All Forum Posts by: William Simpson

Hi Tiffany!

That ol' chestnut of "boarder income" can be an annoying hurdle to deal with conventional finaincing. The good news is that Fannie Mae and Freddie Mac recently relaxed underwriting guidelines to allow for it.

i recommend checking out Freddie Mac's Home Possible and Fannie Mae's HomeReady program.

Outside of that, working with a mortgage broker can also help you shop around for lenders that allow for boarder income.

Good luck! Hope this helps.

Hi Brittany , Unfortunately for primary rresidence lending you have to intend on moving in within 2 months of closing on the property.

Now for value add houshacking it's sort of a hybrid of the live-in flip and House hack. It needs be a property that is livable and qualifies for conventional lending but the projects are done in stages to where it's only slightly uncomfortable residing in a construction zone. For example, doing the kitchen,paint and floors in the 2 months before moving in and then moving to bathroom renovations or adding a master suite addition while living in the property.

Depending on you jurisdiction and capital you can use the value add house hack to even add an adu to increase the density. 

Otherwise it will have to be an investment property loan with about a 20-25% downpayment.

The trade off with less capital is you have to be more uncomfortable with your living situation while a higher down payment loan product gets you a more comfortable living situation.

Hi Francis, the idea is based in the accounting formula of "Owners Equity=Assets-liabilites". It's a little esoteric because it's more theoretical since it just feels like cash is leaving your pocket.

The pay down of principal on a loan is included in the net worth return calculation because on a monthly basis the liability is shrinking, thus increasing your networth on the other side of the equation as assets are subtracted less and less each time.

Also I might be mistaken but wasn't the equation from Craig Curelop's book? 
Sometimes all the literature forms a memory stew in my head. ;)

Currently the only city in Skagit county with restrictions on STRs is Anacortes. Municipal code laws can change from city to city and it's unknown if Mt. Vernon will enact any in the future, but generally speaking properties outside of city limits tend to have less pressure to enact restrictions.

It's always important to have multiple pivot options if your initial strategy dosen't work out. Run your number as both LTR,MTR,STR. If there is a value add opportunity then you get the option to pivot into a modest flip in the case you are need to sell due to regulations.

Hope this helps! Cheers.

Hi Scott, 

It sounds like a good opportunity to deploy the contingency fund for the issue with the roof that popped up.

As tempting as it is to use that contingency money to pay down the loan faster I think that sticking with the original purpose of the funds and updating the roof is the best use of that capital for the following reasons:

1.An updated roof adds value to the property. Estimated national avg roi of about 60%https://www.zillow.com/learn/should-i-replace-my-roof-before...

2. An updated roof mitigates potential water damage in the future. Water damage/mold/ect. is much more costly to repair than to prevent.

3. When you make an extra principal payment on a loan the ROI on every dollar spent is the APR of the loan. You can get a better return on that dollar by updating the roof.

To paraphrase Morgen Housel; at the end of the day it really needs to pass the sleep test. What sort of risk mitigation will help you sleep at night the most?

Wow nice Job Kyle! A great deal!

Just out of curiosity did you run into any troubles getting affordable insurance? 

Puyallup is notorious for being in the Mt.Rainer lahar zone and with insurance companies adjusting their models for climate risk i wouldn't put it past them jack up premiums in the area.

Hi Rudy!

 Here are a few places to post in search of rent by the room residents:

1.Craigslist.

2.Facebook Marketplace.

3.Zillow (They recently rolled out the room rental listing.)

4. Ask around your social circles for trusted friends. Giving reduced rent to someone who will be enjoyable to live with while treating you and your space with respect is worth it. "An ounce of prevention is worth a pound of cure."

Once you have some prospective residents it's important to do your due diligence with screening using background checks,income verification, and credit reports. Once they meet your criteria and are ready for the lease it's important to tailor the lease to a co-living space that establishes the rules and responsibilities for shared spaces. No one likes a roommate who leaves their dishes around.

Hi Rania, glad to hear your enthusiasm!

1. For tenent screening I really enjoy using Rentredi. You can run background checks and credit reports on prospective applicants. It's a part of the BP pro membership but you can also check out their demo and subscribe to a plan separately.

2. The city of Saint Louis has a landlord reasources page here with a lot of info. Grab a cup of coffee and do a deep dive.

https://www.stlouis-mo.gov/nst/documents/inforent.cfm

As far as renovating a basment to be a  separate unit i recommend working with a licensed general contractor. They will help you navigate the permiting proccess and getting the unit up to code. Unpermited units can cause a major headache down the line if you try to refinance or sell.

Best of luck to you!

It's also worth looking for first time home buyer assistance programs in your local area. For example, my local credit union has a first time home buyer program that will contribute up to $8k in down payment assistance as a grant. With less money in the deal it will boost your cash on cash return. A rent by the room or roommate strategy is great for expensive markets, making it more of an equity and cost reduction play for the long term.