the violation. Definitely look into the ramifications if you are thinking of renting it out. A tenant could potentially sue you for renting them an illegal dwelling.
- 3yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Pick a neighborhood you want to buy in, write an emotionally touching letter about why you want to live there and then drop them off in person.
You may connect with someone willing to sell to you without hiring an agent.
Logical Property Management4.9464 Reviews - 90039 · Member since 2022 · 22 posts · 5 votes3y
Quote from @David Bilandzija:
@Geoff Regan if the new place you are looking for will be your primary residence then a DSCR loan won't work unfortunately. That type of financing is intended for non-owner occupied/investment properties. You've still got options when it comes to financing an owner occupied purchase though.
FYI, non-permitted = illegal dwelling. You could be fined for the violation. Definitely look into the ramifications if you are thinking of renting it out. A tenant could potentially sue you for renting them an illegal dwelling.
I have researched it before and decided not to rent it out thus far. Haven't really figured out how to get this place permitted yet. Most of the time people still rent them, but I have heard a few horror stories. I was under the impression with a DSCR loan I could buy the investment property, but if I ended up wanting to move in there at some point I could. Wanted options in case the Mid term rental market changes or didn't work out.
- 3yJosh YoungPro MemberRental Property Investor / REALTOR® / Property Manager · Gilbert, AZ · Member since 2023 · 387 posts · 421 votes
Quote from @Geoff Regan:
Quote from @Josh Young:
@Geoff Regan you need to talk to a mortgage broker as they will have access to different loan products that will help you. The HELOC will be helpful, but you might also need to use something like a bank statement loan rather than a fannie/freddie conventional. Or you could stay living where you are, still rent out your guest house, and use the HELOC and a DSCR loan to buy an investment property. Either way, a mortgage broker will be able to help you.
The current plan was to rent out the main house and stay in the guesthouse until I found a new place. I Didn't think a DSCR loan would work since my rental income wouldn't be enough to cover much a a monthly payment on a new place. My previous mortgage broker didn't really win me over, so I got my heloc from my credit union. Time to start looking for a new one. Have you ever rented out a non permitted guesthouse? Was cautioned away from it, but maybe I'm missing something. Thank you for the input.
I would not ever recommend renting out a non permitted space, especially not as a residence for someone to live in. The DSCR loan on the new investment property will be based off the new property only and should be able to make that happen getting above a 1.0 DSCR, might need to put 30% down, but that should cover at least it will here in Arizona, I'm currently working on deal that's very similar to this. You will be negative cash flow by the amount of the HELOC and repairs/maint/capX/vacancy/management, but if you can afford to cover the negative cash flow then you will be building equity and getting started. When your income improves and you can qualify personally then I'd recommend buying property as a primary residence, the terms tend to be favorable.
- 3yAllen DuanPro MemberProperty Manager · Los Angeles, CA · Member since 2022 · 590 posts · 463 votes
Quote from @Geoff Regan:
Quote from @Allen Duan:
Are you planning on setting up your rental as a MTR? That would be the way to go to maximize your rental income. How many beds and baths is it and what part of LA is it located? I’ll get you some MTR estimates.
2 bedroom 1 bath. Guesthouse is a studio. It's in Silverlake so I was thinking about approaching Kaiser and some of the Glendale hospitals to start. The second bedroom is pretty small so I am not sure if I would leave it as an office or to put a bed in there for the MTR.
That's a great set up for MTRs. My quick off the cuff estimates are $3500-4000 for the 2 bedroom and $2800-3000 for the studio. It would definitely be worthwhile to put a bed in the second bedroom and market it as a 2 bedroom with 2 beds. Feel free to DM me if you have MTR questions.
- 90039 · Member since 2022 · 22 posts · 5 votes3y
Quote from @Josh Young:
Quote from @Geoff Regan:
Quote from @Josh Young:
@Geoff Regan you need to talk to a mortgage broker as they will have access to different loan products that will help you. The HELOC will be helpful, but you might also need to use something like a bank statement loan rather than a fannie/freddie conventional. Or you could stay living where you are, still rent out your guest house, and use the HELOC and a DSCR loan to buy an investment property. Either way, a mortgage broker will be able to help you.
The current plan was to rent out the main house and stay in the guesthouse until I found a new place. I Didn't think a DSCR loan would work since my rental income wouldn't be enough to cover much a a monthly payment on a new place. My previous mortgage broker didn't really win me over, so I got my heloc from my credit union. Time to start looking for a new one. Have you ever rented out a non permitted guesthouse? Was cautioned away from it, but maybe I'm missing something. Thank you for the input.
I would not ever recommend renting out a non permitted space, especially not as a residence for someone to live in. The DSCR loan on the new investment property will be based off the new property only and should be able to make that happen getting above a 1.0 DSCR, might need to put 30% down, but that should cover at least it will here in Arizona, I'm currently working on deal that's very similar to this. You will be negative cash flow by the amount of the HELOC and repairs/maint/capX/vacancy/management, but if you can afford to cover the negative cash flow then you will be building equity and getting started. When your income improves and you can qualify personally then I'd recommend buying property as a primary residence, the terms tend to be favorable.
Sadly putting 30% in the Los Angeles market isn't doable for me. Unless it was someone elses money of course. Trying to come up with some options that don't require me getting rid of all of my cash on hand during a strike. Negative cashflow and depleting savings would be taking a huge risk.
- Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes3y
Quote from @Geoff Regan:
I have a single family home In Los Angeles. Currently getting into rental shape. I have just started working on getting my un permitted guest house permitted as well. I work in the entertainment industry and the W2 income has diminished because of the strikes going on. Any suggestions on the best way to get a property now? When I get this place rented, it will go for well over what my mortgage, tax and insurance payments are. I also have a heloc available to use.
Hey Geoff, when you are considering the rental strategy make sure you talk to your lender. Lenders want to see at least 1-2 years of tax returns of rental income OR have a signed lease in place to help you qualify for the next property. The requirements vary greatly based on the lender. My guess is they'll recommend having a lease signed, and they might require a 12 month lease. This will be a major factor in qualifying for your next property.
- 90039 · Member since 2022 · 22 posts · 5 votes3y
Quote from @Kenny Cho:
Can I ask why you are permitting your guest house?
Not sure what you mean. Getting it permitted would add a second livable space and square footage to the property. It was built decades ago, just never permitted.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.