All Forum Posts by: Tyler L.

I realized one thing wasn’t clear. By $500 short, I mean 31% of my income is $500 short a month. So I would need to make $1,612 more to qualify without rental income

So, I’m a little confused on one aspect of FHA income qualification. As I understand it, the debt-to-income ratios on the mortgage can be no more than 31%. However, for house hacking, lenders are allowed to count 75% of rental income towards the loan. Let’s say my income is $500 a month short of qualifying. If my rental income is $1,000 a month, lenders are allowed to consider an extra $750. My question is, do they count the entire $750, or just 31%, $232.50. If it’s the former, I would qualify under the FHA loans. If it’s the latter, I would still be $267.50 a month short? Which is it? Thanks in advance?

I also just came across this. Would love to come to the next one

Think for a second about the 3 or 5 most successful investors you personally know. What do they have in common? What's different about them? 

My partner and I are going to be graduating college in the near future and are looking to house hack. The problem is, as we're just beginning our careers, in Boston no less, we'll have a paltry debt to income ratio. To make matters worse, neither of us are in a position to get a family member as a cosigner. We recognize no FNMA loan would touch us with a mile long pole, but we're wondering if we can find a portfolio lender who would at least consider us. 

Important info:

Graduating in a year and a half

When we graduate, our base salaries combined will likely be about 1/5th of the home price we would need to buy. We both work part time as real estate agents, which will likely bring it down to 1/4th. 

We're looking to flip houses as well to increase our income, and hopefully bring a respectable downpayment to the table 

Cosigners are almost definitely out of the question

Both our credit scores are good (low and mid 700's, with the only thing holding both back being length of credit history)

I'll be graduating with about one years salary in student loans, he won't have any

Looking at comps, rental income will be able to cover all PITI expenses leaving behind a buffer of several hundred dollars a month for home repairs. We're also open to BRRRRing a property

My thought is this, our best bet would be to get a portfolio loan with a balloon payment, with rental income covering the monthly payments. In an ideal world, we'd be able to buy below market to give us a buffer against a downturn, refinance as soon as we qualify, or sell if we don't. 

Are there any tips to make this kind of deal more attractive to portfolio lenders? 

I'm currently looking at a 6 unit multifamily deal that seems too good to be true. Everything seems to be okay, but there's one glaring issue: every way I've analyzed it, it's been shockingly undervalued. Basing it off of comps, it's priced at about 60% of projected value. Going by square footage alone, it's at 50% of value. The cap rate is about 50% higher than the area, and if rents were raised to market rates, it'd be double the cap rate. It's not a foreclosure, and there have been no murders or meth labs that I have found online. The realtor has said the sellers are "hoping to move on to something different." 

Since this would be my first investment deal, I feel I'm missing something, and want to know what to be on the lookout for.

Here's the facts:

6 family home in a b/c class neighborhood, with a lower than average crime rate

100% occupied

Renovated 4 years ago 

Population is steady, jobs are mostly in health care and warehousing/distribution

Building is older (1890's in a neighborhood mostly built in 1940's)

County is about 100,000 people

Located right in the center of town

I recognize the property may be worth less because of its age, but certainly not 40-50% less, especially when it was renovated a few years ago. It's also not a foreclosure.

Of course, before I actually did a deal I'd have it inspected and do plenty of due diligence. Is there something, in particular, I should look out for? What's the most common reasons a deal like this is "too good to be true?" Of course, there is always the chance that the owners really do just need to sell quickly. And while I'd love for that to be true, I certainly am not betting on it. 

@Tyler Emerson I’ve come to find Zillow to be the Wikipedia of real estate. Not reliable on its own, but a good place to find references. The Zestimate itself is pretty worthless. I’ve found plenty of Zestimates that use comps from 10 or 15 years ago. Oldest I ever saw was 1997. I‘ve also found plenty that use listing price of similar homes instead of sales price. But, Zillow has a great UI. It’s easy to find comps in the area using it. Once you’ve gotten 4 or 5 comps off of Zillow, you can google them to verify the sales price somewhere else, and create your own estimate from that.

A VERY GENERAL rule is that nicer neighborhoods with higher appreciation tend to have a lower cap rate while less desirable areas with low appreciation tend to have a higher cap rate. That said, when looking at the cap rates for a specific area, is there a point where you get concerned at how high it is? I've found plenty of areas where the average cap rate stands at 12-14%, but they tend to have high crime. 

Additionally, could high cap rates in dangerous areas be worth it if the strategy is buy and hold investing? With a property manager and good insurance, if the numbers work out as far as cash flow is there a situation where it should be done?

I’m just starting out in REI, but I’m young enough where if I’m lucky my career can be another 50 years. Over this timeline, climate change is a huge concern. I’ve already more or less ruled out coastal cities for flooding, but most markets seem to have long term issues facing them. The south and east will have heatwaves, the midwest will have huge droughts, etc. Of course, people always need space to live and work. But I’m curious what people think of the long term effects of climate change will be on REI, which markets will benefit the most, and which ones will hurt the most.

@Charlie MacPherson that'd be a great strategy for the future, but not currently. I need to remain in downtown Boston for at least the next 2 years, where prices have a floor of $500k and anything in a decent neighborhood is $800k+. Down the road I'd shoot to house hack just outside of Boston, but my option is strictly flips for right now (possibly BRRRR depending on Mortgage options)