All Forum Posts by: Jesse Hinaman

@Branden Smith it can easily be done as primary conversion (turning your current primary into rental). I have done this for years. Be careful, though, FHA just changed the rules on doing primary conversions and could also effect VA, but I have not researched that. Shoot me a message, we'll connect, and I'll let you know the details of my previous experience.

@Gregory Jay In my opinion, Richmond is a much higher risk investment area than Sacramento. If you are looking for relatively local markets with cheaper entry points, Sacramento offers some great class B neighborhoods for the same price or cheaper than Richmond. You would have longer tenancy periods and less headaches.

(disclaimer: sorry if I offend any Richmond locals. I know there are very nice areas in Richmond, but I am only referring to properties that sell for $300k or less.)

Always follow the classic real estate mantra, "Location. Location. Location."

If you are looking for a Realtor in the Sacramento area, I have a great investor friendly agent I use and highly recommend. PM me if you would like her contact info.

@Gregory Jay Richmond -to me- would be a much higher risk investment area than Sacramento. If you are looking for relatively local low cost entry markets. You can get the cheaper purchase price in a nicer class B neighborhood in Sacramento area.

Never ignore the old real estate mantra "Location. Location. Location."

If you are looking for a good investor friendly agent in the Sacramento area, I highly recommend my agent. She's fantastic. PM me if you would like her contact.

Best of luck and welcome to the site!

@Jamey Newman Never. Don't confuse FHA with low income assistance programs. FHA is simply a government insurer of mortgages. Having a lot of cash savings will only help your situation.

@Ben D.

You are allowed to do multiple credit pulls with numerous lenders in a short period of time, and it will only count as one credit inquiry. Even so, credit inquiries are such a small fraction of your FICO calculation. I've been told a credit inquiry will only have a 3-5 point change, and remember if you had 4 separate lenders run your credit within a 30 day period, that only counts as one inquiry.

FHA is used because of the lenient qualifications, and despite the mortgage insurance (called MIP), you can get a really low nominal interest rate. With FHA you can have credit scores as low as 580, total debt to income (DTI) as high as 55%, no reserve requirements, and the low down payment of 3.5% that can be completely gifted to you from a relative (no money actually from you).

If you want a good mortgage broker recommendation, Private Message me. I hope this info helps.

@Jean Bolger 

You didn't mention if he was married, but as @John Thedford eludes to, if married the first $500k in profit is tax exempt.

Even so, pocketing $250k tax free is way better than any other option. Remember the long term capital gains tax is only 15%. Which is still significantly lower than what most people pay in income tax.

I would not consider converting to an investment property, as you will lose the $250K tax free gain. Even with a 1031 exchange, you are only postponing the tax. You will eventually have to pay if the property or new like-kind properties are liquidated.

I would take the $250k tax free and pay out the small 15% on the remaining profit (as long as he does not make more than $400k in total income for the year, for higher earners cap gain is 20%). Also, you can always use that new chunk of cash and max out IRA or other tax sheltered account contributions to limit your taxes even further.

@Joe Bertolino is absolutely right. There are always good deals to be had in any market. Just need to be patient and constantly keep your eyes open.

I was driving near my house, and I stumbled upon a group of people cleaning out a house that appeared to be just a slight step up from a hoarder house. I noted the address, went back and searched tax roll to see if the property had any recent changes. As it turned out, the property was recently put in a trust and the owner has deceased. I was able to get the trustee on the phone and got the whole Jerry Springer back story...

Long story short, this house was in really bad shape and the trustee knew it. She has no emotional ties to the property and wants to just get rid of it. This house is sitting right on Folsom Lake with a Million Dollar View. Literally, the next door neighbors house is selling for over $1million. No guarantees this will turn into a sale, but a hell of a lot nicer odds talking one-on-one with the Power of Attorney, with very limited competition.

If you want to be successful you have to go out and seize the opportunities. Put in the tireless effort and you will be rewarded.

@Jacob Edmond I would refinance and pull $20k cash-out (if it appraises for $160k), while keeping your LTV at 75%. By keeping your LTV at 75%, will give you the option to go and buy a new primary, at anytime, as long as you get an appraisal with a "rental analysis". The appraisal on the current primary would be done concurrently with the new home purchase appraisal. The bank will take 75% (to factor for vacancy and maintenance) of the potential rent forecast in your old primary, and credit that as additional income for your qualification on your new primary.

For example, if the appraiser pulls rental comps around your house and finds the average monthly rent is $1200/mnth. The bank will take that $1200 x .75 = $900 additional monthly income you will be credited with for qualification on the new purchase.

You definitely want to get out of the mortgage insurance if this is a newer FHA loan. As of 2013, FHA loans that put less than 10% down must pay mortgage insurance FOR THE LIFE OF THE LOAN! Doesn't matter if you pay down the principal to 78% LTV.

You only need to live in the residence for 2 out of the last 5 years to qualify for no capital gains tax. This means you can live in it a year while fixing it up, rent it out, and find the next project. Move into another live in flip and fix it up for a year, rent it out and move onto the next one. At anytime in the first five years, you could move back to the original house for one more year and still get the Cap Gains Exemption.

I'm a believer in keeping your momentum going and utilizing rock bottom interest rates. 5 years from now, you may decide to just do a 1031 exchange on the original house, anyways, which will still allow you to avoid paying any immediate taxes. Best to leave yourself available for multiple options. 

You do have one guarantee by staying in the house for the next 2 years...you will not be able to jump on any great opportunities. Time Value of Money my friend ;)

@Dharmesh R. do you have any opportunity for a sweat equity value add? In So-cal a few thousand dollars for interior/exterior paint and baseboard upgrades could easily add 3x the cost of the improvement to your value.

@Dharmesh R.. Interest rates for 30 yr Investor loans at 75% LTV or less and good credit should be around 4.5 - 4.875%. I can recommend a great California mortgage broker that will get you in that range as long as you meet the standard qualification requirements and have a minimum 720 FICO.

I do understand the idea of shorter loan terms (ie. 15 yr, 20 yr loans), as it forces you to save, lower interest rate, and can save you a lot in the long term. However, when interest rates are as low as they are, I like giving myself the flexibility to have a lower payment and qualify easier for any other loans (a large debt service on your credit report will kill your DTI). I can always pay down my loan in 15-20 yrs with a 30 yr term, but I'm not forced to.

It comes down to Time Value of Money for me. What I can I do what that money today in comparison to the long term savings.