All Forum Posts by: Christian Allen

@Mark Douglas this is great to hear as I will be hitting my one year mark for my FHA loan and look to do another house hack! Did your lender give you any issue for moving so quickly especially from a duplex to a quad? I've heard Fannie Mae is getting more strict on investors using FHA loans to build a portfolio. Moving from a duplex to a quad is sometimes a red flag.

@Eric C. so far just one years returns. Will I need two years before the "investment" calculation method can be used?

Thanks @Chris Mason. This is more what I expect the calculations should look like. I will review with my lender and find another if they are unable to go beyond the primary residence guidelines.

Recently been thinking about how the bank views rental income and your personal debt to income (DTI) ratio. From what I've read and experienced with my two properties, banks will typically take 75% of your rental income and Fannie Mae guidelines require your DTI to be no greater than 0.43. Based on these numbers the debt service coverage ratio you would need to continue to buy properties without getting closer to the DTI ratio limit is 3.1. The proof for this is as follows. DTI=(total payments)/(total income). In the case of a rental property Max DTI=0.43>=(total payment)/(gross rent*0.75) Solving for gross rent you would get: gross rent= 3.1*total mortgage payment. An example with numbers: Mortgage payment-$1000 0.43=(1000)/(gross rent*0.75) Gross rent=$3100.77 (plug in and verify if you don't believe me) Does this mean for a property to not continue to increase my DTI I need to have the rent be 3.1 times the mortgage payment or am I missing something? Are there lenders who calculate DTI differently?

@Chris Chesser If you have a year before you will be ready to purchase my best advice would be to analyze and tour as many properties in the area you expect to invest.  The information you can gather from seeing more properties in different neighborhoods will be a great use of time.  When the time comes where you have the capital to invest, you will be able to move quickly on a good property.  

From what I've seen 2 family house hacking could on paper look like it will cover the mortgage but in reality most likely be negative cash flow after all expenses.   If you factor in what you were paying for rent previously it could still make you come out ahead.  Triplexes have potential to make money if you can get it at the right price or increase rents through renovation or getting new tenants.  Depending on the market they have a good potential of making money after moving out.  

I've been house hacking for about a year now in a triplex and can say I have positive cash flow because I did a complete turn around of the building.  Full gut rehabs allowed me to raise rents significantly and cash flow $1000/month after expenses.  

It's hard to use the 2% and 50% rule for a house hack and in my opinion they are not the best indicator or a good deal or not.  Very often a C/D property will work with the 2% rule but I would stay far away from most of those properties.   A simple spreadsheet which you run the properties through should be able to give you a better idea of a good deal or not.  

@Brent Coombs understand your reasoning, I wouldn't directly ask how I can move immediately after fulfilling the minimum requirements.  

The way I turned 3.5% into 20% is from a doing a live in flip.  I bought a triplex that was in rough condition and did a complete renovation of all 3 units.  Similar condition properties in the last few months have been selling at a price that would give me my 20%.  

My cashflow after expenses on my primary is about $1200 not including reserves.  I would take a hit on a higher interest rate (maybe 1% higher) to allow me to get a second property of similar type with as good cashflow.   

@Anthony Thompson I plan to keep the property as an investment and just move somewhere else in the city to buy another multifamily.  My strategy was to use owner occupied loans to move around to different multifamily properties slowly acquiring investments without putting down a large amount of cash up front.  My mortgage broker said if I can justify the move by saying the new multifamily was in a better area, bigger house, larger bedrooms etc it might pass through underwriting more easily.  

I will be fulfilling the minimum 12 months, more likely 14 months until I'd be looking for another property. I was just wondering if anyone had success in getting a second FHA loan almost immediately after completing the minimum occupancy requirement.

I will ask a few other banks to see what their experience is with FHA loans.

Yes, I plan to refinance into conventional with 20% equity a few months before and then be free to use another FHA. It seems this might not be well received since FHA loans are intended for getting people into homes, not allowing investors to easily acquire properties.