All Forum Posts by: Alex W.

Side story!

Maybe this is just me, but I never found bathtubs appealing. As a toddler, my parents would put me in a big bucket IN the shower for my baths. Once I got old enough to stand, I showered.

I never knew a bathtub > shower in terms of value.

 Such a great point! Even if they can afford it, a 10% bump is HUGE. It's almost like getting a massive pay decrease at work! And great point about them being your neighbor...good relations is a must!

Hi BP!

I have 3 questions --

QUESTION 1: How would you analyze a multi family deal assuming that you yourself are living in one of the units? Do you see it as "just another renter" (and also assume $0 property management) or do you see it as a "bonus" in a way because if you did NOT live in the multi family, you would theoretically be paying rent, anyways.

I am looking into some California markets, and as we all know, a lot of the rules of thumb don't apply here (for example, 1% rule, cash flow, CoC ROI ~5%).

So I have to adjust the knowledge I've learned through BP podcasts and forums to even consider any deals.

EXAMPLE of a QUAD (2bed 1 bath, 2bed 1 bath, 2bed 1 bath and 1bed 1 bath)

  Total purchase price: $750,000

  Down Payment: $150,000 (20%)

  Mortgage Amount: $600,000

  Interest Rate: 4.25%

Therefore, 

  Principals and Interest, Property Taxes, Insurance: ~$4000

Monthly Expenses (CapEx, Vacancy, Maintenance, 0 property management fees): ~$500

  Total Monthly Expenses: $4500

Assuming I can rent the 2bed 1 bath units at 1200 a piece,

  Rent for 3 units: 3x1200=3600.

  Rent-Expenses; 3600-4500 = -$900 NEGATIVE

HOWEVER, I plan to live in the last 1bed 1 bath unit, which is 900/month (which is currently what I am paying right now)

Therefore, 

  Rent-Expenses; 4500-4500=$0 Cashflow, break even.

This deal breaks 2 rules: 

  - 1% rule, which states your monthly income from the deal should be 1% of the purchase price = 750,000*0.01=7500 (not going to happen)

  - Cashflow: None

Of course, I can raise the rents on the 3 units to 1250 each, and that would be 3750-4500=-750...which means I am paying less rent. But say 1200 was the max...how would you see it?

QUESTION 2: Regardless of the situation, would you consider it a good deal in a hot California market if the rents covered the mortgage with minimal cash flow?

QUESTION 3: The CoC ROI is 0...(Put in $150,000, get 0 (because of breakeven rents and mortgages), but why do we not count the equity we build from paying down the mortgage?)

Thanks in advance.

Alex

 90803

90802

Not feeling lucky, but am curious...

Hey Daniel,

I was looking for that first time home buyer loan from US Bank (no PMI) but could not find. Can you link me or direct me to the right person/location? thanks.

wouldnt there be a zoning issue? I think you have to get it approved through the city. Can someone shed light on this? I was thinking about doing the same thing for a SFR I was looking at...

This has been a very interesting conversation. I learned something.

I agree with @Rich Ng 

It might sound like a good idea, but I think you should just keep it separate.

Hmm...but maybe its implied with lack of up votes? I hear you tho...

So to sum it up, an FHA loan is a way for me to put ONLY 3.5% down?

But what about mortgage insurance? (Is this referred to as PMI?) Isn't that going to eat a huge chunk of your cash flow?

Whereas if you put 20% down, then you do not need to pay mortgage insurance. I've been told to always put 20% down or else you are "throwing money away" because of the mortgage insurance.

So if I'm understanding this correctly, FHA loan is a way of putting down only 3.5%, getting the loan, and getting the property. I will have to pay mortgage insurance, but it all boils down to the MATH: if the numbers work out, then this can be a way to get in the game with little down.

That sound about right?