Seeking advice: Feeling stuck

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Seeking advice: Feeling stuck

Avery Heilbron
Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes

Hello BP,

I have been going to go see houses as well as analyzing deals  for a potential househack in the Boston area. I have been looking at the Everett/Chelsea area because of the potential upside for the future as well as it having the lowest barrier to entry for a multifamily in the area. Most 2 units range from 550-625 and 3 units from 600-725.

In my first deal I am not really trying to buy a total gut job . I am looking for something that I can live in and rent out that is the standard for the area. As time goes I would fix up the place etc. (Not trying to be a slumlord). 

The trouble I am having is because I have gone to a few lenders and the highest I have been pre-approved for is 525k for a 2 family and 625k for a 3 family. Most options in that range are usually a total gut job or if it's the type of place I want to/ can get in to the offer point would be well below my competition as well as an FHA offer which is already less enticing. Essentially my lenders have said that I need to make more money (I make 65k/ yr) or I can find a single family. It is also worth noting my credit is only 6 months old. It is however quite solid at this stage for how young it is(700+).

I am feeling stuck because I am wondering if I should wait and save even more, or buy a single family (where I will also have low purchasing power), find hard money, or something else. I only just graduated and get a 6% raise for the first few years so my salary will not be increasing very quickly. 

I am getting slightly discouraged when I see these househacking opportunities pass me by. I am having trouble answering the "How can I afford it?" question

Any and all suggestions are welcome.

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Ann Bellamy
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
7y

Any multi that needs significant work is not going to qualify for FHA financing anyway, so you can't combine FHA and a property needing rehab. And a single family isn't going to provide you with income to pay the mortgage, or the learning experience of being a landlord.

You are in a very expensive market, but Chelsea/Everett are less so.  So network for offmarket properties and continue to save.  Renting and saving is not the end of the world. Especially when we are approaching the top of the market, IMHO.   Live below your means for a while and save more money.  

Also, message me and I'll give you an additional resource for finding offmarket and wholesale properties.

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  • Dan WeberBusiness Member
    Realtor · Portland, ME · Member since 2015 · 655 posts · 552 votes
    7y

    The best way to find a half decent deal in those two cities is going to be off-market, NOT on the MLS. I would suggest networking as much as you possibly can. Talk to some local agents in both cities who have their finger on the pulse of the markets who can get their hands on some off-market leads before they hit the MLS.

    0Reply
  • Avery Heilbron
    OP
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    7y

    @Dan Weber Thank you for the suggestions! I will continue going to the meetups and gaining relationships.

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    7y

    Any multi that needs significant work is not going to qualify for FHA financing anyway, so you can't combine FHA and a property needing rehab. And a single family isn't going to provide you with income to pay the mortgage, or the learning experience of being a landlord.

    You are in a very expensive market, but Chelsea/Everett are less so.  So network for offmarket properties and continue to save.  Renting and saving is not the end of the world. Especially when we are approaching the top of the market, IMHO.   Live below your means for a while and save more money.  

    Also, message me and I'll give you an additional resource for finding offmarket and wholesale properties.

    4Reply
  • Josue Velney
    Developer · Boston, MA · Member since 2016 · 175 posts · 155 votes
    7y

    @Avery Heilbron the struggle is real my friend! I agree with Ann, you need to start looking at off market properties. Start going to every meet up you can find. Make more real estate friends and learn their tricks. You should also tell everyone you meet what you are looking for. I mean everyone!! The guy at Starbucks knows what I do and what I am looking for. 

    1Reply
  • Avery Heilbron
    OP
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    7y

    @Ann Bellamy Thanks for the advice! I understand it isn't the worst thing and it would be a good move for now. I have all this energy that only so much reading and learning can burn off.

    @Josue Velney Thank for the insight! I have tried to be more open and talk to everyone about it even if it sounds annoying

    0Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    7y

    As an agent who is very active in this market I don't think that your price point is that outrageous. To make your buying power a bit stronger have you considered asking for someone to non-owner occupy so sign with you? Perhaps it can be someone in your personal network that can vouch for you so you can buy a property in better condition. There are some ways that I have been able to find my clients deals such as seeing bonus living areas that is not legally advertised as a unit for example. There's a lot of different hack you can use. 

