All Forum Posts by: Grant Shipman

Quote from @Zack Karp:

@Jacob Mitchell this is where the confusion lies. These aren't various loan programs. There are only 2 programs...FHA and Conventional. It's that simple. However it's the deep understanding of the guidelines of each of these programs that matters. 24 years writing mortgages, I know these guidelines inside and out, and how to use them in a way to help real estate investors and house hackers. It's not something you can easily learn. It's years of practice, and learning what you can do, what you can't do, and the repetition of doing thousands and thousands of loans and the nuances of working around the guidelines. This is what sets someone like me apart from the order-taker LO's in the call centers and banks. Any LO can quote a rate, or teach a room full of realtors a few nuggets, but very few can actually do what I do.

Let me be clear. You CAN house hack a new 2-4 unit property every year with a low down payment. But people talking about it on BP is very different than walking the walk. Any decent LO can explain how to buy properties 1 and 2. But very few LO's can actually guide you through getting to properties 3,4,5... I have done that successfully for dozens if not hundreds of house hackers. You just need a very realistic and pragmatic approach to the properties you buy, and the right LO and realtor team to support you, and as I mentioned you already have one of those :)

Hi Zack- I'm really appreciating your thoughts. In regards to there only being two loan programs, what do you think of Multifamily USDA loans and the 10-15% down multifamily DSCR loans? In my experience, these are rare but findable with persistence.  Have your written any of these loans yet and have any insight to share? 

Quote from @Brian Bohrer:

Quote from @Grant Shipman:

Quote from @Brian Bohrer:

Hey @Grant Shipman,

Did you have to have a cost segregation report done to take advantage of this? I am currently getting ready to start STR'ing our lower level and want to be sure I can take as much tax advantages as I can!

Thanks in advance for any input you can provide.  Take Care,

Oh cool I'm glad you're aware of a cost seg and keeping it on the table. So far a cost seg hasn't made sense for our situation, so I haven't done it.  We keep checking each year though, as it can be a big help.  My only encouragement on this is to NOT settle for a CPA that discourages them b/c they don't understand them. Get a CPA that loves them and can do them well- most likely they may want to include a 3rd party professional to make it audit proof in the future. 

 So you can simply state the sqft of your "rental" and then write-off expenses at the same ratio as your "rental" sqft to personal space sqft?    

So for an easy math example, if you had a 1000sqft home and rented a 250sqft room, then you could right-off 25% of your monthly/yearly utilities etc?

 Gotcha. Sorry to misunderstand, and thank you for clarifying.  I think of cost segregation in regards to a tax strategy with depreciating a property.  In regards to actual expenses like utilities, I think you are roughly on the right track w/square footage.  To get any more specific than that, I'd need to defer to my CPA (or any CPA's on this forum).  A CPA would not need a 3rd party professional in regards to expenses. Remember to be thorough with expenses- i.e. cleaning costs, internet, repairs, improvements, landscaping, mowing, snow removal, and all other expenses in regards to your property. A good CPA will guide you through collecting these expenses and property applying them.  Sorry I cannot be of more help than this. 

your question to be about low down financing options in regards to programs and frequency, so I want to answer specific to that.

Quick notes: Good mortgage brokers can easily offer 15% down loans with conventional and other programs like DSCR, so I'm only going to address <15% Down options.

The path of House Hacking hit a Y's in the road. You have the option to house hack alone or with partners.

Alone "House Hacking" <15% down options: Private & Portfolio Loan, FHA 3.5% down**, USDA 0% down**, VA 0% down***, Conventional with DPA (down payment assistance programs like CHFA) 0-5% down*, Home Ready Loan 1-3% down*, Conventional 2nd Home 10% down**, and Conventional 3% down*. KEY: *limited to 1/year. ** limited by one purchase until refie'ed out of program; ***limited by total of all loan(s).

With Partners (I call this "House Hacking 2.0" for clarity sake): You have all the above options but remove the limitations because you are partnering with partners, so you are NOT limited by your past loans. Examples from my portfolios include getting a $370k property with using a Conventional mortgage w/DPA and only requiring $1k cash; getting a $316k property with 1% down Home Ready Loan; and actually none of my properties have cost me a dime because my partners provided the cash. All of this is done in complete compliance with mortgage and governmental rules/regs. House Hacking 2.0 has the additional benefits increasing capital (partners provide cash), decreasing risk (spread out among partnership), and increasing loan worthiness (partners provide loan worthiness).

I am a fan of low/no down b/c instead of money going towards the acquisition it can increase financial reserves; provide money for more properties; and massively increases cash ROI %.

I wanted to answer your specific questions, but there's other more foundational factors including acting according to your risk profile (for instance I like having 3 back up plans), initiating/managing good partnerships, etc.

