Buying a multifamily - Part 2

[Adiel Arvizu]

The first post here: https://www.biggerpockets.com/forums/432/topics/42...

So whether or not I am able to buy my very first property I want to chronicle this so people can at least see the tedium and they can probably do better than me.

So my objective remains more of less the same and thanks to some replies I have a little more information and I have taken some steps as well as more questions so let's begin:

Requirement:

• ROI doesn't matter too much as long as it can sustain me a little bit and that is utilizing an FHA loan or its equivalent.
• It is in Jersey City heights because I still have aging parents to look out for.
• Like I mentioned in the previous thread I want FHA financing but I'm open to other options.
• As for multi-family I am willing to do multifamily or mixed if the price is right
• Improvements needed should be minimal but if it can be completely fixed via an FHA loan with a 203k without incurring any additional out of pocket costs then I am for it.
• Vacancy doesn't matter too much because I'm sure people will want to live in the heights.

Action taken so far: I still have been going to realtors and getting pre-approved for a mortgage in Wells Fargo which if you are socially awkward like I am is a big step. Desperation is the best motivator if used right, that is all I can say. In any case, I found a promising property which is situated in the heights for $195,000 and it is in disarray not to mention that the location while not the best in my opinion it is very close to the shopping district, very close to a park, very close to the laundromat, and it is bike friendly. 

My plan was simple:

1.  Get pre-approved and get a private hopefully low interest loan for the down-payment and closing costs.
2. Get the $195,000 property at a lower price point and go through all the red tape since it needs to be fixed and it is a very good price for a two family. And the FHA 203k loan will fix it all up and things will be peachy keen.
3. Get it renovated and rent the second unit for $1800/month via services such as free internet and the location not to mention it is a 2 bedroom.
4. After a year move back with my parents and rent the first unit for $1800-$2000 since it will have the yard.
5. Make a nice ROI and look for more investment properties while possibly enjoying life since I don't really buy much and the only primary debt I have is college loans. Heck, my primary source of transportation is my bicycle which has served me well in saving me a nice chunk of money and giving me a workout.

However sometimes even the best laid plans can crumble. So first there is the matter of my pre-approval which if you apply for a loan your debt to income ratio needs to be 45% although that will vary from bank to bank or realtor to realtor. I also learned of the self-sufficiency test. So for now I got denied unless I either:

• Make more money: I work as a substitute teacher and math tutor for my university so that isn't going to happen. I am trying for an NJ Transit internship so wish me luck.
• Get a co-signer: As much as I don't mind I do not want to involve my parents or friends on this. I am also scared of doing this with an investor because I am already putting a lot on my plate I don't want to make my co-signer liable for my failings if it should happen. Because I don't mind taking responsibility for my own failings but I don't want anyone else to also take responsibility.
• Get the property at such a low price point that I will get a better debt to income ratio.

Also, the closing costs are insane and I am very sure that it isn't the end of it. Here are the costs the mortgage loan officer told me:

• Commitment fee: $995
• Appraisal: $690
• Credit: $14.04
• Title closing/escrow: $1,145
• Title lender's policy: $916.15
• Title/endorsement: $100
• Title courier: $100
• Tax Service: $80
• Record deed: $123
• Mortgage DOT: $333
• Total closing costs: $4496.49
• Total closing costs with Wells Fargo $500 rebate: 3996.49

And that isn't even counting the down payment via FHA loan. I know that isn't that much money for a couple of you but to me that is an insane amount of costs just to own a property.

I will be visiting the property this Saturday just to see how bad it is. I saw pictures and it is pretty bad so I expect a lot worse out of this. I can do minor repairs such as replacing doors, tiles, and painting. And have contractors fix the bigger underlying issues. I am also getting a quote on inspection just in case I want to pull the trigger. I looked in courthouses and banks and they seem to be really underrated places to look. So yeah these are the actions I took to get this far. I'm sure I took more actions but I just don't remember them.

What I want: I want to see if there are any more leads like the one I found and what else can I do to obtain financing. I want to start getting passive income and I want to start the harsh journey of property ownership. And if it looks hopeless for me then I don't mind giving the info about said property and see if anyone else thinks they can profit off of it.

Also, if you want a mortgage loan you need the following (forms needed probably vary but have them anyway):

• Bank statement from possible current or last month
• W2 forms and income tax forms from the last two years
• Two forms of identification
• Pay stubs spanning years or months

If I can do something then I don't mind chronicling it on this forum so people can learn from my failings or they can be inspired to actually go out there and get that deal. I have a feeling it will be the former but I will do what I can if there is a sliver of hope and what not. And I want to thank everyone who has helped me thus far I really appreciate it.

I also forgot to add succeed or fail, I am learning a lot more than I bargained for.

[Ro Maga]

Not a bad plan, but you need to add to this an aggressive savings and income-increasing plan. I know we hear a lot about buying houses with "little or no money down," but that might be the case elsewhere. In this most expensive state and in one of the hottest markets, the more you have the more likely it'll be for you to close on a deal, any deal. Do keep on saving!

A HML is probably not an option for a down payment. Remember that FHA will ask for seasoned funds for your down payment and that your lender will want to see an additional 6 months of reserves in your bank account. So for a $200k property you'll need at least ~$20-25k ($7-8k down payment, $12k for 6 months of PITI, and some $5k for closing costs unless you roll them into the loan, which can be a deal breaker when dealing with lots of competition).

That's not including repairs that may fall outside your 203k loan. And there are always more repairs than you thought were possible or necessary -- count on that!

So come up with a plan to aggressively increase your reserves! It can be done.