All Forum Posts by: Juan Montes

Quote from @Juan Montes:

Quote from @Josh Young:

Quote from @Juan Montes:

Hey All, I’m an electrical engineer by training and have been working in the electrical utilities industry for 15 years.

I’m tired of working for someone else! I would like to be more financially independent. Just recently bought my first home and wanting to learn how to do house hacking. Hopefully I can expand to other properties. 

It’s awesome that there is this whole community here sharing information! 

Congrats on buying a home, that’s a big step in the right direction. I live in Gilbert and own a few homes that I rent out traditionally, but I have been looking into renting out a house by the room to increase cash flow, that is what you want to do is rent out your extra bedrooms. Get the house and yard nice and clean and neat and take a few really good photos, write up a nice detailed listing and post for rent online, I’ve been looking at https://www.roomies.com/. Look at what is listed in your area so you know how to price it, I think furnished bedroom might bring slightly more, but unfurnished bedroom would attract a longer term tenant so I’m going to go unfurnished bedroom when I do it.  The key is that this will help you save up to buy your next home, you will be able to buy a new primary residence in 12+ months, I don’t think you can use this room rental income to help you qualify, but when the time comes to buy another home, you will be able to put a traditional 12 month lease on the current home and use 75% of that rent as income to offset the mortgage to help you qualify for the next home though. Good luck!

Thanks Josh, really appreciate the suggestion and the link! So would I move out of the first house and into the second house? Would I apply for the mortgage on the second house as a primary residence? How much of a down payment would I need for the second house? Got an FHA loan on my first house and put down 3.5%. I heard for investment properties 20% down is needed. 

I was reading that it is best to put a rental property under its own LLC for asset protection. That way if someone sues you they can only get that one property at most. Do you do this?

Seems like things will get complicated fast by having multiple properties and multiple LLCs. But I guess that’s why you pay accounts and such to help keep all the books straight.

You will be able to by your next house as a primary residence using a conventional 5% down loan and yes you will move into it as a requirement of getting the primary residence financing, this is the lowest rates and lowest down payment. And yes buying investment properties is 20% down, sometimes 15% but that’s a higher rate and sometimes 25% or more, but you can get around this buying a new primary residence and moving into it and turning your current home into a rental, and the lender will let you use 75% of the rent that you will be collecting to help you qualify. You may want to refinance your current home into a conventional loan next year or the year after if you can decrease the rate and extend the loan back out to 30 years to lower the payment, it would be most beneficial if you did this before you moved out, so you get the best rate as it still being your primary residence.  FHA is good to get you into a home and the 3.5% down is a little better than 5% down for conventional, but if you qualify for a conventional loan the rates are usually better, also I don’t think you can have two FHA loans at once.

I don’t have any of my properties in LLC’s, this is a concern that I had to, but my CPA told me I don’t need an LLC until I have over $1M in equity, I have landlord insurance on my properties and require my tenants to have renters insurance. An LLC is a pass through entity so it’s tied directly to you anyway, and if you are negligent they will be able to get at all your assets in a lawsuit regardless of LLC or not, eventually you might set a Family Limited Partnership or Trust and that will own the LLC’s that own the properties (you will use a quitclaim deed to just move each property into an LLC later) and that is true asset protection, but that’s way down the road in millionaire land.

 
I saw your post about being afraid of mortgage debt as a barrier to entry. I had a similar fear and used to think the idea was to pay off your houses so they would cash flow better, but after reading a few books I learned the difference between bad debt and good debt and how to use it as leverage so you can use your house to borrow money to help you buy more houses, and collecting rent the whole time, so your tenants are actually paying the debt down, not you. If you haven’t read these book I highly recommend them: Rich Dad Poor Dad, The Millionaire Real Estate Investor, The Richest Man in Babylon, Cash Flow Quadrant, Loopholes of Real Estate.

@Juan Montes

There’s a broker in Cleveland that focuses on a full service real estate investing model. Will purchase fix and rent out properties for clients. Will help you sell when ready. I can connect you if you like.

Welcome to the community!

Would love to connect.

Quote from @Juan Montes:

Hey All, I’m an electrical engineer by training and have been working in the electrical utilities industry for 15 years.

I’m tired of working for someone else! I would like to be more financially independent. Just recently bought my first home and wanting to learn how to do house hacking. Hopefully I can expand to other properties. 

It’s awesome that there is this whole community here sharing information! 

 Juan,

You are in a perfect position as you know a trade and sound handy.  The idea of house hack is for you to buy a property that needs some work, move in, fix it up and then sell it a few years later for a nice gain. Because this home is your primary residence, you can get a owner occupied mortgage and save on taxes.  When we consult people on making a change we normally ask people to take baby steps.  Keep your 9 to 5 if you have one.  Work 5 to 9 or on weekends to gain extra income. You can then roll that extra income into properties and start building wealth.  At first, this will seem like a lot of work and a slow process. But once you have a few properties under your belt, you'll love it.  I highly recommend you do not quit your job.  Investors need capital.  So put in the work at your job until your houses earn you enough income that your houses can buy you houses. 

Quote from @Juan Montes:

Hey All, I’m an electrical engineer by training and have been working in the electrical utilities industry for 15 years.

I’m tired of working for someone else! I would like to be more financially independent. Just recently bought my first home and wanting to learn how to do house hacking. Hopefully I can expand to other properties. 

It’s awesome that there is this whole community here sharing information! 

Congrats on buying a home, that’s a big step in the right direction. I live in Gilbert and own a few homes that I rent out traditionally, but I have been looking into renting out a house by the room to increase cash flow, that is what you want to do is rent out your extra bedrooms. Get the house and yard nice and clean and neat and take a few really good photos, write up a nice detailed listing and post for rent online, I’ve been looking at https://www.roomies.com/. Look at what is listed in your area so you know how to price it, I think furnished bedroom might bring slightly more, but unfurnished bedroom would attract a longer term tenant so I’m going to go unfurnished bedroom when I do it.  The key is that this will help you save up to buy your next home, you will be able to buy a new primary residence in 12+ months, I don’t think you can use this room rental income to help you qualify, but when the time comes to buy another home, you will be able to put a traditional 12 month lease on the current home and use 75% of that rent as income to offset the mortgage to help you qualify for the next home though. Good luck!

Welcome to BP and congrats!

Build long-term wealth one house at a time!