All Forum Posts by: Bradley Padula

I'm not an accountant and You should check with your accountant as to the tax part, general understanding is you can't deduct expenses/repairs while its owner occupied, but once it's a rental you can. Cost of improvements while you're using as a primary residence can potentially be added to your cost/tax basis for the home, but not depreciated like you mention. Easy question for any accountant and happy to be corrected by anyone in this forum. I'm wondering if you can find the month/year of manufacture on the HVAC unit as a 40+ year lifespan would be incredible and not very likely. Each brand/model has a way to find out the date it was made. I wouldn't replace it until it dies. Good luck!

Section G

The homeowner insurance is listed as $424 per month and it looks like in this case pre-paying 5 months worth in this paperwork. Is your policy actually $5k + per year?! Or did they spread the annual cost across 5 payments?

Property taxes are listed as $433 per month with 6 months being pre-paid. The 6 months of prepaid property tax is probably driving the total number up a little, my most recent refi's only prepaid 2 months worth. Either way it'll get paid at some point and is not a controllable cost, but will increase your closing costs as it bundles more of the cost up front

That rate seems high for a primary residence refi. Seeing mainly mid to high 2%'s now for a primary. For example your P&I in this example borrowing 300k @ 3.625% is $1368. The p&i on the same 300k but at for example 2.875% is $1244. You might want to get some other rate quotes

I'd be focusing more on the rate than the closing costs which are more or less fixed (you might be able to shop the lender title ins policy and save a few hundred but is it worth slowing down the refi to save a few bucks or lock in what's there now and pocket the $77k cashout?)

I've been using cozy for years and a fellow landlord who decided to use "cozy" last month reached out to me. I worked with them to set up the (now apartments.com) account since cozy pushes/forces any new account registrations to be under their apartments.com site. The apartments.com interface as of now looked basically exactly like cozy, and had the logo for both cozy and apartments.com at the top of the page. This below quote from Cozy's website seems to indicate everything will remain status quo until the transition middle of this year, which would explain why everything looks similar now between cozy / apartments.com for rent collection specifically. Would be nice if they could give us a sneak peak of the post-transition view we should expect to see

"While we won’t be releasing any new features in Cozy, you can continue to use all of our services uninterrupted until your account is ready on Apartments.com. Landlord and renter accounts will still look and function the same on Cozy.co until your accounts have moved to Apartments.com."
Source: https://cozy.co/blog/the-brigh...

Depends on your risk tolerance and time horizon, so I can't say yes or no. If inflation of sub 2% is crushing you capital in savings, I'd ask can you afford potential downward market movement and still have enough $ left to sell the index funds to buy your next deal? Would an index fund decrease of over 2% then be really killing your capital when compared to inflation? Conversely, any gains are gravy. Keep in mind if you sell prior to holding for a year you get hit with short term capital gains vs long term

Index funds are generally regarded as fitting for longer term investment timeframes to ride out the ups and downs. If you're buying an index fund to hold for a month, 3 month, 6 months etc, You'd just hope to land in an upswing versus a downswing

@Jonah Kolsrud ask a few lenders what they would loan you at 70k salaried income and then the 2nd scenario 60k salaried income (usually takes 2 years for the bonus portion to be included as income for loan). It might not be as big of a difference as you think. 

It's really situational / personal to you. If this new job is your dream job or a great opportunity, if you're leaving a job you don't like for this new one you will really enjoy, if it gets you on a new trajectory to earn even more down the road, I would say go with the best long term play job-wise as you're building your future while your early in your career, then build in RE as you can

Also your note on 10% down, there are loan options with 3.5%, 5% down, etc don't feel locked into needing to do a 10% down payment

Good luck!

First thought, sketchy. Not sure if the agent is trying to take advantage of your inexperience or not, who knows. Some good ideas mentioned above here. Even though the agent is saying the seller isnt a rent roll type of person, I would then ask, what type of person is he? Is he a write it on the back of a napkin guy? A only tracks it by deposits in his bank account guy? Where can I see the income on the property and which tenants have/have not been paying and how much? Every deal has a price it makes sense at, you just have to factor in all the variables, what if you buy and all the tenants aren't paying? You then have to evict all of them? Then take care of damages caused from their time in the property and deferred maintenance and general repairs.

