All Forum Posts by: Josh Young

I have an early termination clause in my leases and I have provided this lease to lenders when applying for conventional financing and none of them have ever had a problem with it.  Here is my actual clause from my leases: 

Early Termination Of Lease

The Tenant(s) may terminate this lease’s length by delivering to the Landlord a written sixty (60) day Notice To Vacate and an early termination fee of two (2) month’s rent (section 1). This notice and fee must be received by the Landlord at least sixty (60) days before Tenant(s) vacate and stop paying rent. Additionally, to initiate an Early Termination Of Lease all rents owed to the Landlord by the Tenant(s) must be paid in full and current.

So it's worth $465k and you are going to sell 10% of it for $20k instead of $46k? Having a partner especially family can get complicated, what happens next time you guys need cash for repairs or what happens if one of you wants to refinance or do a HELOC or sell the property and the other one doesn't want to. I'm not saying don't do it, but you should at least create an LLC (quit claim the deed) and have an operating agreement if you do bring him on.

Quote from @Doug Smith:

Hi @Ben Capone, I would just caution you that as part of Anti-Money-Laundering (AML) regulations on lenders, they will have to "source" any down payment. That means that we'll have to get your last 2 months of bank statements to show where the money is coming from. Most lenders will not allow borrowed funds to go as a down payment. If a down payment shows in the beginning balance of the oldest of the statements, you're good to go, but if they see a big deposit, they're going to want to know where it came from. Just something to watch for when borrowing down payment funds. I hope it goes well for you. Doug 

Doug, this is great advice on the deposit already being in the account for two months of statements! I will never forget this! Thank You!

Quote from @Kevin Forsell:

Hello all-

I'm saving for my first multifamily home and my Agent (who invests himself) advised me to house hack for at least my first property. I expressed some uncertainty with living in the property and he told me some under-the-table advice; you don't actually NEED to live there, you just have to have the "intention" of living there. Once the property is sold, you can rent out all units, and no House Hack Police will come knocking to check if you're living in the property. 

Obviously this is more ideal for me (and I assume for most people), but the thought of cheating the system scares me a bit. Has anyone done this? If I do this and the lender (or anyone else) finds out, what might the repercussions be? Thanks in advance for the advice!

Kevin, what he is telling you to do is fraud, don’t commit fraud. It’s all about intent, so when you sign the closing docs you need to intend on moving into the property within 60 days and living in it for at least 12 months.  However, peoples circumstances change, such as you have to move for a job, or you are in the military and get transferred/deployed, or your family is growing a you need more space. I personally have bought a new primary residence 8 months after I bought a different primary residence, I intended on living in it longer, but my circumstances changed, my family was growing and we needed more space, so that’s what I told the underwriters because they asked why I was moving so soon. 

If you are looking to make this deal cashflow better you could rent it by the room instead of by the unit (I’m making the assumption they are 2+ bedrooms) or at least rent out the other bedroom in your unit if you don’t plan on spending all your time there.

Zillow rental manager is free (except $10 per week to list property for rent) and does everything you need.

You can buy an investment property to rent out as soon as you want, you just have to qualify (usually W-2, tax returns, DTI, Credit, reserves etc.) and have the 20-25% or even 30% down payment, but these guys are right buying a new primary residence will be a better interest rate and you will only need 5% down payment. When you bought the house you are in now you probably signed a form saying that you intended on living in the home for at least 12 months (because you get better terms on your loan for it being a primary residence), but it's been six months now, so as long as you buy a house that's at least a little bigger you can tell your lender that your circumstances have changed and you need more room for your growing family. And then put a lease on your current house and they will count 75% of the rent to help cancel out the mortgage on your DTI.

Quote from @Marco Samame:

Hello, 

I am looking for input from those who have used online rental payment applications for their tenants to pay their rent.  I am looking into Innago, Avail, apartments.com, a few others.  Ideally I am looking for an app that allows the tenant to pay thru direct deposit at no charge and for the payment data to be collected for credit scoring purposes.  I know apartments.com used to offer that feature of reporting to credit agencies for free but it's no longer available as a feature.  Any advice or lessons learned from your experiences is greatly appreciated.

Thank you.

