All Forum Posts by: Jason Malabute

You should have an idea of cost. 

For instance, what does a roof cost to replace or to have a new HVAC installed or repaired? You can find out by calling local businesses and talking to them about their labor rates and standard material. 

I have called roofers and given them the sq ft of a roof to get a verbal quote, realizing I really just need a ballpark figure. Now of course they would need to go out and look at the property to give an actual accurate quote but that should not be far off.

Over time you get the hang of what things cost to repair and can do the analysis based on those numbers.

For other repairs like windows you can do the same thing. By calling a window company to get labor rates for a standard window you can multiple that out by the number of windows that may need replacing. We walked a home that had all very very old windows. Based on already knowing cost for what needed to be replaced we could get an idea of cost.

My local REI has a contractor member that has given out a cheat sheet of sorts that has material cost (updated as cost changes) and typical labor charges (also updated as needed) for several things like roof, flooring, appliances, cabinets and counters, windows, painting, etc.

I don't think there is any substitute to short cut the process. The more familiar you become with price on labor and materials the quicker you can analyze what your repairs will be.

I have found it typical for Owner's to pay for landscaping ($60-$100/mo) if they care about the curb-appeal of their rentals. Other than that in SFRs i think it is normal for tenants to pay for their utilities. 

I would scour Craiglist and look at their rental section and see what property managements are offering. It's very easy to get an idea of what to expect

Howdy @Jason Malabute

I am not a lender or loan officer.  But, here is my understanding of the difference.

First, LTV stands for "Loan to Value". It is expressed in a percentage based on the appraised value of the property. 80% LTV, if property is appraised at $100,000 then the loan would be $80,000 ($100,000 x .80 = $80,000).

PMI is Private Mortgage Insurance provided on conventional loans. It is required when the loan balance is more than 80% LTV of the appraised value (I.e. 90%). Once the balance goes down to 80%, PMI is dropped and no longer required. So if you pay at least a 20% down payment PMI will not be required.

FHA Mortgage Insurance (MI) is required on a balance over 78%. Also the borrower must pay it for 5 years. It doesn't matter how much the down payment is you still have to pay for 5 years. The exception is if you have a 15 year mortgage vs 30 years.

There are pro's and con's to both.  You will have to decide what is best for you.

Hope that clears things up a little.

Jason Ma
On FHA loans, mortgage insurance is charged in two ways. The first it the up front MI. This is 1.75% of the loan amount and is generally just rolled into the loan. The second is the "monthly MI." This is either 0.85 or 0.8 depending on your LTV (FHFA was about to lower it but on January 20th they canceled the change). This is calculated as an annual rate but broken up over 12 months (100k x 0.85% = $850/12months = ~$71/mo).

Does this help?

Cheers!
David

Very interesting that you posted this the exact time I was thinking about making my first official post about this same topic.

The purpose of factoring in the market rent for the unit (or room) you are living in is just to determined whether this is a good deal or not. This allows you to know if it would cash flow and thus be a good deal. When living there you could "pay yourself" to actually see this cash flow, which would essentially be moving it from your personal account (you paying rent) to a business/separate personal account (you receiving rental income). Then as an investor you would save the appropriate percentages of your cash flow.

Personal finance wise, this is equivalent of you netting zero but also getting a place to live. Investment wise, you are getting (for example) $1,600 for two units with a mortgage and expenses of $800. The goal for house hacking in duplexes is usually about living for free or very little while gaining equity. When you get to tri and quads, that's where real cash flow is can be made. 1 unit pays mortgage + expenses and the other 1-2 give you cash flow.