    Don't get discouraged! Whenever I get to this point I remind myself that I am three feet from gold. You've clearly dedicated a lot of time to this goal and it's time for you to reap the benefits. 

    Ask your agent to scour the listings for you to see bonus spaces that you can rent out or extra square footage that if not obvious. It goes without saying that you need to network and and find off markets but frankly off markets would be a little hard for you to get from a wholesaler for example because they prefer cash. 

    You can figure out your target area and start mailing them and be proactive that way. Keep going! We are all here for you!

    [email protected]
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    0Reply
  • Will Gates
    Rental Property Investor · Maryville, TN · Member since 2018 · 80 posts · 53 votes
    7y

    I think the best way would be to do like others said and search off-market... find some wholesalers, other REI contacts.. maybe even send some yellow letters trying to find that house hack... That's what we've been doing to find a local house hack around our area. No luck yet, but it will happen. Keep pushing!

    0Reply
  • Avery Heilbron
    OP
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    7y

    @Lien Vuong Thank you for the advice. I actually asked my lender about this and the rule for a non-owner occupant signing with you means that the down payment for a multifamily must be 15%. You can still do 3.5% for a single family or condo

    0Reply
  • Avery Heilbron
    OP
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    7y

    @Will Gates best of luck to you in your search!

    1Reply
  • Clifford Paul
    Rental Property Investor · Member since 2018 · 483 posts · 956 votes
    7y

    @Avery Hellborn 

    No one ever likes this advice but here it is. Get a second job or side hustle. I was in the military for 23 years and always worked a second job unless overseas. I have flipped cars for over 20 year's. I started a gaming computer company in the 1990's and sold it for a great profit. We currently have 7 streams of income. We live on a lot less than we make. My point is if you want to be successful in real estate hard work can get you there.

    2Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    7y

    @Avery Heilbron I don't want to contradict your lender but I have a client right now that is doing the same cosign non owner occupied 5% down (conventional loan) and he can also do FHA (3.5 down) ..

    Just want to make sure you asked the correct question and have all the info you need. Msg me if you want to connect with some others that could help!

    [email protected]
    The Elle Group5153 Reviews
    WebsiteView Page
    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Lien Vuong:

    @Avery Heilbron I don't want to contradict your lender but I have a client right now that is doing the same cosign non owner occupied 5% down (conventional loan) and he can also do FHA (3.5 down) ..

    Just want to make sure you asked the correct question and have all the info you need. Msg me if you want to connect with some others that could help!

     I am curious with the conventional non-owner occupied loan that you mention only requires 5% down, is that a Freddie/Fannie backed or some other type of loan? I have always had to do 20% down (25% more recently due to having more loans).

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Avery Heilbron Banks have gotten pretty loose with lending standards. If they are not approving you for more money, then their formula is saying you can't afford it.

    You should not be feeling discouraged. At your age and with your credit only being 6 months old, it is way too early to feel discouraged. Owning rental properties is no walk in the park. I assure you far worse hardship is ahead, so if you can't be patient and persistent to power through this, then you shouldn't get in the business.

    My recommendations are:

    1. Patience - set your goal out one year, not everything in life happens immediately. You are disappointing yourself by having unreasonable expectations.

    2. Save money - more cash reduces your payment and increases your purchase power. You will need cash reserves for emergencies too, so just barely having down payment doesn't cut it.

    3. Make more money - you have a good day job, just find a side hustle. Lots of ways to do this in the current economy. Higher income will allow you to save more money and get a higher loan value.

    0Reply
  • Matt P.
    Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
    7y

    @Avery Heilbron Your young and seem to have your head on straight. Your making money. It wouldn't be the worst idea to look at getting into a cheaper single family and bringing in a roommate or 2 for a year and then looking to move on to a small multi after you have saved a little more. Haveing roommates will let you bank up some cash and when you leave in a year you have a SFR. Good luck.

