All Forum Posts by: Michael K Gallagher

@Mikael Winkler We have not seen any issue with tenants paying...luckily both our tenants work in medical and are considered essential, so again we managed to be fairly insulated from that issue.  

I don't see a substantial "crash" happening in my area of Columbus OH for a couple of reasons.  1) We are not an expensive market to begin with.  Therefore the cost of housing is not as large of a percentage of people's income as in say SF or NYC.  2) We are a huge manufacturing and logistics hub.  So while some industries like food/dining/Auto might see a short term draw back, other industries like logistics, data centers, higher education perhaps will be there to expand and pick up the slack.  3) As an investor with a property that rents for about or under average for the area, while I might see a little bit of turnover due to people's changing circumstances here in the coming months, I expect we will see what we did back in 08 and that people who go into foreclosure will still need a place to live and will turn to renting at about my rent level. 

So my opinion is that yes I can see there being a draw back, but I think it will be localized to several specific markets, most likely the coasts where we are already seeing a negative population growth.  But I also echo what many others on here have said, trying to time the market is a gamblers game.  If its a good deal you should be doing the numbers to account for situations like this, and therefore it's a good deal in any market.  

I'd second @Remington Lyman especially on the Bars!  and more specifically the breweries.  It's for sure one of the most underrated parts of the city.  Pre-Covid, I traveled a ton!  Like 40+ nights in hotel annually, and I'd put Columbus beer up against any beer I've had...apart from maybe the Alchemist, or Hill Farm Stead from VT....but those guys are in a whole other galaxy when it comes to US breweries.

@Jack Liu, The fact you can get a fully flipped duplex for 300K and rent each side for over $1200 isn't bad either!!  

@Jared McCullough That is an insane situation!  I second the notion that if the government is going to supply relief it needs to be all encompassing.  AKA it needs to include mortgage relief as well.  Especially if they are taking away all ability for you as the owner to make back any losses by getting a new tenant that will pay.  

I feel like no one wants to evict a tenant, its messy, and time consuming, so it does make you wonder what the ulterior motive the government might have for taking away the recourse for the owner....is there perhaps some huge hedge fund or investment bank waiting in the wings that has paid off the governor to take the small time land lord out of the game so that they can come in a swoop up all the properties after the land lords can't support them anymore?  I don't want to spiral too far into conspiracies here, but let's be honest.... no one in government does anything without thinking of themselves first...and who their donors are...no matter what side of the isle they sit on.  

@Alexander Rotolo I think it would.  You would just have to do the math on it.  I know, at least from the brokers I've dealt with, that to get a duplex conventionally you have to put 20% down, or in other words they will only give you a loan for 80% of the appraised value of the property.  So if what you owe on the duplex is 80% or even lower, than the appraised value of the duplex, then you would have to bring very little if anything to closing.

Another point worth mentioning is that you could keep your current FHA mortgage on the duplex, and go buy a single family, because if you are going to claim occupancy of the single family you only need to put 5% down. Again it would depend if going to a single family and renting both sides of the duplex would put you in a good position month to month on financials, but that is another option if you are just looking to move on and rent both sides out. But I will say getting the duplex refinanced to a conventional loan gets rid of your PMI....and that is just money back in your pocket...so its worth doing it eventually even if you can't swing the numbers in the immediate future.

@Alexander Rotolo My understanding is no you would not. You could however, refinance your current property into a conventional loan, then go get another FHA loan. I am in a similar situation you are where I have an FHA on my duplex, and our plan is to use the appreciation + our loan pay-down to basically come up with that 80% LTV ratio that is high enough for us to refi into a conventional loan. I am not too familiar with the rules surrounding it, but because you and your fiance are not married yet I've heard of couples using that to their advantage to each get their own FHA loan individually.

Perhaps you keep the current FHA on the duplex, and whoever's name is not on the deed for the duplex then gets an FHA loan for a single family. You move into the single family and then rent both sides of the duplex. You'd obviously have to run the numbers to see if you come out ahead in that scenario, but thats probably the only way to get a second FHA without refinancing the first.

Hey @Johnny Mack I had a similar issue trying to buy my Duplex. While not the same exactly....We basically were in contract FHA on a Duplex to house hack, and while it was zoned correctly the zoning had changed in that area with the city so that you could no longer build multi family. So while we could get the city to say that there was a process to get special permission to re-build a duplex if there was a fire or other complete loss on the property, but that the city could not at this time guarantee it. In other words they said, that yes if you had a complete loss today there is a process to get permission to rebuild, but basically said they can't guarantee what the rules or processes are going to be in the future....which made logical sense to me. But the underwriter working with my lender decided that was not good enough and would not approve the deal.

So I say all that because we ended up just changing lenders to one who had a better relationship/more experienced network of underwriters and they got the deal done for us.  So while your realtor is probably correct that there will be some hoops to jump through, its probably going to come down to the underwriter more than anything...at least from my experience.

So probably worth having an upfront conversation with a couple lenders to see if any of them see more confident, or perhaps have gotten deals done like this before and can offer some best practices.  

But good luck and I hope you get it! 

@David Hong I'll second what all the others have said regarding Columbus OH. In my opinion it is one of the best cities for REI since it has a ton of job growth, even currently, and has a diversity of industries (insurance, fashion, logistics, and University) that are headquartered here. The fun fact I love to quote is that you can get to something like 73% of the continental US within a days drive of Columbus, so it has been and always will be a huge logistics hub. We've got something like 3-4 Amazon warehouses around the area, several Pro Logis campuses, and then theres a couple server farms in the area as well. So not the sexiest industries by any means but they will be around for a while, and the jobs they provide pay well.

@Daniel Black and this is exhibit A as to why you shouldn't listen to dickheads like me on the interwebs!  @Natalie Kolodij thank you for the callout and correction...much appreciated.  Completely misunderstood the entire short term vs long term cap gains differentiation.  Cheers and thank you for the lesson.   

@Daniel Black your normal W2 job will continue to get taxed as normal, and then your additional income form the flip will be taxed as the short term cap gains (only on profit from flip). However, unless you shelter that income in an LLC or something similar you are technically taxed on the total income (W2 plus profit from flip). So if the additional income pushes you into the next tax bracket then you could end up with a higher than normal tax liability because your overall earnings pushed you into the next income bracket.

Even if you do perform the flip inside of a LLC you could still end up with the same above issue if your LLC is structured as an S-corp or other pass through entities. So doing the flip in an LLC really ends up opening up a whole other can of worms! not that it can't be done, just more to consider.