All Forum Posts by: Dan Kelley

Is your current loan an FHA loan? As Brent stated, you are generally only allowed 1 FHA loan at a time. Once you have accumulated the necessary 20% equity in the property, whether through principle-pay-down, forced or natural appreciation, or a combination of multiple factors, you would then seek to refinance to a conventional loan with the 20% down payment already built into the property. You could then pursue a new FHA loan.

Something to consider: I'm scheduled to close December 29th on an owner occupied duplex. I was able to secure a 30yr fixed mortgage with only 5% down through Ruhl Mortgage without the need for FHA. You may have some luck shopping around with different lenders to see if you're able to hit your 5% target without resorting to an FHA. (I avoided FHA due to some repairs that needed to be made on the property that I feared would derail or delay the process in getting an FHA loan to make it through to completion.)

Best of luck on your endeavor.

Dan

@Joel Florek, Thanks for the reply. I overlooked where you mentioned that you paid cash for the property. It makes much more sense now. Still a fantastic way to keep that money working. I hope to have my 6 flex appraised and pull a LOC out sometime next year, granted I have a mortgage on the property but I've raised NOI by quite a bit. Thanks for the inspiration.

Dan

Awesome story. Congrats on the success! It definitely helps motivate me to get creative and get moving on more properties.

Can you provide some more details on the secured LOC against the triplex? I suppose I have it in my mind that I'm only able to get a LOC after I've appreciated the property, let it season, and then pursue an appraisal/refi. What did the process look like for you to obtain that LOC?

Thanks for sharing.

I'd have to agree with Deanna on this. It makes me cringe to think of tenants doing any work themselves on my property. I'd say, if you like the idea of a fence being put up, split the cost with them but use a professional contractor and have all the plans approved by you prior to starting the work. If you couldn't care less about a fence, tell the tenant the cost is all on them but they STILL need to have the work done by a professional contractor and the design/plan has to be approved by you prior to starting the work. 

ALSO, if you do allow them to have it installed and they are covering the cost, I'd make sure that you get in touch with the contractor and insure that the tenants have paid him upfront. You'd hate for them to have a $1,500 fence installed and decide they don't want to pay for it anymore and leave in the middle of the night with the contractor calling your phone asking for the payment.

I've had good luck with the floating click together Luxury Vinyl Plank. Similar to glue down vinyl plank, just without the glue ;) 

What's the flooring like beneath the carpet? A nice plywood/OSB subfloor would be ideal for the click together LVP, but it works pretty well over any surface. The only issue is if there are irregularities that are too severe, they may eventually cause a joint to fail and a board could stick up a little bit at a seam. Something to consider.

Jason,

Definitely consider coming to our Dubuque REI group. As Sarah mentioned, we meet once a month and it would be great to have more people come. In a situation like this, you could even let us know ahead of time that you're looking at a property and we could all run numbers on it and bring our results to compare and discuss.

To give you a comparison of what's out there, I purchased a 6 plex downtown Dubuque last year at $108k. Keep in mind, however, that my rents are lower and my location is not as nice.

As for the utilities, they don't seem too far out of line to me depending on what the tenants pay. My tenants pay electricity only and my Utilities were around $5400 last year, however I had 2 units vacant that I was paying electricity on. So the water usage will certainly go up with full occupancy, but I wouldn't imagine it would be much more than the $6600 you have estimated. 

I ran the numbers on my spreadsheet and, at asking price, I came up with a 7.6% Cap and only $88.40/unit/month cash flow, which is below my minimum target of $100. In my opinion, it's not a great deal at current asking price, but we all have different ideas of what a good investment is. 

Jared is very knowledgeable as a Realtor and also as an investor in the area, so I'd definitely take him up on his offer to meet as he would be a very valuable resource to you in the Dubuque market. 

Let us know if you have any other questions!

Happy Investing,

Dan

September Dubuque REI meetup is on Saturday, September 2nd at 7:30AM at Chick-fil-a in Dubuque. Join our group "Dubuque REI" on facebook and come on out to the group!

@Dave Younts I like your spreadsheet. Any desire to share or is it a secret family recipe? 

@Lora P. Correct. I just read through portions of the law, and it sounds like the main thing is you have to have a predetermined criteria for selecting tenants. The tenant must be aware, before applying, what criteria will be used to approve or deny them. So if you have criteria A, B, and C for tenants, you must select the FIRST tenant who applies who meets criteria A, B, and C. You may not choose the BEST qualified tenant, simply the FIRST who meets the qualifications. 

I don't live in Washington and this is just my understanding after browsing through the law. It makes me a little queasy reading through it. Without getting into a debate on discrimination, the law references many times a pre-existing inequity in regards to distribution of housing vouchers and burden of housing expenses, stating that certain minority groups are spending 50% of their income on housing which is due to discrimination that makes them unable to secure fair/equal employment. 

I digress. This is not the place to discuss such matters. Long story short, Seattle apparently is cracking down on what they believe to be discrimination and will require landlords to be very careful on how they choose tenants.

@Thomas S.  If, worst case scenario, the OP was taken to court by this tenant for discrimination, couldn't they claim familial status discrimination? While being a foster parent is not a protected class, I feel like a judge would see her foster kids the same as he would any other family member. I have no experience in this though, so it's just a thought.