All Forum Posts by: Cole A.

Rentals that are in my name only, Schedule E deductions are pretty straight forward. Here is a more unclear scenario in a family partnership:

Rental property investment loan purchased with the mortgage in fathers name. After closing, myself and brother (his children) are quitclaimed and added as joint tenants (lender is fine with this). In that case, we are equal 1/3 owners of the property, but only 1 is the mortgage guarantor. 

I assume the rental income is split 1/3rd on Schedule E taxes. Can the expenses (including interest,taxes) be split equally 1/3rd as well? Or does something different need to be done since only 1 person is on the mortgage?

Bonus points-- What if it's quitclaimed to an LLC we set up instead of personal names? The LLC would still operate as 1/3rd ownership each. The mortgage is also still in father's name. Does that change the taxation and deductions any different than the above scenario, in our own names?

@Jennifer Hallock -- the first time homebuyer programs differ by lender and loan type. My lender offered conventional with 0% down for first time homebuyers but only single family residences applied. The loan consultants and underwritiers said it was the preference of the specific lender rather than a federal guideline.

@Mia Edgar If you house hack, and live in one half of the duplex, will you still get 5k/month for rent?

@Account Closed -- Taxable income is not the same as adjusted gross income. I'm far from an expert in tax law, but I'm pretty sure that the bank is concerned with gross income for approving/denying a mortgage rather than taxable, post-deduction income.

@Account Closed -- In terms of mortgages, FHA is one of the easier types to obtain. They allow for a higher debt to income ratio so you can get a larger loan than conventional mortgages. If you have decent credit and a steady income, it shouldn't be much of a problem unless you're looking at a property that is far too expensive. I spoke with 3 different lenders and they all were willing to provide financing...you'll find that each place will offer you different interest rates though. I would highly recommend looking in to using a credit union as your lender...they're not for-profit and you should get a better interest rate than you would get from a private lender such as Wells Fargo, Quicken Loans, etc.

In regards to your last question...you will find different answers from anyone. In my case (and it sounds like yours too), not only was I looking for an investment property that is a successful and smart investment, but it was also going to be my personal residence for a considerable amount of time (likely up to 5 years). For this reason, I had to balance a property what would have a good ROI, but also a place that I was comfortable living in. Sure, buying a crap-hole property that cash flows like Niagara Falls is great for many investors on this site, but I sure as hell don't want to live there.

I will also add that for the most part, an owner occupied duplex collecting rent from one side only will very likely not cash flow (especially if you go the FHA route with a low downpayment). But your out of pocket contribution to the mortgage should be far less than a tenant would pay, and far less than if you rented an apartment for yourself. What matters is what the numbers will be like when you no longer live there and have tenants in both sides.

@Account Closed , I'm owner occupying a duplex and would recommend it, especially since you're young. As a side note, FHA mortgage insurance rates are dropping at the end of January and interest rates are low, so the FHA route becomes even a bit more appealing.

@Kyle Gregg , you could really go to any lender to go the FHA route...Quicken Loans is the largest FHA provider. Wells Fargo is another option, and lots of private mortgage companies in your area I'm sure.

I would highly recommend looking in to a credit union though. Credit Unions are not for profit so I've found they always offer lower interest rates. Private lenders such as the ones mentioned above generally have an overlay and will charge you higher interest to meet their lender requirements (and thus making a profit).

I looked in to the 203k loan at one time but didn't go that route and don't remember all the specifics. I do believe you have to go through a contractor and prepare official bids and submit improvement plans before closing on the loan...but don't quote me on that. I'm sure a simple google search would provide all the specifics.

@Kyle Gregg -- I started in a similar situation that you described. If you can't get a 15-20 percent down payment together, FHA is a great route to go. You can finance up to a 4-unit owner-occupied property with 3.5% down, assuming your debt-to-income ratio is suitable. The downside is you pay monthly mortgage insurance as part of your monthly payment, and you'll need to refinance after you reach 80% loan-to-value in order to get rid of the mortgage insurance payment.

That being said, now is a better time than ever (well, best in several years) to go the FHA route if you have to. Interests rates are lower than they've been in a while, and beginning January 26, 2015, the cost of mortgage insurance for FHA loans will decrease thanks to Obama's mandate.

will reduce by*

@Jared Rine -- I've been making some calls and getting mixed responses. I have a pretty good rate already, 3.875% on FHA, but I'm trying to see if streamline refinancing with reduce by the minimum 5%...hoping there will be between even lower interest rates, newly reduced mortgage insurance, and a 68% refund of previous UFMIP. If you had to speculate, what would you say?