All Forum Posts by: G. Brian Davis

Hi @Joshua Rountree, and welcome to BP and the world of real estate investing and passive income!

You can actually have multiple FHA loans at a time - you don't need to refinance. You CAN refinance if you want to, to get rid of MIP or to pull some cash out, but keep in mind you'll be paying a higher interest rate if you refinance to an investor loan instead of an FHA loan.

I would actually keep your FHA loan in place if I were you, at least for the foreseeable future. After a year, you can buy another 2-4 unit property with another FHA loan, if you like. Or, maybe by that point you'll have enough cash put aside for a larger down payment and a non-owner-occupied loan, so you don't have to move again.

Best of luck!

Hi Isaac, 

I admire the ambition, but I agree with @Jonathan Klemm, it's more than you probably want to tackle for your first deal. 

One issue is that if the property is not habitable when you buy it, you can't get owner-occupied financing (at least not easily). I would recommend finding a 2-4 unit building that only needs cosmetic work, and get FHA financing.

Here's a good case study, for how one new investor did it:

https://www.biggerpockets.com/renewsblog/newbie-ho...

With FHA financing, you only need 3.5% down, and you only have to live in the property for a year if you want to move later.

Best of luck!

Hi Patrick, glad to hear you're in the hunt for your first rental property!

I own most of my rentals in LLC names, and to be honest, it's always been more trouble than it's worth. The protection they provide is overstated, and any tax benefits are completely wiped out by the extra costs.

There are others who disagree, but this has been my experience. 

Personally, I would simply buy it in your personal name, and worry about the legal minutiae of legal entities later. You can't put an LLC name on the deed with an FHA loan anyway.

We always encourage our students to worry about the fundamentals (e.g. finding good deals, accurate cashflow projection, finding good tenants, etc.) now, and later on you can get fancy with asset protection and whatnot if you want. But fundamentals first.

Best of luck!

Hi Anthony, 

You're on the right track! House hacking is a great way to buy your first property. 

Check out this article for a case study on how one new investor did it: 

https://www.biggerpockets.com/renewsblog/newbie-ho...

As for financing, you can get a convention or FHA loan for a building with up to 4 units. You have to then live in the property for at least a year. But you'll get much better terms buying a property you'll live in, rather than an investment property loan.

Best of luck!

I totally agree - very important to combine a human connection/relationship with professionalism and business-level efficiency. A lot of landlords fail to get it right, but it's not "hard," it just requires good policies and the discipline to follow them.

Student rentals can have strong rents but they're a LOT of work. 

As you mentioned, students cause more damage, and perhaps even worse, they usually turn over every single year. Turnovers are where landlords lose the most money, in my experience. 

I prefer longer-term, lower-maintenance rentals, where the rent just comes in month after month, year after year.

Hi Tatiana, and welcome!

Having owned many low-income rentals, I can tell you that my experiences with them have not been good. It's not just about trash and graffiti. Low-end tenants are more aggressive, more entitled, move more often, treat your properties with less respect, and are FAR more likely to default on rents. 

I realize that's not a "politically correct" thing to say, but that's been my experience. 

Now with that said, there's a difference between "lower class" and "working class". If I were you, I would avoid "lower class" housing, and aim for "working class" neighborhoods. Neighborhoods where people have stable jobs, live long-term, raise their kids there, and have a sense of community, and most have blue-collar jobs. We encourage our students to look for neighborhoods where people like cops, firefighters, plumbers, electricians, teachers, secretaries, and other blue collar or not-so-well-paid white collar workers live. 

Best of luck!

In general I would say look for multifamily properties to house hack, but you can do it with SFHs as well. I did, for my first home, and to this day my old roommate is a good friend of mine.

Maryland is tough for multifamily properties. I'm from Baltimore, and while there are some multifamily properties out there, they're not as common as in some other states. And competition among investors is fierce for them, in my experience. 

One thing to consider is going outside the major cities to invest. Smaller cities and towns might deliver better yield for you, in Maryland. Just something to research and chew on.

Best of luck!

Welcome @Joddie Mcclain! 

Check out the BP blog as well, some great information on there. 

Please don't hesitate to connect about any questions regarding rentals, I'm what you might call a "passive income evangelist" :-) 

Cheers,

Hi @Don Spafford, congratulations on the first rental!

Lease agreements survive ownership transfers, so you can't raise the rents until each lease comes up for renewal. 

Keep in mind there's a mandatory notice period that varies by state, for raising the rent or non-renewing a lease. You have to send written notice, but I also recommend calling the renters and discussing it with them. 

One thing we recommend to our viewers and students is to raise the rent incrementally every year, to set expectations and prevent the rent from dipping too far below market levels. It also sets the stage for you to offer longer-term lease renewals, that lock in the current rent increase so they can avoid next year's rent hike.

Congrats again on the purchase!

Brian