New investor - Opinion on plan for getting started

[Ben D.]

Hello everyone,

New investor here based out of the Portland, OR area. 

I've been listening to the BP podcasts and reading up on the forums for the past couple of months and have decided to move into real estate investing. Excellent work by the way! I was hoping for a second opinon on any obvious pitfalls for my scenario so any comments/feedback would be greatly appreciated.

I currently have a conventional loan through Chase on my primary residence at 4.875%. I'm currently still paying PMI despite the house having gone up in value quite a bit at this point. I've been in the current home for about 5 years. I'm also taking care of my parents who just moved to the west coast and don't have a place of their own or are settled with jobs quite yet.

I met with a real estate agent through a friend and after some discussion it seems that starting off with a duplex would be the best way to go.

I've also spoken to a conventional local credit union loans specialist and they informed me about the 20% down payment rule on investment properties.

So the questions I have are

1. My plan is to purchase a duplex with an FHA rehab loan and live in it for at least 12 months while fixing it up. Then move on to the next property. I should still qualify for an FHA loan despite the conventional loan correct?

2. I'm also thinking about refinancing my primary home. Should I do that? If so, before or after qualifying for the FHA loan? What's a safe mortgage to income ratio for having 2 properties?

3. Is getting a duplex best first choice? If not, what properties seem to be neglected in the PDX area that may be interesting for investors you think?

4. I've done some research and it seems the Portland area prices have been going up like crazy. I know that nobody has a magic 8 ball, but do you think there is a bubble brewing in Portland? How about nationwide? What does the market look like in your area?

5. I asked the real estate agent to provide me with some comps for my current home and she told me that given that the current prices are roughly par with those in 2007, selling my primary residence might be a good idea. What do you think? I'm not so keen on that idea given my parents situation and also would like to have it as a backup?

My concern with getting started is the order of the steps to take more than anything.

Any input or feedback would be fantastic. Thank you!

Ben

[Ben Bard]

I think it is generally 25% down required for a multi family , the 20% is for a single family home

1. Duplex or triplex is definitely the way to go, very tax beneficial, and can make the biggest financial impact by reducing expenses. Yes you should qualify for FHA, you can have one FHA loan at time and having a coventional wouldn't matter.

2. Not sure what your goal is with the refi, if it is just to get more cash for the down payment, I would say open a line of credit on it instead of refinancing they are more flexible, and you can use and payoff again and again, and if you are sure you have the equity you can order an appraisal on your current home to remove PMI, it will cost you a few hundred so you should be sure

3. I would say 4plex and triplex are the only thing better than duplex, duplex is great because as a live in you don't need to pay capital gains tax if you stay 2 years, and it removes an expense at the same time, I can't think of a better way than this....I have a live in triplex now, all the units are separate houses it's great.

4. Not familiar with Portland I'm east coast 

5. If your current house doesnt cash flow when you rent it out, I would probably sell it and take the money you make to put into a property that does cash flow.  If it cash flows I would keep it. And take out the line of credit while the appraisal is good.  In either case live in multi unit would be a good next step.

Just some thoughts...