All Forum Posts by: Kyle M.

yea that makes sense, good example of how the 50% and 2% rule work together. Thanks Jon

Well I had the mindset on buying my first single family home and living in it with the intention of renting it out to tenants in the future. But after hearing the advice of the people here I have changed that mindset. I now want to pursue a multi-family home for instant cash flow and a place to call home.

FHA is hindering my ability to make a profit monthly. Is it ever worth it to be a little thin when having a FHA?

This is an example property that I am looking at, the asking price is higher than the following example.

1)

Quad-plex / FHA 3.5% down
Value: $310,000
Gross monthly rent: $3200
Mortgage Payment: $1840
50% rule: -$240

2)

Quad-plex / 30yr, fixed, 20% down
Value: $310,000
Gross monthly rent: $3200
Mortgage Payment: $1460
50% rule: +$140

answered my questions, thank you!

I applied online to get pre-approved for an FHA loan on a triplex. I filled out a form through Quickenloans and the representative called me 30 seconds later. I was told that FHA loans work for duplex's, however they do not work on triplex's and above. She also told me that the minimum down-payment on these type of properties were 25%. I did not even get to the point were she asked for my social security number, income, nor did she check my credit.

So BiggerPockets, is this the norm or do various lenders handle these issues differently?

my head is spinning thinking about what type of mortgage would be best for my situation.

If I choose FHA, I will most likely be moving into the residence alone. There is small chance that I would take on another roommate, but lets assume this does not happen. Choosing this option would ruin my short term cash flow on the investment as it is fully occupied currently. I would also not net as much profit per month down the road. However, it would leave me with more capital to purse other investments. This would also give me more time to sort out the minor problems with the house and make sure I have things done "right" before I take on tenants. This also will hold me in one place for a year (at least).

If I choose 20% down I can capitalize on the current tenants on the residence and have an automatic cash-flow. This would be great, but it would strap me for cash to perform other investments. It would also yield me a higher profit per month in the future.

After evaluate these options and I feel like I have more long term +EV choosing the FHA loan. Thoughts?

Harry M. - thanks for clarifying the 2% and 50% rule, that makes a lot more sense. That confirms my inclination that 50% rule is a bit more relevant in my situation.

Shane Johnson - I will look into purchasing foreclosures/hud properties in the future. This seems like the best way to go.

Talked to my relator today, he answered a lot of my questions. Should be seeing the property tomorrow or Friday!

Some things I wanted to clarify in my long post:
1. I would want to remodel kitchens and put c/a system in. So the estimated costs of these repairs would be taken off the numbers that I gave.
2. For a first time investor, what would you say could be my "cutoff" number?

you're absolutely right, I will look into this and see if there any good deals out there.

I just received my per-approval, 3.625 for 30 year fixed. I have been calculating a lot of different examples using the 50% rule and 2% rule.

Listing is currently $110,000 and renting as we speak for $1200.

Mortgage Rate: 3.625

Price: $110,000
Monthly Payment (after taxes & insurance): $490
50% rule: +$110 / month
2%: 1.1%

Price: $100,000
Monthly Payment: $473
50% Rule: +$130/ month
2% Rule: 1.2%

Price: $90,000
Monthly Payments: $425
50% Rule: +$175
2%: Rule: 1.33%

Price: $80,000
Monthly Payments: $375
50% Rule: +$225
2%: Rule: 1.5%

The actual 2% would be 60k for this listing. These all seems like profitable numbers and I want to keep the number to as close as 2% as possible. However, I am unsure if hitting the 2% is achievable.

I'm calling my realtor tomorrow to discuss this property and moving on this property ASAP. I want to make an offer quickly so I do not let this opportunity pass me buy. My general mindset is that I would ultimately take any of these deals. The +100 in cash-flow was something the I wanted to achieve (at least).

Pending there is nothing wrong with the property, what is a good number to come in with?

Also is the process of buying a house as follows? I'm confused about when the home inspector comes into play.
1. buyer makes offer
2. seller accepts offer
3. buyer hires home inspector, and the offer isn't "official" until home inspector approves everything?

I understand I have a lot of random thoughts right now but any help would be appreciated, thanks!