All Forum Posts by: Michael Facchini

Hey @Chris Heyman, congrats on taking the first step to real estate investing! Sounds like the duplex condo will help get you a step ahead too! Regarding your questions above, happy to chime in...and let me know if I miss anything here. First, SFR vs 2-4unit - typically the 2-4unit is going to get you more bang for the buck. It's all about getting as many units under one roof as possible, in my opinion. Sure, it requires a little more effort, but in the long-run it is worth it. You will have similar costs to keep up the walls, roof, and foundation, but you have more units within bringing in more income. Granted you'll have more tenants to manage, and likely see more maintenance/repairs to be handled, but again the additional income should cover those headaches. Like you said, the numbers aren't going to blow your socks off in Chicagoland - our prices are move expensive, which leads to less down payment typically and higher housing payments, but it's a steady market that performs consistently well. I've exited other markets personally and am only focusing here at the moment. But, slow and steady wins the race. Regarding numbers/calcs & assumptions to apply, it really depends on the property type and sub-market (are we in/near the city, more removed burbs, or past the metro Chicagoland area?). There is quite a bit of qualitative context that can come in as you start to narrow down on property types and locations. Whether you go 3.5/5.0% FHA or 20% down Conventional, that also depends on a few things. Ideally 20% down is the better way to go, but can you use the other 15% to pay down other debts, invest in more property, or do some improvements on the new subject purchase? Money is so cheap right now, so if there's ever a time to keep some in your pocket to be used elsewhere, now is the time. Same general concept for a single family....but I'd definitely encourage a house-hack before worrying about an investment at 20% down, assuming you're still planning to sell the condo.

@Jonathan Klemm, another great question bud! So, the income from the commercial space DOES count towards the self-sufficiency calc, fortunately. However, the rental income from the commercial space does not count for DTI qualification. Therefore the buyer's/borrower's income needs to help make up the difference. As for 203k rehab, you can indeed use on mixed-use but cannot include improvements on items that are for "commercial use".

@Jonathan Klemm, great question! On FHA mixed-use, the borrower/buyer must occupy one of the residential units. Solely ccupying the commercial/retail space for their business (and not the apartment above) isn't enough. And the person will be the borrower/guarantor on the loan, not the LLC/business. This is a big difference compared to most commercial financing which requires there to be an LLC and the LLC is often the named borrower.

Hi all, agreed with the above that the general concept of "house-hacking" could be applied to commercial real estate where there is an owner-occupied business sharing space with other businesses or residential tenants (in the case of mixed-use). In the case of a mixed use building up to 4units, the majority of the square footage needs to be residential and then it can be considered for FHA financing (residential) with as little as 3.5% down.

@Drew Obradovich, kudos on making the decision to not only purchase your first place, but to house-hack a multi-unit!  This is where it all begins!  Regarding areas to look at, whether in the city, suburbs, or NW Indiana, there are of course pockets for each where you can find neighborhoods trending, where you might ride more of an appreciation wave....or neighborhoods that are a little more established and rents already stabilized.  Depends on what you're looking for, and your budget/price-point - I'd establish your requirements and price range first, then start exploring.  In terms of exploring, find a great agent for the areas of interest that know that sub-market AND specialize in multi-units.  The 2-4unit property is a different game, so you definitely want specialists on your team.  Good news is, you have down payment saved up and the drive to make something happen.  The rest can be figured out from here!

@Jake Kinney, first off congrats on taking the first step into house-hacking and multi-unit investing! This is the most opportune first door to open in my opinion! As to your questions, FHA is a great way to go for low down payment, but per Brie's breakdown below can be a bit limiting in loan amount (and thus buying power), which can make it very challenging to purchase a multi-unit in the neighborhoods you mentioned. For FHA to work, if you want to access 3.5% or 5% down, you'd need to look at some of the developing neighborhoods on the fringe. Otherwise, you can look at other programs such as Conventional which would require 15%-20% down.

@Michael Johnson, of course there are lots of details that go into this answer, but assuming market availability and your main objectives are met, I'd personally choose a single 4unit in Chicago vs two 2units, for several reasons. One, I prefer more doors under a single roof - more economy of scale. Two, if I'm using FHA I want to get as much bang for my buck as that's a card (FHA) I can't play a whole lot. 4units gets me more under that single "card" I'm playing. Three, and goes back to point 2, if I'm financing 96.5 of the deal via FHA, I'd rather finance 96.5% of 4units (CoC) vs 2units, and then 75% on the other 2units. Four, and I don't think people give enough credit to this, but I'd rather own more units within my reach vs remotely. I've been the cross-country investor and I'm less interested in that these days. I want to be able to drive to the place without much hassle to oversee what I need to oversee. I don't let property managers take it from there....no one will manage the property as good as you, and even property managers most often need to be managed :-) Granted, Milwaukee isn't that too far away, but I still prefer a 5-30min distance, let alone just walking downstairs. Hope that helps!

Correct, a conventional renovation product on a 3unit would require 25% down (on the total of purchase price + rehab), which if we're looking at a $1mil budget would be $250k.  Can go to a max loan amount of $848k.  

@Iso Iyi, agree with @Jonathan Klemm, to properly size up this venture you need to have a complete & experienced team to break everything down for you (for starters). General contractor, lender, and agent initially, then eventually an attorney and perhaps a home inspector (another set of eyes/ears to double check things) or HUD Consultant. This path will take more planning, coordinating, and effort, but if you're up for it then there's quite a lot to be gained!

@Kenneth Marks - sounds like there are a couple ways to go about this situation, and there are financing as well as tax strategy considerations to consider.  Are you JUST past 1 year in this current condo, or perhaps a few months past that and 2 years isn't too far away?  Overall, I agree with those above that getting into a house-hack would be a good move.  That said, this is all worth some live conversation to figure out the best way to slice it.  Appears you have gained some ground on the condo's value, so that certainly helps!