I love house hacking and have used it to live my day dreams, so please lmk if I can be of any other help to you.

Loan programs are constantly changing, so I highly encourage you find a stellar mortgage officer to serve you.  I'm happy to connect you w/the one I use, if you shoot me a message. Creative financing offers more options like master leases, lease option, seller financing, and more. You are in the right place with BiggerPockets. Don't give up and I encourage you to move solidly and quickly towards your first rental property.

Quote from @Brian Bohrer:

Hey @Grant Shipman,

Did you have to have a cost segregation report done to take advantage of this? I am currently getting ready to start STR'ing our lower level and want to be sure I can take as much tax advantages as I can!

Thanks in advance for any input you can provide.  Take Care,

Oh cool I'm glad you're aware of a cost seg and keeping it on the table. So far a cost seg hasn't made sense for our situation, so I haven't done it.  We keep checking each year though, as it can be a big help.  My only encouragement on this is to NOT settle for a CPA that discourages them b/c they don't understand them. Get a CPA that loves them and can do them well- most likely they may want to include a 3rd party professional to make it audit proof in the future. 

My wife and I do STR w/our lower level, and it allows us to live in a million dollar beautiful mountain home for free (actually way better than free).

It's so good you are bringing your CPA in on this b/c you want it done correctly and it can easily be done correctly.  My CPA educated me on all this stuff, so if your CPA isn't confident AF on how to do this and isn't researching it a bunch to get confident AF then shoot me and email and I'm happy to share my CPA info. 

According to my understanding, for STR the rough and dirty is it's going to come down to square footage. All your expenses (factored by square footage) will offset your income for your tax advantages. I can't speak as confidently to MTR b/c all my MTR's are fully rented out (not owner occupied).

The three things to have in place are: 1) bookkeeping that is audit proof; 2) knowledge & plan of any government regulation/permits; your insurance expert informed any insurance updated as needed.  Then go make a mountain of money! 

Congrats on considering new moves and wanting to put thought into them!  

The previous comments are quality, so I'll just add the following: 

1) I highly highly encourage you to have a lease no matter what. Make sure the lease is clear to you both. Then following it no matter what- no favors, no anything besides following the lease for the sake of your friendship & learning good business practices.

2) Sign-up with a free service like Apartments.com that implements the lease.  Make sure it does the following things for you (this will also guard your friendship and help you learn good business practices):  

----1) accept security deposit & rent payments electronically (according to the lease) 

----2) automatically charge late fees (according to the lease)

Then keep to the lease and never accept payments outside of the free service like Apartments.com

I hope that helps!

Looks like you're off to a great start, mistakes and all. comingling business & personal funds is a mistake, but one that has been done many times by many successful people when they started out, and now you are wanting to do a course correction which is stellar.  What's good is since you're house hacking (I'm assuming you're living in the property), comingling is not as bad or hard to work out.  I can help you sort out acquisition issues (buying additional properties), but my CPA is going to be the best at helping you figure out your financial/tax issues.  She's not the cheapest (she's not the priciest either), but your books/taxes/receipt activity will follow you around for at least 7 years so paying to do it right and to maximize the tax advantages of real estate is key. Like it's been said "It's not the charge but the cost".  It doesn't matter as much the CPA charges for service as the cost to you of not using their service.  That said she's normal priced. Also- I do not get a referral fee. I'd suggest emailing her to setup a phone call or something to see if you'd like her services and she'd accept you as a client.  Message me your email address, and I will email introduce you to her.  Get that ball rolling since it's the end of the year, and then feel free to reach back out to me if you want help troubleshooting acquisition challenges.  

Quote from @Curtis Mears:

@Tim Jameson

I think you were to emotionally involved. I send the notice and they have a choice to make. If they do not leave, then I start the eviction process. There is no explanation necessary.

 beautifully and concisely stated. thanks for posting

Hi @Richard Lee- very cool to hear about your progress and your goals!  

This is what I do and I have a proven & stellar team around me (including a CPA).  Before I hand you off to her, I'd like to help how I can. Please lmk your specific questions, issues, and goals. Be specific, and I will try to be specific w/helping. Please tell me how you keep your books (Quickbooks, etc?), how many properties you have & types, and how you filed your taxes for 2020 & 2021.  These will all help me give you better feedback. If you feel better you can message/email me.  House Hacking is a tremendous strategy, and I applaud your efforts to get a solid financial team around you.  After you nail down this, I encourage you to look at house hacking syndication, coliving property management, and lease strengthening. 

It's so good to see so much repeated advice here that I think is solid- follow the lease, follow the law, run your business, and just get him out IF it's not worth the hassle/etc to you right now.  Keith Cunningham taught me that any issue is usually due to a hole in my systems- I encourage you to get through this and also to learn from it and improve. Good luck & press on @Tim Jameson!