All Forum Posts by: Jim D.

@Jeremy Mattson Just leave your FHA loan as-is on your current property, even if you move out. Once you've met the 12-month minimum residency requirement you can move out and there is no need to refinance it (unless it lowers your monthly payment by getting a better rate or by dropping the PMI).

If you are buying another owner-occupied 2-4 unit, you should use the conventional HomePossible loan; it's similar to FHA but with much better terms (lower PMI and the PMI can be dropped when you get to 78% LTV, unlike FHA which stays on for the life of the loan).

Finally, don't ever call that credit union back again. 

@Curran D Bishop I've house hacked 5 times in 6 years and used low down payments for every one. There are at least two options for low down payments if you are owner occupying one of the units. The most well-known is FHA, which is 3.5% down and has very high PMI payments added on that can never be removed.

The other one is the conventional HomePossible loan, 5% down and lower PMI which can be removed when you get to 78% LTV. This is the loan you want. It's a conventional loan, so any lender should be able to do it. You might consider a different lender thought... any investment lender worth their salt should know about both of these loans.

Congrats on getting started and good luck!

Well thought out question... you're thinking about it in all the right ways. 

I moved out of state a few years ago, and decided to self-manage my rentals. They are in A and B areas, are already in good shape, and had good renters, so I figured I'd just let it ride until I needed more help and then would hire a manager. It's turned out to be far easier than I expected, and I am 2,000 miles away. I pay a handyman to do a maintenance check every 3 months and take care of odd jobs. If something breaks, the renters just text me with a few photos to let me know, and it's so easy just to call a plumber or tree trimmer to head over and take care of it. It's actually way easier than when I lived there, because I'm not tempted to drive over in rush hour traffic, stare at the problem for a while, haul around used appliances in my Prius... I just make one call and it gets done. Now granted, I am in good neighborhoods... this wouldn't work so well with tougher tenants. When I eventually have turnover it will be more difficult, but so far I'm stunned by how easy it's been. 

It looks like you'll probably be breaking even or having to spend a few hundred bucks a month if you keep the house. My advice is this: if you want to learn to be an investor, keep it. The experience and confidence you will gain from renting it out for a year or two will be far, far more valuable than a few hundred dollars a month. You'll be very well prepared to buy your next one and will know just what to look for. My first property had similar numbers to yours, but the experience of doing it and getting started was extremely valuable to me.

If you don't plan to be into real estate investing in the future, I would sell it. 

Great responses here from everyone.

My feeling is that if you hit the big items out of the park (cars, mortgage payments, credit cards), you don't need to worry so much about the small stuff. All of our friends spend $1200-2000/month paying their rent or mortgage, while we pay $200/month because we live in one unit of our duplex.

That's a lot of lattes.

There's nothing wrong with skipping certain updates and repairs if you don't feel they will add much value, as long as you are transparent about their condition. I wouldn't ever replace a working 7-year-old water heater, or lightly used kitchen appliances, for example. On your flip you could hypothetically decide not to repair the driveway. The buyer can easily note the age of all those items and knows what they are getting. Nothing unethical about that. You don't need to fix and update every last thing on a house to make it a good value for the next owner.

When it becomes unethical is if you are doing something incorrectly and covering it up.

It sounds like you've made every reasonable effort to inform the owner of the state of the market. It is entirely reasonable of you to part ways with these clients. Both of you are losing money every month.

If the owner hasn't responded to your feedback yet, maybe sending that notice or breaking ties will be enough to finally get their attention. 

While closing costs will include fees like title insurance, origination fees, etc., the majority of closing costs aren't actual costs; they're just pre-paying insurance and taxes. You'll get them back whenever the mortgage is closed.

If you have enough savings to pay cash and you buy something that cash flows reasonably well, I don't think you're going to be at risk of damaging your credit (missing payments) as long as you have a good emergency fund for vacancy and repairs. 

Financing will earn you more in the long run if that's what you're after.

Wow, this is going to be a game changer for several of my clients (and myself). Thank you so much for posting!

That is great news that the first-time homebuyer requirement has been dropped. Do you have a link to the loan details which show this?