All Forum Posts by: Neil He

I am doing a refi on a current FHA loan on our current rental property. This would be refinanced as an FHA. The paperwork is all drawn up.

I am asking for strategies to set myself up to get a loan to buy a second rental property a year from now. 

With the assumptions that we have a decent income ($90k) and we would have to put down less than 20% (also assuming lending will loosen a bit from current crisis)

Apologies on the confusing Q. Trying to include as many variables as I could.

Hey all, Hope we are all staying well

I am working to refi my FHA loan on a Triplex, our first and only rental located just outside Sacramento, Ca

The plus side is that we'll be getting a better interest rate and our payment will go down $325, but that isn't quite the primary concern.

The concern is that we are rolling 9k in Prepaid PMI to the balance plus I think we'll see values come down a bit which will kill our LTV which is sitting at about 80% right now.

The goal is to be in a position 8 to 15 months from now to buy our next 1-4 unit property to fix and rent. This will kill any chance of pulling out equity as I see it and I was hoping to be able to put down a lower % down payment when we buy (5-10%).

 My loan guy says this is the correct strategy to the next purchase if we want to refi for a lower payment and be setup a year from now. It isn't the path strategy I know.

Assume we our combined income is about 90k. 710 credit score, student loan debt of 40k. Current Mort/escrow payment is $3666. Monthly rental income is $3275 (we live in the 3rd unit and is rentable at $2100).

Any suggestions or experience would be a big help!

Thanks all.

Hey all,

First, BP is a great resource and I appreciate everyone who contributes. Thank you so much. I hope this Q will clarify for someone in the future.

We bought a triplex for 532k with 3.5% down FHA in September ‘18 just outside of Sacramento Ca. A fixer for sure, the house was in cosmetic disrepair. We put in new floors, paint, fixtures, and cleaned up landscaping. The house is pretty reasonable now and we were able to up rents from $3100 to $5400/mo.

I started talking to some lenders to refi Because i think i have an 80% ltv on lock to ditch PMI. I learned that they want 75% to cover a freddie/fannie loan. I think that will take some convincing on the appraisal to reach 75%.

From searching, it looks like the appraisal weighs heavy on comps and money put into the property, less on the rent multiplier and cap rate comps? I figured that ill have to assemble a report to try and show the appraiser how the valuation can pass. I have 3 really good comps that will support a 75% ltv (if they pick any junk to comp it’ll kill the deal). On money we put in, we absolutely cleaned out lowes and HD on clearance. We found quality stuff for 50-80% off along the way including a pallet of flooring for a dollar a box. On landscaping we used existing plants and made something out of nothing. Other materials i got at wholesale because i own a business.

Any suggestions from people that have been through the process?

How can i value the work and discounted materials and our free labor?

Thanks for these answers guys. I’m appreciative of the help.

For clarification, my father lives in the house in Florida, hence renting to a relative.

My wife got a job that is a bit farther of a drive so we may have reason to rent a separate place until we find a deal.

Also, just to clarify, if we buy another property and owner occupy, are there programs for lower down payment? ...or is it 20% regardless if we owner occupy on the 2nd property?

We bought our first Triplex rental last year in July 2018 using an FHA loan.

Bought it under market, improved rents, improved the home. I think we are at 80%LTV with an appraisal or very close.

• I want to switch up to a conventional loan to drop PMI.
• Then, If i understand it correctly I might be able to get a heloc on up to 90%LTV
• Last, use that to cash out on the HELOC for a down payment on another owner occupy with 10% down.

Do I have my method correct and is the 90%LTV and 10% down correct from what the banks usually offer?

Side question: My wife's and my total income is slightly low for buying in California.

• Would it be beneficial to move out and rent an apartment so we can show extra income from our now owner-occupied unit?
• I own another house in Florida. Can I have a lease that rents to a family member to show more income?

Only that there are not many multifamily properties available for sale in natomas it is a new single family neighborhood. My point was that there are many more properties just down the road, in say, north highlands which is impoverished. Assuming you may not want this.

Hey Bronson, my wife and I invest in Auburn currently and we may buy another and relocate into Sacramento. Were looking in Midtown or east Sacramento. I'll second woodland if you are into small town life. Lot of growth here. We bought on FHA just over a year ago. It was competitive and tough to find a property that would take a loan program. We didn't stand a chance against the cash buyers in Sacramento. We found a great place just outside of town where there is less competition to work with us. That is where woodland might be the answer. Finding cashflow is also not easy. Keep me posted!