All Forum Posts by: Kenneth McKeown

1. If you don't occupy it - you're welcoming yourself into mortgage fraud. I'm not an attorney and this is not legal advice but I would highly encourage you to learn more about this. The key word you just said "I don't intend to actually live in the unit." 

The easiest and quickest entry into real estate investing is buying a primary. Whether or not that's a 3.5% FHA 2-4 plex or house hacking a SFH with a 3-5% conventional and rent out the rooms. Both are viable options and can really get your feet wet with being a landlord and be a good start.

@Zachary Kingsberg I know this having done it first hand - I was a high school teacher/coach and transitioned into real estate full time after just a year. My suggestion would be - if you're looking to get into real estate just know that if you continue to build your business up, there won't be time for another career. I work day in and day out and couldn't imagine being where I am today if I was still teaching/coaching. 

@Ariana L Canales I wouldn't say it's impossible. I'm purchasing a SFH right now that will be better than a 1% rule - quite a bit higher. But with that being said I'm purchasing it cash and it has significant foundation work & extra updating we will do. It's also not a deal that you find on the MLS every morning when you wake up. It's one of the better deals I've come across in years. It's also not in North Dallas. But I'll be in $0 at the end of the day and be cash flowing tremendously.

You have to understand primary residences though - you're purchasing likely the property retail and only putting $10,000 into a $250,000 investment. Are you planning on renting out the rooms? My sacrifice was buying a MFH, renting out the rooms on my side and it was in a very low income area. I've done that multiple times. This would be a different situation if you were putting 20% down which a lot of out of state investors are doing which are snatching up SFH's to rent out.

@Alex Stone if foundation work is a worry for you - then purchasing any home in Texas may not be in your plans. I own multiple properties and have had foundation work on nearly all of them. It's just Texas for you - and I'd rather have the foundation taken care of with a lifetime transferable warranty than not. Sounds like the HOA will cover it so it won't even be an expense out of your own pocket but the hassle may be getting them to finally do it. The next question will be - how awful is the foundation? Is it going to clear FHA, VA or Conventional financing? A total of 19 piers isn't a massive job but it's also not a minimal foundation job either - probably depends on how the property looks overall. A lot to take into account here but at the end of the day - I don't let foundation problems cause me to not purchase a property. Just hopefully your agent will negotiate the hassle you'll have to go through within your contract to compensate you!

@Nick Arsic what was his first purchase? It's a different beast when you go from purchasing a $160,000 single family and a $2M property so just curious his previous purchase. 

@Umar Farooq you are going to be incredibly over leveraged if you purchase two 4-plex's as an OOU and the other as an owner finance. The other option is 25% down which if that is possible - that would be a much better route to go. 

@Max A. you're not going to find SFR in N Dallas that fit the 1% rule. Period. Especially if you're buying turn key. Maybe in a few months with furloughed and unemployed individuals potentially losing their houses you could find opportunities with distressed properties at a discounted price but definitely not turn key in N Dallas at 1%.

@Max Ratner a lot of everyone would have to fall in line to be completely $0 out of pocket. Is saving for downpayment an issue? If you're a Veteran you can use your VA loan, you could use a USDA loan, or you could use a downpayment assistance program that will cover all your downpayment. Now you would also have to get a house under contract with enough compensation to cover closing costs too as purchasing a house will entail downpayment + closing costs. Wouldn't say it's impossible - but it's not likely that you'll be out of pocket at the end $0.

@Timothy Stolyaroff I'd definitely associate yourself more with exactly where you're interested in. Only reason I say this is because $1900/mo for rent in Forney/Royse City while keeping your mortgage at 1200/mo for 3.5% FHA may be unattainable. The taxes are high here but we don't have state income tax so those who LIVE here get a little bit of an advantage versus investing out of state.

What value homes are you looking at? Your P&I on $200k is only $850/mo or so - but you add in taxes, insurance, and PMI you're not at $1200. However I would look into a 5% down conventional loan versus a 3.5% FHA unless you're wanting to house hack a MFH - then FHA it is.

@Kathleen McCabe I'm very familiar with essentially all the MFH areas in the DFW metro-plex and this it not a BAD price for LG. I'm personally building in a nearby community myself. You're going to get a lot of peoples responses saying this is a horrible purchase - which it in a sense is. It's not really a true 'investment' but rather a sacrifice to some extent in your position but not really an investment. Now I say that lightly as I believe all homes should be called an investment because at least your money is going somewhere.

Now - when it comes to downtown, you're going to have to accept that positive cash flow is impossible. It's probably impossible in any downtown location of any large metro-plex. As you mentioned - my lot itself before we tore down the old house was mid 400k. However, you also have to consider build cost - so lot value isn't a big sticking point. Your taxes are always going to be high here however and with a 100 year old home - maintenance and cap-ex can kill you. However, and I tell everyone I help that wants to be near downtown, you're not sacrificing as much as you would be in a low income area of Arlington - so be aware of that. You're purchasing likely in an A class neighborhood downtown so the numbers are never going to "work". BUT - as you mentioned before, you're saving money from renting but that doesn't account for vacancy or any other costs. 

So without reading all the other replies since none of them are local and know our market - I would ask yourself this... are you wanting to pay for the location? If so - you won't be buying a positive cash flow property. If you aren't concerned about location - then I'd strongly suggest you look elsewhere.