    0Reply
  • Avery Heilbron
    OP
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    7y

    @Clifford Paul That is a solid point. I have been looking for supplemental income, but I will try harder to find something else

    @Lien Vuong Thanks for the note.  I will send you a message

    @Joe Splitrock I am not feeling discouraged, but I appreciate your sentiment. I appreciate your recommendations and will take heed of your advice.

    @Matt P. Thank you for the note. I think the only worry here is that the down payment is still not insignificant and in a year a good chunk of change will have been put into the SFR

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Avery Heilbron:

    @Clifford Paul That is a solid point. I have been looking for supplemental income, but I will try harder to find something else

    @Lien Vuong Thanks for the note.  I will send you a message

    @Joe Splitrock I am not feeling discouraged, but I appreciate your sentiment. I appreciate your recommendations and will take heed of your advice.

    @Matt P. Thank you for the note. I think the only worry here is that the down payment is still not insignificant and in a year a good chunk of change will have been put into the SFR

    Sorry I only referenced the word discouraged because that is the word you used in your original post. 

    0Reply
  • Michael Sontheimer
    Investor · Saint Joseph, MO · Member since 2016 · 44 posts · 15 votes
    7y

    @Avery Heilbron

    If your main reason for that area is the 'future upside', you may want to reconsider that as a main factor.

    As an example...if you could get a place 20-40 minutes away that may not have the same PROJECTED growth in value, it could still be an amazing deal. I would consider a potential 10% value increase over 5 years that I coukd afford and make happen, then struggle through the hassle and waiting to hopefully score a place that goes up 30% over 5 years.

    It sounds like your strategy is solid. But it may be primarily based on speculation of market values. Remember anything can happen.

    Consider a different area (where you can still get to work and not dodge bullets on the way), that is a bit cheaper.

    You are in, gain the experience, get the tax benefits of househacking, and in 6-18 months you can go to Chelsea and make it happen

    0Reply
  • Michael J Callinan
    Rental Property Investor · Clinton, CT · Member since 2016 · 49 posts · 36 votes
    7y

    Avery, first of all we all get discouraged in this business and sometimes more frequently than people like to admit. Between living at my parents, living with friends, apartments and so forth I can say there is no shame in renting a studio or 1 bedroom apartment for a very inexpensive price while you work on your goal. I share this story because looking back on it I realized all the good that came out of it. I used to rent a $850/month 1 bedroom apartment in a building that had one kid overdose and die in the first 3 months and a couple who would fight at least twice a week on the other wall. I absolutely hated living there. So what did I do while I had to stay there? I worked, every single minute besides eating and showering. I hated that place so much that I wanted to do anything I could to get out. After a little over a year I made high 6 figures that year because I was motivated and focused. Sometime you have to put your self in positions you don't prefer to get places you want to go. Live where you need to live and concentrate on making more money. Money doesn't buy happiness, but it does buy that 3 family you want.

    1Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    What about single families?  Try true private lenders rather than bank financed.  What about a different location pending you are very familiar with that area?

    0Reply
  • Abbie McCaffity
    Flipper/Rehabber · Hillsborough, NC · Member since 2018 · 1 post · 0 votes
    7y

    @Avery Heilbron how do you find out about meet ups?

    0Reply
  • Matt P.
    Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
    7y

    @Avery Heilbron Another option is find a jod somewhere that you can actually afford to live and move there lol. 65k goes a long way in a lot of places in the country.

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Abbie McCaffity:

    @Avery Heilbron how do you find out about meet ups?

     There are several ways:

    1.  There is an events section here on BP under the Network tab, and it is searchable by location

    2.  Go to Meetup.com and search with the keyword real estate and by a radius from a zip code.  Do not assume that attendees at say, "Waltham" are looking to invest only in Waltham, people drive based on the composition of attendees and the topic presented by the speaker, if there is one.

    3.  In NH, there are 2, and maybe more on the seacoast.  First is NHREIA.com in Manchester at the Best Western, 2nd Wed of the month.  Second is in Nashua and was last night, NH RE Investor Mastermind on the 3rd Wednesday, find them on Meetup and Facebook.  

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