All Forum Posts by: Simcha Davidman

@Yvette Chung If you're living there, you will not be able to rent that unit out. So you're looking at $1,100/month of income. Assuming you put down 25% at 4% interest, your debt service will be almost $1,000/month, not including taxes, insurance, utilities, maintenance, repairs, capex budgeting and vacancies. You'd be losing money, as an investment. But you'd also be paying relatively less for your home than if you were to buy a SFR for yourself with no income to offset your expenses.

If, or should I say when, you rent out your unit also, you'd be grossing $2,200/month, and there'd be what to talk about (is $1,200 a month enough to cover all those items listed above aside from debt service?).  It still might not a good enough investment for you - that will depend on what your requirements are.  You might be ok taking on the risk of owning an illiquid asset with a huge debt burden for only 5% return, or you might require 10% return for yourself.  If you require 10% and this only returns 6%, walk away because you're making an investment decision.

But again, it seems to be only relevant once you would rent out both units.  Your income from one unit alone will not support any sort of immediate investment thesis.

I hope that might be a little clearer.  If not, please let me know and/or message me.

@Mike Dymski Are you calling the "take action" stream of thought the bird dogs and wholesalers?  I'm trying to find deals first and then money, but to hold for rental income.  (I'm not challenging you - just trying to learn what more experienced/successful investors mean and think.)

@Yvette Chung If you're purchasing it as an investment, just run the numbers.  Let's forget the time period that you're living there, because the income will be skewed down.  But if you move out and lose money on the property, or barely make money, you would essentially have to sell - because it's an investment.  If that's the case, you should feel good about buying only if you feel good about needing to sell when you want to move.

But if the numbers work, assuming two paying tenants, and you'd be earning whatever return you are aiming for, then it makes sense.  A lot of people purchase their first property without the forethought of calculating it as if it's an investment (myself included :( ).  You're putting yourself in a great position because you're already thinking like that.  If it's not this one, it'll be some other.

Also, as an investor, asking price really should be almost inconsequential.  Every house has a "right price" for you as an investor, which will provide you the return you seek for the risk you take.  If $272k is too high for your investment return requirement, figure out what is right for you and offer that (or maybe a little lower, depending on your negotiating technique).

Good luck!

@Darren Landerway I am new to this, as well. My limited experience has been that nobody's going to want to commit any money to you without knowing what you have to offer or what you personally bring to the table.  In other words, Mike, above, appears to be a seasoned investor.  He might have relationships with investors who know his track record, so they are willing to commit to him finding a deal, because they trust that he will actually be able to find something, and they also trust that he will be successful in the endeavor.  I, on the other hand, do not have a track record of success, and so it is almost unreasonable to try to find investors willing to commit to the possibility of me ever bringing them a deal, and then not really knowing how well I will perform.

A very solid option for you might be to get pre-approved for as large a mortgage as possible, so you know your own price range.  This can be even if you feel you could not afford to go all out.  But you can then credibly go make offers.  Generally, all your offers will have financing contingencies, and my impression is that if you cannot find the financing on time, you can walk.  ***But do not just take my word on that.

Once you have something to show investors, either a deal or a track record, it will become easier for you.

Good luck, and keep on truckin!

Congrats! Good luck with it!

@Chris Mason Thanks for your input.  That's basically what I wanted to hear. I just wanted to make sure that it was really that bad.  I'm not a lender or a real estate attorney.

You don't know me, and I understand my question looks incriminating.  But my premise was that it was wrong from the start, notwithstanding stories I've heard to the contrary.  As I wrote above, I told the broker it was for investment purposes.

@Matt H. and @Russell Brazil Thanks for your replies.

Am I incorrect assuming people say residence when they only plan on renting it out?  If I am correct, how definite does one's intent have to be?  For example. if my intention was to live in the new property and then the day after closing I have a change of heart, I do not think that would amount to fraud.  However, if my intention is only half-hearted, would that be considered illegitimate/improper?

Again, this is under the assumption that people actually do this - it may be common practice within the industry, in which case it may be acceptable.  If that is wrong, it seems lousy, even if not actually fraudulent, and I want no part of that.

I recently got pre-qualified (waiting for the pre-approval letter any day now) for a mortgage on a residential property.  The broker asked whether this would be for my residence or investment, and I told him it's an investment.  I have two questions.

(1) How does that effect the underwriting and ultimate mortgage I may obtain?

(2) How legitimate is it to say that I "might" live there?  In other words, at what point does it become shady to say that I might live there?  I am under the impression that "some people" do this in order to obtain better financing.  Right now, I only own one property and I live in it.  While I do not plan on moving to a new property, I theoretically could move into the new one and then rent out my current residence, right?  I doesn't sound right to me, but I am hoping for some interesting feedback.

Maybe my gut is right and I should avoid this because it is seriously problematic.  Maybe my impression that lots of people do say they "might" live there when having no intention on it is not accurate.  Or, perhaps, this barely figures into the underwriting/decision-making at all?

Any and all feedback is appreciated.  Thanks!

@Jeff G. and @Ryan Pemberton

this thread might help https://www.biggerpockets.com/forums/12/topics/267...

but what might be more helpful is the bounce up to the top of the forum.

Good luck!

@Jason Rivera what ever happened with this story?  I'm curious to know whether it worked out for you.