All Forum Posts by: Kell Caro

@Arya Jackson

As with a cash out refi, you can weigh the option of using a heloc to access equity in your home in the same way. A competent mortgage broker would be able to analyze your equity + situation to help you determine a safe route to go.

Look I understand people with the "hey, its just business" mindset when it comes to this stuff.  We live in a capitalistic society where a competitive marketplace rules the day.  That goes for jobs, businesses, all the way to housing.  If you're not able to compete, well hey, sorry but I don't make the rules around here.

I live and operate in Oakland, a heavily rent controlled city, where the level of tenant rights are so strong that they literally have more rights as a tenant than you do actually owning the building.  The right for an owner or owner's family member to move into a unit is one of the few and only ways to legally end someone's lease and I have and am willing to utilize my legal position to the extent that the law allows.

But would I have done it in this particular instance?  Absolutely not.  I appreciate @Joe Splitrock for bringing his vantage into this conversation because I couldn't agree more. I also agree that it's a shame that this 100 yr olds family isn't there for them, but that's beside the point.  It's a scarcity mindset saying we need to squeeze this lady out. It's an ethical and moral position that we should be respecting and honoring our elders.

The lady doesn't have much time left anyways.  She can absolutely stay.

@Trevor Hatchard

Yeah double check how they treat the interest, but other then that as far as the amounts it seems very similar. Our program allows you to borrow up to 50% of account balance, up to 50k.

I used it just last summer, closed on a 4plex here in Oakland in June. One unit was vacant for me to move into (and subsequently renovate) and another tenant moved out a couple months after, which was great because I then moved into that unit and placed a new tenant in the renovated one. I was negative cash flow first couple months but now I'm breaking even on PITI while living there so I'm pretty happy with that.

Definitely factor in your 401k payment when analyzing deals. It's not hard to pay it as long as you're accounting for it. In my case, near the end of the year I had some extra money so I went ahead and paid about half of it back. I close on a SFR next week on my street. Will be using some 401 money again.

@Trevor Hatchard

“Looking to get a quadplex in the pricey southern california market. Have been looking into creative ways to fund my first deal. Does anyone have any experience borrowing against their 401(k)? My company does a 50% match which i figured i would be able to take advantage of here?”

I’m curious if there’s some confusion here on how and when they match your 50%.

In most cases a company will have programs to match a portion of your contribution INTO your 401k. Certainly take advantage of this match to its fullest extent.

However, when borrowing against your 401k I don’t see how the matching program is to be taken advantage of here? Wouldn’t affect you borrowing against your acct + and I’m almost certain they wouldn’t be matching 50% of how much you’re borrowing against it? Maybe I’m confused but just wanted to clarify this here. Perhaps I’m mistaken.

As for experience borrowing against 401k... That’s how I got my first property. Borrowed about 25k + had 25k. The interest rate wasn’t great @ 8% but you feel a little better about it because half of the interest is yours and half is theirs. So I end up paying myself 4% interest back into my acct and 4% to them. Also by showing them I was using it on a primary residence down payment they gave me a 30 yr term which is nice having the flexibility.

I’m sure these programs differ greatly but that was my experience. Good luck man

Almost guarantee your lender is talking about Home Possible... Concurred on over 40k, I put 6.5% (almost 49K) down on 750k to get it down to 701k, and thats with wrapping as many closing costs as I could into the deal.

Just stick with it man.  As you're in this process of specifying exactly what you're looking for you'll end up hyper aware when something falls within the parameters.  Get this first one done where your housing expenses are covered and you'll be in a whole new arena.

@Donald Cespedes

@Donald Cespedes

Hey DJ,

About where you at in Oakland? I was in a similar position and in fact had an FHA offer accepted only to have the financing fall out due to the Self-Sufficiency Test that is required.

FHA tends to have high standards for what they deem as habitable, and in any market with competition, sellers often set the FHA offer aside simply due to the headache of red flags the housing administration could possibly throw out during escrow. FHA multifamily is highly touted on BP but seems more effective in markets with higher days on market than the Bay Area.

The only way I've found to get around these constraints; the uncompetitive offer, the FHA standard, etc, while maintaining the low down payment for owner occupying multifamily is Home Possible with Freddie Mac.

Home Possible puts you directly into a conventional loan, instead of being stuck in your FHA. And when they came through to approve the multifamily I bought last year, even with all the delayed maintenance the property had, they didn't red flag us on a single thing.

$750k works, and is about the limit (w/o a larger % down) because the loan limit is $701,250. There are income limits, but these limits don’t apply to many areas in Oakland so you’re probably fine.

Other than that, a month isn't very long... Keep an eye on it and decent places end up popping up.

Anyways, you can find the matrix here

http://www.freddiemac.com/singlefamily/factsheets/...

And the property/income map here

http://www.freddiemac.com/homepossible/eligibility...

I’m a big proponent of continuing to invest in the Bay Area and of course in Oakland the house hack is a great way to go, so right on.

“But math just doesn't work out for me with 20% down-payment.”

@Inna Hurin

Pretty sure that’s what he means

I know this is a cabinet thread but...

IF the ARV actually is 130k... 75% all in at 97.5k would need to include purchase, reno, closing costs, etc... doesn't sound like a BRRR

Otherwise good info though, thanks for the thread

@Daniel Lorence If you know the guy then talk to him... I’m sure he understands the dynamics that are going into his place, you can get a good feel for what he’s going to go for. A lot in the deal can be handled before anything is put down in writing 

Outside of that, when the SFR on the same block is going for $800k I tend to think you're sitting good getting the 4plex for the same price...