Rental income is not public knowledge for you won't find it anywhere online. In terms of your mention of tax report, the seller would need to provide you with the schedule E page of his tax returns so you can see the info. Even then however, that is 2019's taxes and says nothing about how the property performed in 2020 pre covid and throughout covid. Even if you were able to backtrack and find the online rental listings for all of the units, that still doesn't mean that is the rental amount being paid, or if its being paid at all

Happy to help! 

And no, you have it flip flopped. Telling your lender you'll be renting out the LARGER units would increase the max amount you can be loaned because you'd have presumable more rental income. Renting out the smaller unit would give you LESS rental income resulting in a SMALLER overall amount you can be loaned

And no and yes on your last sentence. Generally you need to include a lender prequalification letter as part of an offer to have it considered, which can't be accurately provided until you tell the lender the proposed rent for the non occupied unit(s). You'll be hard pressed in this market to put in an offer with no lender pre-approval and have it accepted. Sellers want to know that you have your ducks in a row in terms of financing. You should really talk to a lender to learn more about loans and also a few local realtors to understand what goes into a successful offer.

Before you even start shopping, you should talk to a lender and run a few scenarios with them so you can get a realistic maximum loan size in mind. If you don't, it's like going to a car dealership and choosing the perfect Ferrari, then at checkout they don't approve you for financing because the monthly payments are crazy high and you can't afford it. It is smart to run several scenarios with them. One scenario, duplex where the rented unit is $1500/month income. Based on that they say you can borrow up to xxx. Another scenario, duplex where the rented unit is $2500/month income. Based on that they say you can borrow xxx. And so on. This will help you understand based on your current personal income, debts, and the varying proposed rents on the multi fam,  if you can afford a $200k multi or a million dollar multi. 

When you identify a property you want to put an offer in on, you contact you lender and they input the proposed rent and see if you'll at a high level qualify. From there they give you a prequal letter. This is part of your offer. When you have an accepted offer, Then as part of underwriting, the appraisal also include a rental appraisal to make show average market rents in that area for that sized unit

So in practice, you don't really find a property, then shop around for different loan sizes, quite the opposite, you need to know your budget across different scenarios, and then shop accordingly, keeping your lender in the loop if you want to make an offer to see if the multifam is within your price range 

It does matter, you should talk to a lender to understand the loan a bit better. And Sure, I can tell you from personal experience. If you are going to buy a duplex, and say one unit is a 3 bed 1 bath, and one unit is a 1 bed 1 bath. Which one do you think will rent for more? Let’s assume the 3 bed 1 bath will rent for more

If you tell the lender you plan to occupy the 1 bed 1 bath, a portion of the projected rent from the non owner occupied unit ( the 3 bed 1 bath) gets included in your income when they run your DTI

If you say you're going to occupy the 3 bed 1 bath, then the non owner occupied unit (the 1 bed 1 bath in this case) get included in your income when they run your DTI

More $ will be factored in if you occupy the smaller unit than the larger unit 
 
The fha self sufficiency test is where for 3 to 4 units the rents for All units minus a vacancy provision is calculated to make sure the the property could carry itself. But that’s separate from the lender calculating how large of a loan they’ll give you based on dti

If you reply to this, please tag me so I get a notification. The reason I saw your reply from 6 days ago was someone upvoted my post last night and I clicked the notification this morning, lol 

What @JD Martin said. I'd also ask what happens when they move out. Are you left with this (janky? high quality?) shed? Could be a win if its really nice, or a small expense to remove if its ugly / not well made

I agree with what others have posted, give tenants proper notice and  have a walk through inspection performed. Until then, its speculation as to if they're growing weed, have an open window, or are running a bunch of space heaters. I'd also take a look at my bills month over month to make sure there were no large increases to either electric supply charge and electricity delivery charge.

You need some boots on the ground now and going forward for situations like this. I personally wouldn't ask my mom to check on a unit for me alone due to safety factors.

If this is a long term hold for you, definitely get the utilities separated and pass them on to tenants as their leases expire/renew or as new sets of tenants move in (unless you think you tenants with existing leases will sign a lease amendment agreeing to pay for the newly separated utility for their unit, which is unlikely)

Please keep us in the loop with what happens! Very interested to see what the cause is!