All Forum Posts by: Paul Hoeppner

@Andres Rossini The best way to find out if a Homepath home is eligible for a 5% down payment is if the home is eligible for Homepath financing.  You can just go to the homeopath website, and there will be a note on the house that says whether or not that property is eligible for Homepath financing.  Depending on the market, there are less and less homepath homes that are eligible for homepath financing and a %5 down payment.  However, the website also tells you which banks offer homepath financing.

One local bank I spoke with in an area I just started investing in has started doing a loan type similar to a homepath loan with less money down, but you eat the costs in the other areas.

@Account Closed I think it's better to avoid an FHA loan at first, because you should try to avoid PMI as an additional expense. It's just going to make your 1st investment property that much harder to cash flow. I ran into this same scenario and it was rather discouraging.

I would look into building your website on Word Press. There are a ton of different templates you can build off of. I believe about 65% of business use Word Press now. Very user friendly and it's free. It also looks very professional. Literally YouTube "creating a website with Word Press" and you'll find great step by step tutorials from start to finish.

Does anyone adjust their expenses for a condo rental?  The reason I ask is because you'll never be replacing roofs, siding, driveways, etc and you won't have any landscaping or snow removal.

Thanks!

Paul

When you're doing these cash outs, are you typically doing them as a commercial refi?  

Also, how much does your personal debt to income come into play?

I'm in a very similar scenario.  I have 3 conventional mortgages right now, but have rearranged my business to create more tax benefits, however, on paper my income has dropped substantially.

Good thread so far!

Thanks in advance!

Paul

Originally posted by @Stephanie Hay:

@Paul Hoeppner Great ideas. Do you keep your RE income and your Production business separate? Did you go with a sole proprietor, LLC, or corporation?

I pay myself weekly from my business account to keep things organized and myself on a budget. For now, I am a sole proprietor for my massage business. Is there a system (like Quickbooks) that you use to keep your income/expenses organized? 

I bet you don't miss Iowa from Dec-March! 

 I keep the RE income and Production business separate.  The production company is setup as a corporation.  I keep my books pretty organized just using custom excel spreadsheets that I've created.  Also, I pay myself through a payroll company Intuit.  It's free with a BOA business account as long as you are direct depositing your payments for your employees, myself, into another BOA account.

At the end of the year, Intuit generates a W-2 for me and the total tax due from payroll.  The software also reminds me when to pay my taxes electronically.  At the end of the year, I turn over all of my expense reports, payroll information, 1099s, etc to my tax person, and they handle the rest for me at a very reasonable discounted rate since it's very well organized.

I do not miss Iowa!  Occasionally in the late spring when it hits 100 degrees here!

@Michael Evans I appreciate the reply and you have some very good points that will help me make a decision.

@Bill Jacobsen I've definitely considered the future maintenance costs, and that is why this has been a tough decision for me.  It leaves no room for the "what ifs".  Also, a good point.

The current seller has recently expressed interest in purchasing the property potentially, but his credit is pretty bad, so I might look into options for that.

Thanks guys!

Paul

I think everyone has had their doubts at one point or another.  Just be persistent and find the deal that makes the most sense to you.  Don't get discouraged, and the experience you'll get from even making your first offers will be worthwhile.

Thanks for reading this post!

I purchased a condo in October of 2009 for $115,000 as my primary residence in Las Vegas.

December 26th, 2012, I did an FHA streamline to lower my interest rate to 3.75%, however, the PMI is extended now until 12/26/2017. November 2013, I purchased a new primary residence.

EXPENSES

Mortgage (includes insurance, taxes, and SIDs) - $727.58

HOA - $190.60

Trash - $14.21

TOTAL: $932.39

Total rental income currently $925/month. However, the PMI is $103.29, but won't go away until the end of 2017. Right now I'm losing a few dollars a month on the property. The HOAs include water, maintenance, land scaling, basically everything. There is very minimal maintenance, and the renter that has been there since January always pays on time.

I tried to refinance the place recently to remove the PMI and lower the payment, since I currently only owe about $85,000, but I'm having serious issues getting a bank to refinance a condo as an investment property. The property was appraised last month at $130,000 through a BOA appraiser (which the cost of this actually got refunded to me when they said they couldn't do the refi).

So my question is, who thinks it's better to sell the property, which I feel would sell for close to the appraised value, take the cash and reinvest elsewhere (since I dislike the idea of investment property being a condo)?  Or is it best to keep the property, since it is only losing $7/month, I have a great tenant, the property is very low maintenance (and brand new as of 2007), and will produce positive cash-flow in 3 years right around $100/month.

Two things to note, I think that I could get closer to $950-$975/month if the current tenant doesn't renew his lease.  Also, the property is on the incline in terms of value.

I'm honestly 50/50 on this one.

Thanks in advance!

@Stephanie Hay 

I can speak from experience with this topic.  It's frustrating, but there are ways to get financed.

I understand the purpose of writing off expenses against income to lower our taxable income.  I do the same thing.  I ran into the same similar issues.  There's some great info in this thread.

For instance, what was just said about a part time job, it won't count towards your income for typically 2 years.  Otherwise, more people in your situation would have done the same thing temporarily to increase the amount they can get approved for from the bank.

I think you should put together an action plan.  For instance, determine the type of property you want to purchase, and the price range, then work backwards from there to determine how much income you'll need to prove (assuming you'll go the more traditional route of financing).

In my personal case, I incorporated, and have everything invoiced through my entity.  Then, I pay myself a "reasonable" salary and receive bi-weekly paychecks.  You could potentially do the same thing if the numbers make sense.  Also, being that you are a licensed massage therapist (according to your profile), it might make sense to do something like this, as it can provide other forms of asset protection to protect you further from any potential claims that could arise in the future.

Also, sometimes the easiest and simplest solution would be to find a co-signer. I was lucky enough to have my brother co-sign for my first property, and 2 years later I was able to re-finance, lower my interest rate, remove PMI, and remove my brother from the loan. If you can show a potential co-signer your long term plan, and that you've done your homework, they may be more willing to help you out.

Also, in case you haven't already, look into Homepath financing as an option to avoid PMI if you're going to be putting down less than 20%.

I have property in Davenport, IA, I noticed you're from Iowa.  I used to live there.

Paul

Rich Dad Poor Dad.  It's a good read that will really make you think.