All Forum Posts by: Matthew Porcaro

Congrats on your engagement!

That's great that she's on board. House hacking is for sure the best way to get into real estate investing (in my humble opinion)

If you combining your incomes puts you where you want to be, I'd do that. Remember, although FHA only allows one loan under your name at any given time, Fannie Mae allows 11.

With the new guidelines that came out with Fannie Mae back in November, you can now put 5% down on up to a 4-unit property with conventional mortgages. 

So essentially, if you use that loan product, you wont have to worry about "using up" your low down payment loan quota. You and your fiance can do it together over and over (as long as you financially qualify and fit the guidelines)

Hope this alleviates your concern!

Couple of options here: 

1. You can use software like propstream or something similar to pull lists of all 2-4 unit properties in your target areas. Then, you can go the off-market route, and contact the owners directly via direct mail, door knocking, or cold calling the owners and asking them if they'd have any interest in selling. 

2. Depending on your market, look at their ADU laws. Accessory dwelling units (ADUs) are becoming more and more popular nationwide. Most zoning for single family homes is now allowing you to add a separate accessory unit from the home, whether it be in different space in the house, garage, small unit outside, or in the basement where applicable. You can get another income producing area of the house and it still be separate.

3. Look for single family homes that are built well for adding accessory apartments. Properties with basements with outside entrances to the basement with egress windows (you can add these too), split level homes (very popular here in NY) where you can make an apartment upstairs and downstairs. Or, look for properties that are considered "mother daughter" properties or properties with "Mother in law" suites. 

 You can still buy fixer uppers to house hack with the Fannie Mae HomeStyle loan. They’ll lend you 100% of the reno cost in addition to the purchase price. 

@Griffin Malcolm

Are you able to purchase your next house hack with 5% down without pulling equity out of your current property?

Because if you did pull out equity to repeat, you will increase your payment on that property and that $600 cash flow will evaporate.

Fannie Mae changed their guidelines now where you can go and do another house hack and buy a 2-4 unit property with only 5% down. Low down payment options for 2-4 unit properties were previously only reserved to FHA, which only allowed one loan at a time.

And, they’re a lot more flexible with your exit property (aka, holding onto your current property as a rental).

Most importantly, finding a property where the numbers work, no matter what financing you use, will be what to work towards.

What are you doing to source deals currently? I know you mentioned you’re coming up short.

I’m responding to the original posters question who mentioned that they’re open to using 
it as a funding option and wanted more information on it. 

when I see information that’s posted out there about it that’s inaccurate, I chime in. 

you can check my account and my previous posts and see that I myself struggled to find the right information about it when I first started into investing. 

the 203k is great for house hacking, which in and of itself is an investment strategy. 

you can use the BRRRR strategy with it as well because you can build equity into the property and use that equity to go buy additional real estate.

yes, the caveat is owner occupancy for a year. And if you follow the guidelines, as I mentioned above, you can go and refinance and move and do it again. 

Fannie Mae has also changed their guidelines with buying multifamily homes with only 5% down if you occupy the property. And you can have up to 11 of those loans under your name. 

so the process is repeatable as long as you follow the guidelines. 

im not saying its the best option, but im saying its a viable option, and what annoys me most is when I see so much misinformation posted about it anywhere. 

the reason I created my YouTube, Facebook, and Instagram communities around the topics was because I saw how many times people were posting here asking questions about the 203k and were getting the wrong answers or mislead constantly by people with no deep & hands on experience with the program. 

I’ve made thousands of hours of videos and posts  on the subject, all on YouTube Instagram and FB

My only goal is to stop the misinformation and make people aware that it exists and it’s indeed a viable and quite honestly only option that worked for me after years of trying to break into real estate investing in a HCOL in NY. 

No idea where you're getting $10-15K in "fees" on a 203k. The HUD consultant would be a maximum of about $1500 or so, and that includes the draws and an inspection on the property, and a full creation of a scope of work. A lender is going to charge anywhere between 2-3% in origination points, and that's no different than any other mortgage. Not to mention, all of these fees are wrapable into the loan.

Also, recommending a HML for someone that's new, saying that it's somehow easier than working with an FHA 203k doesn't make much sense. HML's require their borrowers to have experience in construction or flipping, where a 203k does not. The reason for the few extra pieces of paperwork is to help people with no experience have a more controlled process. I worked in large construction in NYC for over 10 years. Everything required on a 203k is how every construction project should be handled. Having a clear scope of work, a vetted, licensed and insured contractor, and someone to objectively inspect the work is not a "pain", its how every project should be handled.

But the biggest most glaring difference, is you only need 3.5% down on an FHA 203k. On a HML with someone with little experience, you're looking at 25-30% down.

The vetting of a contractor and having a 203k consultant involved is a small price to pay for getting 110% ARV LTV potential for someone with little experience.

Im in long island area, but have helped several people do 203k's in NYC. The new Fannie Mae 5% down HomeStyle product on owner occupied multifamily is very similar to the 203k. 

The pros and cons are limited. Pro's of it are Fannie Mae is a bit more flexible with guidelines, and looser on renovation requirements. It also technically doesnt require a hud consultant, which some say is a positive thing, but I'm not convinced. Because with the right consultant they can provide a ton of value such as creating your scope of work and validating the contractor bids for feasibility. You also get lower Mortgage Insurance on the fannie mae version, as well as no up front mortgage insurance payment (1.75% of the total loan amount due at closing) then 0.55% year over year. 

Cons are the conventional product is a lot less forgiving on credit score and LTV. Your credit should be in the 700's to get the best rates and terms. Also, depending on the number of units, they may require you to get a property management company if you have no landlording experience. That came up in the guidelines but I'm not sure how much lenders are enforcing it.

I know several lenders that do these in NYC and am happy to intro you if you need. 

There are so many different strategies to finding off market deals. I'll tell you how I found my own primary residence in a very competitive market as well. 

My wife and I drove the entire neighborhood and took down every address of a property that we saw ourselves purchasing. We were looking for fixer uppers in a very specific area of Long Island NY, and were only looking for Capes, Colonials, and ranches. 

The more specific your criteria the better, because it makes the next step a lot more efficient. 

We then mailed to all of the property owners using Ballpoint Marketing mailers. They're about 1.80 a piece of mail, but they're handwritten and sent on greeting card style stationary. 

I mentioned that me and my wife were outgrowing our apartment and looking to move into the area. The response rate was great, and we ended up finding an older lady who was moving to a senior living facility and wanted to sell the house as-is with no contingencies. We used a fannie mae homestyle loan to take it as-is and renovate it using the banks money. 

The Facebook/Craigslist strategy works too. 

 I know a year may seem like a long time, but remember real estate investing is a long game. When I got my first duplex using a 203k, especially it being a fixer upper, the renovation alone took almost 8 months to complete. I wasn't in the property very long until I had the ability to refinance and continue on my journey. 

Dollar for dollar its the best way to start and your money will go a lot longer in the long term. 

As far as finding properties off market, I wouldn't focus too much on wholesalsers if you're looking to do a 203k or homestyle reno loan. I'd focus on agent outreach. Go to zillow and sort by lowest prices in your market. Call every single listing agent (include pending sales) and let them know your criteria. Keep them on a list and follow up with them. If there are agents that are receptive, invite them to coffee or a lunch and build those relationships. 

My flipping business was entirely built on agent relationships. At the end of the day they're the ones that get the lowest hanging fruit. 

Other off-market strategies work, but you have to be willing to put the time, money, and effort into sticking with it long enough to see results.