All Forum Posts by: Matt Slakey

You would not be able to count the income from a unit you are planning on living in. I'm not sure about counting the unoccupied units, probably a question for the lender. Good news if you occupy a unit: you may be able to qualify for a FHA loan. As long as the new living situation is a step up from what you are in now (closer to work, more living space, first-time home buyer)

Is $650 a month reasonable rent for the neighborhood? This would be my main concern. I wouldn't count on the proforma to provide you with realistic data. No laundry facilities for me wouldn't be a deal breaker, it could be a source of revenue in the future. Larceny could be an issue for me, not sure. 

I think it depends on what you want at the end: cashflow or a lump to reinvest. And what do you have experience doing?

Having a little trouble following (formatting, I think):

Questions about Option 1: 

$188k with 28,800 down (15.32%) is 159,200 left on principle, not 131,200. Or am I missing something?

Net cashflow for years 0-2 is 780 and for years 2-30 is 1180 (or more for rent increases)?

Taxes are only $100 and debt service is $600? In my opinion, it is a illogical assumption to say that you will get a 3.75% interest rate, or 2.75% if you assume that it will be $159,200 of principle, in two years. 

Are the proforma numbers from your research or from the seller? I have found that many sellers will skew the numbers in their favor.

Option 2:

Seems like a lot more work and a lot more risk. You assume 4 months and $24k to fix it. What is the worst case scenario? Can you still afford it if something expensive comes up or if your contractor underestimates costs or if it takes longer to fix than 4 months?

Another thing to consider is what interest rates will be when you have 20% equity. If you do find out what they will be, let me know! 

Matt 

Just recently went through the same kind of scenario. 

1. 3.5% or less down payment of the sale price- applies for a FHA loan. There are certain criteria one of which is that it has to be your primary residence, not an investment property. Our lender was going to count this new place as an investment even though we would be moving into it because we would be gaining an income property (our current house that we would not sell). The unfortunate situation for us was that the lender has a mortgage insurance premium that would be added onto the PITI that raised the monthly payment so much that the property was not really a deal. The mortgage insurance premium payment was based on how much less than 20% down we paid. And you continue to pay it for the life of the loan (even after you have 20% equity). There are grants to get refunded some or all of the down payment. To qualify for those you have to have a certain debt to income ratio, good credit, and make less than 40k (I think) annually.

2. Conventional loans have higher down payments generally.

3. USDA loans have a higher loan to value ratio so you get more bang for your buck. You can check out the USDA loan website to check out if a property qualifies as "rural" by just putting in the address.