Marco

I use Zillow rental manager and it works great to list properties (cost $10 per week to list a property for rent), screen tenants (free for landlords, applicants pay $30 per person for credit report and background check) and collect rent (free for landlord and tenant unless they use a credit card then the tenant pays a fee), but it doesn’t report to credit agencies. I’ve actually been looking into reporting to credit agencies just because it seems like a win win for me and the tenants, it encourages them to pay so they don’t hurt their credit and helps their credit when they do pay. I really like using Zillow rental manager so I’ve been thinking about using https://frontlobby.com/  it looks like it’s free to do. Has anyone else used this website?

Quote from @Josh Young:

Quote from @Priti Gupta:

Hello BP community!
My name is Priti and i live in the South Denver Metro area. I came across Bigger Pockets podcast last year and i have been reading RE books and listening to different BP podcasts since then. I truly believe at this point that RE is the way to go to build wealth and achieve financial independence. My goal is to achieve FIRE and also be able to give back.

I don't even own a primary residence yet. So I was thinking about starting out by doing a live in flip so i get some experience with rehabs and have a primary residence at the same time. May be also do a house hack by renting out the basement if possible.
But since i read the BRRRR book and Long Distance real estate investing by David Greene, i am also thinking about doing out of state BRRRR with the money i have saved up for down payment.

I was hoping to get some recommendations from this community

1) about the strategy to pick as a beginner

2) how to structure research to pick the market/sub-market to invest out of state

Thanks in advance! And hoping to engage more with this community.

Priti, welcome to BP. Buying a primary residence is the best 1st step, conventional loan 5% down payment. In a few years you can cash out refi and that is basically a BRRR, or you can sell after 2+ years of it being a primary residence and it's tax free. You can also buy out of state, but you definitely want to buy a primary residence 1st and then keep buying a new primary residence every few years. Nice job saving for the down payment! That's the part most people can't do! Make sure you always have at least 6+ months of reserves, that gives you time to pivot if something unforeseen happens, good luck!

 The major things to look for when picking an out of state market are high paying job creation like tech jobs moving into a market and the other thing is population growth, so basically people are moving to the area and there are high paying jobs for them to get, these two thing typically lead to price appreciation and rent growth.

Quote from @Priti Gupta:

Hello BP community!
My name is Priti and i live in the South Denver Metro area. I came across Bigger Pockets podcast last year and i have been reading RE books and listening to different BP podcasts since then. I truly believe at this point that RE is the way to go to build wealth and achieve financial independence. My goal is to achieve FIRE and also be able to give back.

I don't even own a primary residence yet. So I was thinking about starting out by doing a live in flip so i get some experience with rehabs and have a primary residence at the same time. May be also do a house hack by renting out the basement if possible.
But since i read the BRRRR book and Long Distance real estate investing by David Greene, i am also thinking about doing out of state BRRRR with the money i have saved up for down payment.

I was hoping to get some recommendations from this community

1) about the strategy to pick as a beginner

2) how to structure research to pick the market/sub-market to invest out of state

Thanks in advance! And hoping to engage more with this community.

Priti, welcome to BP. Buying a primary residence is the best 1st step, conventional loan 5% down payment. In a few years you can cash out refi and that is basically a BRRR, or you can sell after 2+ years of it being a primary residence and it's tax free. You can also buy out of state, but you definitely want to buy a primary residence 1st and then keep buying a new primary residence every few years. Nice job saving for the down payment! That's the part most people can't do! Make sure you always have at least 6+ months of reserves, that gives you time to pivot if something unforeseen happens, good luck!

Quote from @Sam Brasseale:

I’m looking at buying a new house. I currently own a 3/2 with approx 185k in equity and 115k left on the loan. My plan is to take out a home equity loan for the down payment of 20% on a 520k house.

Current mortgage is 1100/mo and HE Loan payment would be ~900/mo

My plan is to rent our current house out as a LTR.

My question is, should I consider the HE loan amount as a loan service in the cash flow equation on the rental, or consider it just as an expense on my new home?

Sam, you can buy your next house as a primary residence using a conventional loan and only need to put 5% down. But you are smart to take out a second position loan on the house you are in now before you turn it into a rental, just make sure your DTI will qualify. You want to count both loans on that house as loans on that house, but it's probably better to do a second rather than refi the 1st since the rate is probably super low on the 1st loan. This will probably mean your cash flow won't be very good if anything at all, but it's better to take it out as your primary residence now rather than wait until it's a rental because it's harder and higher rate to get a second loan on a rental, even if you don't need all of the available money, might be smart to have extra reserves, so you can buy another one next year too. Just make sure you will still qualify with DTI. When you qualifying for the new primary residence you can put a lease on the current house and count 75% of the rent against your mortgages, so that will help your DTI.