Ideas for Direction on Refi and Buy with Very Low Income

[Christine Seeley]

I originally put this post on the BP Facebook group but it isn't getting any action, so I'm trying here.

Hello, all of you savvy and wise investors. I'm pretty new to this group. I've been reading and learning as many posts as I can over the weeks. So, I've decided to take the plunge and create this post in hopes of kind and helpful responses to my position. I need some direction.

My goal would be to move forward financially by purchasing my next multi-unit to increase my cash flow (I'll have nothing else to live on except an extremely small SS). I would like to move to one where I can be more comfortable as I age. I've invested in single-family rentals in the past and have some landlord experience, but now I own only one property in a great location—an old, 2-story side-by-side duplex that I've resided in for the past 16 years. My current tenants have lived here for 18 years. 

My income is very low and I don't see it getting much higher. Therefore, I don't think I would qualify for much at all. However, I do have about 75-100k equity and 750+ credit. My property value is hopefully about 200K (guesstimating). It's just that my income is under 25k. Current tenants pay 850 mo., and I believe I could easily get 1000 to 1200 mo. from my side after I move out. 

I've been looking at USDA (online) running numbers. But I would have to sell my duplex if I go USDA since they would only allow me to own one single-family property (to my understanding, anyhow). To me, that would mean giving up on getting ahead and settling for the one property. I've also considered FHA and conventional. Ideally, I'd refi my current property, and use it for repairs, and down payment on the next property. But again, I think my income is too low. I'm looking at 200-300K multiunits. I'm in West Michigan.

I don't know which direction to go. All kind comments, advice, or ideas are very appreciated. I'm feeling very alone here. Thank you.

[Glenna Wood]

If you can rent your side for $1000-1200 then you're losing income on the $850 tenants. Are the units the same? If the tenant side if smaller, move into it and rent the larger one. It may be hard to do since they are your long time neighbors but are you getting fair market rent? The extra monthly increase can go toward down payment savings. 

What choices do you have for getting to a single level age in place home? If there are multifamily properties available, what would it take to buy them? If they are individual units, is it better for you to live there and give up your 2 story duplex? Since you mention refinancing, you have a current mortgage or a cash out refi? Would selling your duplex and using the proceeds on a downsized single level get you a much smaller mortgage? That's improves your overall cash flow by paying less for your own housing. Are you working with a mortgage broker? They can give you advice on what's available based on your specific details. You don't know what you qualify for until a lender runs your numbers. You don't know if your income is too low until somebody says it is. Don't be afraid to ask.

Since you've been in your place 16 years, how's the roof, porches, HVAC and other major parts of the house? If there are major repairs ahead, selling might be better.

If you can find a good replacement, you can 1031 into a single level duplex, triplex or quad. The rental side would 1031 into the new rental portion and your personal side would be tax free under $250k net profit. A good QI like Dave Foster can walk you through that. Really depends on your market.

Whatever you do do not get a reverse mortgage to tap into current equity. These sound good in the sales pitch but end up being very expensive.

Does your city or state have any lower income housing programs that could help? Do you have a Dept of Aging or Sr services that could steer you to some free help? Best wishes to you!