All Forum Posts by: Elijah Miller

@Kevin S., the seller has made it clear that they would not want to repair it prior to sell. This will be my first home purchase, so looking at the FHA guidelines I am not sure what to make of the garage. The guidelines say that they are looking for, "Safe and Sound", as well as 2 years prior to major repairs needing to be done. With a 40 year standing history for the garage and roof as-is, I would look at it and guess it could survive another two years. I just don't know if the appraiser will look at it the same way.

There are no history of termites, and on inspection, we couldn't find any signs of wood damage by insects, water, or otherwise.  

As you mentioned, the 203k would be a last resort for those very reasons.   

Yes, sir!  We are looking into the possibility now, but would like to close sooner than that if possible. 

Guys, I apologize in advance if this is not the right place for this question.  Please move it to where it'd be better suited.

I have recently found a 4 BR/2BA property that will suit my needs of going back to school and renting out the other rooms perfectly.  I should be cash flowing approximately +$500/mo. However, I have also found one problem though: financing.

This was my mistake, but I contacted Quicken initially to get an idea of what I could afford. I was pre-approved for 190k, and this number has only been dropping ever since. Since this has been an issue and it appeared they may have absurd closing costs, I have begun looking for other banks, but at this time- an FHA loan is looking like the most probable form of loan for this property.

The only issue after financing then is that I am concerned that the garage may not meet FHA requirements. There is a slight sag to the roof and it has supposedly been that way since construction (Approx 40 years). It will need to be fixed at some point costing approximately 2-6k, but I am assuming it would make it as-is another 2 years.

Has anyone had a similar issue? How did you resolve it? Was it an issue for FHA financing?

Any and all help in understanding this issue will be greatly appreciated!  Thank you! 

Aidan,

  That is a great point regarding changing the garage into an apartment!  Thanks for bringing that up!

If you wouldn't mind DM'ing me that information, I would really appreciate it, just so I can learn a bit more about how you guys are figuring your numbers on the front end.  One thing I thought of after posting this is that the ABnB is not going to have a 100% occupancy rating.  

For a first property, how would you personally view the $275 in cash flow?  

P.S.

  Another thing that I need to consider in this strategy is that I will be starting medical school in two years, so there may be some other educational loans potentially.  

I will be moving soon, and would like to purchase a house since it is highly likely that I will be living in this area for a minimum of 2 years, and likely 6-9 (Or beyond).  Due to this semi-permanence, it would be much preferred to dump my rent money into equity in real property if at all possible, and get a few others to do the same for me.

My thought right now is to purchase a house that is listed at $199,000 due to its location, style, etc., I could definitely see myself living in it through the remainder of school. This will put my monthly mortgage payment (Not to include taxes/insurance/PMI) at approximately $1050. The house's upstairs consists of a bedroom, bathroom, and second seating area/office, so I would like to take that for myself so I have my own space as well as room to study. Then the main floor consists of the kitchen, two more bedrooms, a bath, dining room and living room. I plan to rent out those two rooms one to a friend for approximately $400, and the other at market rate, which is going to be around 500-600 more than likely.

The basement has its own access as well as a wet bar.  I would like to turn this initially into short term rental area by placing a door on the stairs that can be locked from the top side, and converting the bar to a kitchenette.   The exterior access will need a digital lock pad placed on it so that the code can be changed after the rentals, etc.  This space looks like it could fetch between $600-$900 a month using limited data sources from a less desirable neighborhood.  (This location is nearby a major expo center).

Finally, more long term: the garage.  There is a two car detached garage that has potential for an accessory dwelling unit to be built on top of it.  As a personal preference, I would like to keep the garage if at all possible, but I am not above merely converting the garage itself into an accessory apartment for more long term rental potential.  This could fetch $700-$900/month as well based on preliminary assessments.   

Some things to overcome:

1.) Qualifying for the loan: I used some basic calculations to come up with how much I could qualify for and the max was 215,000. This was based on a gross income and a DTI of no more than 43% on a 30 year term with interest rates between 4.0-4.15 (My credit is currently excellent, and I intend to borrow from a bank at this point unless a better option reveals itself). However, I am still concerned about my ability to find a lender willing to go this high.

2.) Doubt: this will be my first purchase/investment like this, and it is- as many of you I am sure know- terrifying.  While the numbers more than make sense, my concern is the ability to bring these numbers in, and what happens if I for some reason can't.

3.) Finding funding for the accessory dwelling unit over the apartment: My current thought is to look into a FHA 203k loan, and whether or not it could be used for the improvements I listed (As well as redoing a fireplace), and the apartment over the garage. If this can't be done- are there any other options to secure funding for this type of improvement? Looking at it from a cash flow perspective, it would make sense and provide some more security as I am somewhat leery to rely on ABNB rental of the basement. Also, this is going to be additional permits and dealing with contractors that I am entirely new to. Any advice would be extremely helpful.

The monthly payment: -$955

Insurance: -$85

PMI: -$48

(EDIT) Forgot Taxes: -$185

2 Roommates: $900

ABnB potential: $700

Potential garage apartment: $700

Net income potential: ~$900

The cost of permitting/construction of the garage apartment is a huge unknown at this point.  Would anyone have any suggestions on a ballpark estimate in making this decision?  The structure can be no more than 650 sqft per city code.  Is there a recommendation you would have about determining this cost? 

Everyone, thanks for reading!  I look forward to any suggestions, modifications, and constructive criticism.  

 Mods, if this is the wrong place- please feel free to move it.  I wasn't sure if this should go here or the, "Starting out", forum.

@Raphael Collazo, that all sounds great!  When time permits, I will certainly look to making it out to both of those events.  Thank you!

@James Wilcox, thank you!  I was planning on doing just that! I appreciate the advice!

@Cameo Bennett, will do!  Thank you!

@Justin Brown, I do indeed boulder, and I have been planning on checking that gym out here soon!  I look forward to it! 

Good morning, everyone!
  My name is Elijah Miller, and I am new to the forums.  I've been listening to the Bigger Pockets Podcast for approximately the last year as I've been considering my next financial move.  That next move is coming soon as I look to move to Louisville, KY in the next few months. 

My full time gig is as an EMT, so starting capital isn't necessarily the greatest, but I do have some saved up.  My part time gig is as an associate appraiser for Miller Appraisal and Realty, which has provided me with some basic knowledge for valuing properties- but not necessarily investing in them.  This is what I am hoping to learn from these forums and returning to the podcasts.  

In my free time, I enjoy rock climbing, mountain/trail biking, motorcycles, coaching lacrosse, and studying for my return to school for pre-med/medical school.   

I look forward to getting to meet each of you!  Thanks for your time.