I have a potential MF - what do you think?

[Account Closed]

Hello BP family -

I have been trying to find my first MF and I believe I might have found it.  So, I welcome the community's input.

It is a three family in a class C neighborhood.  The building is older but well-maintained.  It is currently fully rented with three long term tenants bringing in $2700/month.

I am thinking of offering 125K and it will be an owner-occupying FHA so the monthly payment should be about $1200 (including taxes, insurance). I will also lose $900/month in rent from one of the tenants so my true rental income will be $1800.

So- from what I have learned here it does pass the 2% and 50% rules but I am sure that is not the whole story.

Also, the home will probably not take a large down payment so I should have enough left in savings to do a small conventional property in the spring.

Any thoughts?

[Tom Mole]

@Account Closed, congratulations on your deal. You sound like you're feeling a little jittery, but from you first post, it seems like you're on to a winner. Now you're at the point where folks are giving you a lot of cautionary advice and you wonder if your head is going to explode. If this is true, do this.....breathe. Take a deep breath, let it out slowly, then do it again.

Now that you're calm take a good look at the advice you got in this thread and follow it. @Account Closed makes a great point, so as your lender about that. You mentioned that you'd lose $900/mo in rent from one of your tenants. I assume that you mean when you take over that unit to live in, but you won't lose that money, rather YOU will be that tenant. Whatever you're paying for housing now becomes your rent for the new place.

Before you worry about DTI ratios for your next acquisition, I recommend you get through this one first. There must be a million details to consider to get around debt to income limitations, but there are plenty of things to deal with right now. As @Brent Coombs suggests "Try to run a steady ship". This man knows what he's talking about. You'll be through the straits in no time and back into open waters.

Class C properties have two problems that worry me when "house hacking". First, you have to live there. Are you OK with that? Second, the tenants can be pretty flaky. Do you have a plan to cope with that? A corollary issue, then is that the other tenants usually find out that you're the landlord. You MUST deal with that last one very effectively. There was a recent BP podcast (#143, I think) that addresses this nicely. If you get this property under contract, I'll make sure to find the right podcast for you.

So, take few more deep meaningful breaths, get that offer accepted and let's get busy getting you successful!!