All Forum Posts by: Alex Pepe
Alex Pepe has started 6 posts and replied 24 times.
Hi guys. Here's my situation:
Context: I've been in Austin for close to 2 years, renting. Come July I will have enough funds to house hack (and decent cash reserves after). I have an Uncle in Scottsdale who has done very well for himself and has developed a strong network. He has offered for me to live in his home while he works in Scotland for the next 2 years. I want to move there to leverage his network and the opportunities it could bring.
Problem: Do I stay in Austin for another year (starting in July) to house hack and then move to Scottsdale to conduct another? Is the PHX market stronger than Austin? I'm sure that's too black and white, but curious to hear opinions. My objective side tells me to stay in Austin, take advantage of the knowledge I have here and secure a prop through a house hack before leaving. I could still go to Scottsdale after that. Just not too keen on staying in ATX any longer.
Thank you
Hi Guys,
I've spoken with an investor friendly realtor here in my area about helping me find a house hack come July when my lease ends. I currently am paying 1200/month in rent. He says I should expect to still pay around 700/month HH'ing a 4BR house. If I used FHA on around a 350K home, Id be looking at 25-30k out of pocket, to save around 6k/year.
My question:
I'm not sure there is enough margin on 6k/year to justify a HH. Maintenance/repairs could easily erase that 6k and go beyond. If I could get closer to 0-300/month in mortgage payment, then perhaps a HH has more merit to it. Otherwise I'm of the mind to save 6-12 months longer and go into a BRRRR for my first deal.
Very curious to see what other more experienced minds think. I appreciate the time to respond to my thoughts.
Quote from @Kevin Sobilo:
Quote from @Alex Pepe:
Quote from @Kevin Sobilo:
@Alex Pepe, I don't believe there are any prepayment penalties on FHA loans. So, yes in theory you could refinance after a year.
The question is, is it likely to make sense? Typically people use an FHA loan for the low down payment. In order to refinance into a conventional loan the house would have to go up in value by almost 20%. Very unlikely to happen in 1 year.
Also, with an FHA loan these days, I believe you pay a chunk of PMI at closing and then a monthly PMI as well. By taking out a second FHA loan you would be paying that chunk of PMI at closing twice.
You are likely better off using a conventional loan for the 2nd purchase. If its for a primary residence, you can probably find a loan with a 5% down payment albeit with a limitation of 3% seller assist.
You mention a HELOC. What equity would you use for a HELOC? With an FHA loan you likely put little down, paid very little off within 1 year. You likely have no equity you can tap with a HELOC at that point.
@Alex Pepe, typically you can't buy a fixer upper with an FHA loan because they require the property to be in good functional safe condition for someone to live in.
It would still be livable, just in need of paint, modern amenities, new floors.
Quote from @Caroline Gerardo:
You paid 1.75% for the PMI on FHA and likely 3.5 down. There is probably not enough equity to refinance conventional OR get a HELOC. To refinance conventional and get rid of mortgage insurance you need 80% loan to value. You can refinance to conventional at 90 but the mortgage insurance is often higher. You will need to go down in rate for it to be sensible to an Underwriter. Also the costs of two loans at $3000 or more each is added to balance.
Say you buy a $600000 house and you owe $585000 in a year you owe $584996. You will need the value to be something like $740000 to refinance and do another low down payment government/conventional loan. Markets are not increasing like that so you will need to add square footage to make the appraisal higher. $585000+ 6000 costs
Your departing property is appraised when you buy another low down payment property. The departing property also needs market rents to cover the PITI plus any HOA for you to qualify. Also you will need to write a letter of explanation such as job transfer or growing family size for it to make sense. If market rents don't cover the PITI (which is typical) that loss hits your debt to income ratio. In a year you need higher income or less debt if your ratios were tight. Not impossible but unlikely plan considering values are not increasing.
HELOC you need 721 score and goes to 90% which will be hard to hit in 2023 as you owe 98% from the start.
Do the rents need to cover the PITI while I am living in the prop or could I show that they would cover them after I move out?
Quote from @Kevin Sobilo:
@Alex Pepe, I don't believe there are any prepayment penalties on FHA loans. So, yes in theory you could refinance after a year.
The question is, is it likely to make sense? Typically people use an FHA loan for the low down payment. In order to refinance into a conventional loan the house would have to go up in value by almost 20%. Very unlikely to happen in 1 year.
Also, with an FHA loan these days, I believe you pay a chunk of PMI at closing and then a monthly PMI as well. By taking out a second FHA loan you would be paying that chunk of PMI at closing twice.
You are likely better off using a conventional loan for the 2nd purchase. If its for a primary residence, you can probably find a loan with a 5% down payment albeit with a limitation of 3% seller assist.
You mention a HELOC. What equity would you use for a HELOC? With an FHA loan you likely put little down, paid very little off within 1 year. You likely have no equity you can tap with a HELOC at that point.
Happy Fall BP Gang,
Due to numerous circumstances, I think a BRRRR house hack is a great strategy for me to implement for REI debut. My question though is if I am able to get out of my FHA loan through a refinance after I've lived in the property for a year. If yes, this opens up the ability to use another FHA loan correct? If I am in the financial position to not need a 2nd FHA then perhaps I can use a HELOC instead to save on costs from a refi.
Happy Holidays
Quote from @Eliott Elias:
ATX is overpriced, but deals that i never thought possible are starting to appear. Flips in the 78745 ares for 250k, flips in round rock for 230k. Don't rule Austin out yet
Will message you about this. Would be cool to know more even if out of budget.
Post: Anyone interested in an Austin meet up?
- Posts 24
- Votes 9
Quote from @Jordan Moorhead:
We have one this Thursday. If you look at our team page you can see it on there. @Devin Dang is hosting
Cant find the details. Can you share them here?
Thank you everyone for giving me your advice - being a novice in this game, it's appreciated!
Post: Anyone interested in an Austin meet up?
- Posts 24
- Votes 9
Quote from @Xavier Toefield:
I am open to meeting and am in Austin. Is there one this month?
I’m available as well. That makes two. Lets shoot for 10