All Forum Posts by: Kyle M.

Did you give any thought on buying a duplex and living in one side and renting the other. That may be a good way for you to get your feet wet with the landlord gig and if you like it you can buy your own place and rent out both sides of your duplex.

This would be be awesome if I could find one of these. However, these are a rare find in the market I want to invest. Buying a unit with three apartments in it and living in one would be more common.

Quality of life is also important to me. Any properties like these that I can afford would not be the ideal living situation for me at this point in my life. But now I'm looking at some of these properties and they don't seem half bad. Now you got me thinking (which is good), thank you!

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Originally posted by Scott W.:

If you go fha, you will pay pmi until you have 20% equity and you will pay about a 1.5% of your purchase price to fha for a service fee.

Okay understood, seems like a -EV move when compared to 20% down, 30 year fixed. I will use this as a last resort and evaluate the best decision down the road if I am low on cash etc.

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Originally posted by Glenn Espinosa:

Welcome Kyle! Stay active and engage the community. BP walked me through my first deal in 2010 and I haven't stopped since!

Congrats on your success, thanks Glenn!

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Originally posted by Danny Day:

www.hudhomestore.com to search hud homes in your area (free)

Thanks, I will update with future progress/questions!

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Originally posted by James Vermillion:

Welcome to BP Kyle. You are right, the sense of community here is like no other. Members are very willing to help others and the networking that can be done here is unbelievable. If you stay active on the site you will be surprised with the results. Good luck!

I plan on it and I will give updates. I'm looking at a prospective property this week, thanks James!

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Well new sheetrock would be the best option, but overkill for this situation. Oil primer will seal out water stain. From there you can topcoat with flat paint. If there are inconsistencies in surface you can spot prime with oil, apply joint compound to create level surface, then re-prime whole surface with oil primer, than topcoat. The main issue is that the source of the problem is truly fixed or else it will reoccur. Good luck

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Originally posted by Danny Day:

Kyle M. , yes you are correct. Factor rehab cost into the equation. Some more things to look at is how much equity you can grab on the buy. If it is distressed you might be able to grab more equity than a property that is rent ready. You mentioned FHA loans, you can not buy rental properties with fha loans. You must be an owner occupant and live in the home that you have the fha loan on (or else mortgage fraud). Now here is the gray area. There is no time limit that you have to live there. You must move in, and live there and prove that you had *intent* to live there. This is what I've been told from loan officers. So don't let this discourage you from living there a few years, and then possibly renting it out. But you will not be able to obtain fha financing and not live at the residence.

Another thing to consider. You can't get fha financing on all properties. Read the fha appraisal guidelines here: http://homeguides.sfgate.com/fha-appraisal-standards-1539.html

This being said, you can't buy a property that will need major rehab on an fha loan. Maybe a carpet and paint job.. maybe. One thing to consider, all HUD properties will appraise for an FHA loan.

Good luck

Danny

Very informative post. I think the best idea is to purchase the property to initially rent (abiding by the rules). And purchase a home which will give me a place to live, fix up, and eventually rent out. So it will be essential that this property follows the above rules as well so I can maximize my equity in the future.

On FHA loans, I think this is the best way to put the down-payment on the property where I will live. This will give me more access to cash so I can perform more investments at a faster pace.

On HUD housing, I was previous unaware of what this is. But I have tried to search, but it requires payment. What is the best way to obtain listings that are HUD properties?

Thank you!

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Originally posted by Raymond B.:

Kyle M.,
Here is a link to the landlord and rental property forum:

https://www.biggerpockets.com/forums/52-rental-property-questions-landlording-issues

In that forum, I suggest that you read this as a guide to the 50% and 2% rule:
https://www.biggerpockets.com/forums/52/topics/18371-help-me-understand-this-deal-and-5-2-rule

If you're going to self manage your rentals, expenses will drop to the 35-40% area.
They could be even lower, if you are able to do any of the repairs needed.

Raymond

After doing some research of the 50% and 2% rule, it looks like my purchase price for the house would have to be for $60k to meet 2%, and 80k to meet 1.5%.

The 2% rule factors in the price that is paid after all rehab is complete and paid for correct? For example: You want to abide by the 2% rule without fail and you estimate the property will rent for $1200. So the 2% rule says that the max you can pay is $60k. However, you factor that you need to put 20k of rehab into the house to achieve your estimate of achieving $1200 per month. So the max you can possibly purchase the house for is $40k, correct?

Also, the FHA of 3.5% down-payment looks like the best way to go because I put less money up front, is this the way most investors go?

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Thanks guys, this site already has a nice sense of community to me. Its inspiring to see so many successful people on this site! I am happy to be a part of the best real-estate forum on the planet and learn from the best.

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Originally posted by Andrew O.:

Originally posted by Kyle M.:

1) Initially rent it out to tenants and use the profits from that property to pay for my current apartment. Is this common when starting out?
2) Buy the house, live in it and save up until I can put a down-payment on a different property where I will live and start renting first property.

My guess is that it depends on exact numbers and depends on the situation (just like everything). But is there any advice on which would be the best avenue to take?

You should have a quick read up regarding expenses, there is a generally accepted guideline that 50% of gross rent will be payable in some form of an expense over the life of the property. That is before PI (your mortgage). With the numbers you have suggested #1 of your options is not viable, as you will not be profiting from this deal. You may be able to pull money and feel like you are profiting, then when a major repair comes you will find yourself without the necessary resources.

Andrew

I will be researching this to get a good grasp of the concept. I feel like my best option is to buy two houses. One to initially rent and one to live in and rent down the road. This all seems a little crazy for a complete novice.

Thanks Andrew!

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All Forum Posts by: Kyle M.

Kyle M. has started 36 posts and replied 144 times.

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