3rd property unit #4

[Isiah Ferguson]

This is for motivational use only. Me and my wife closed on our "Primary Residence" back in August 2018. I believe is is a C+ neighborhood. In the back of my mind, I figured somewhere down the line this house could potential be a rental property. 

PP - 200k

PITI- $1,350

4b/2.5b 2,996sq

Interest rate - 4.875 no PMI

5 year ARM/ 30 year amortization

During the purchase, I just assumed once the 5 ARM is time for renewal we would have enough equity to refinance into a loan with an 80% LTV to avoid PMI. We add some personal touches to the home. We undated the kitchen, all new paint throughout, living room, open some walls and closed some. In total, we spend about 30k for upgrades. My wife fell in love with the neighborhood and built great relationships with a few neighbors.

Fast forward to January/February 2021, we refinanced 3 years later instead of waiting the full 5 years of the ARM.

Appraisal - 262k

New loan - 201k

We received a check at closing for about $1,900.

PITI- $1,117

Interest rate - 3.375

At this point our mortgage got lower and we was happy with that. We had thoughts about a cash out refi but instead we preferred a lower mortgage payment. We could've got a lower rate but we decided not to pay for interest points. After about 1 month, somewhat we are ready to turn our home into another rental property. We found a New Construction duplex on the MLS. We spoke with a lender to get pre-approve but got denied because of the '100 mile rule -The FHA has a requirement that specifically states the new primary residence must be 100 miles away from the old departure residence. This means you cannot keep your house and then turn around and buy another one a few miles away using an FHA Loan for the acquisition of the new primary home." 

At this point, we had to find another route but we refused to put 25% down because we didn't want to touch our cash reserves. From here, we started to have deeper discussing about rental out our now home in which we just refinanced. My wife definitely wasn't on board emotionally because she love our neighborhood and she comfortable. At the same time, she understands wealth creation and our family long term goals. Instead of trying to buy a new "Primary residence" right away, we decided to rent apartment again to avoid 25% down payment and the "100 mile rule". Going to an apartment was a semi low blow because we went from a damn near 3,000sq home to a 2 bed 1,100sq. It took a certain mindset to make a sacrifice like this with 2 kids.  

We finally agree to rent out our "Primary residence". I'm super excited at this point. My wife is on board and we're focused on the bigger picture and our future together. We making living in an apartment work for us. We come from humble beginnings, so we know how it is as far as making it work. 

We use Cozy and Realtor to market our new rental unit. We got a lot of interest and did some showings. Our standards were pretty high. We mainly focused on job security and credit score. Along the way, we had a few potential candidates ask us do we take Housing vouches ( Section 8 ). We have 3 other rentals but we never had tenants w/ a housing voucher. We really are not familiar with of the program work from a landlord standpoint. Well I do have some experience as a child on Section 8. My parents were in the housing program. I remember going to see our specialist and we lived in the housing projects. So we know the vibes somewhat with the Housing Program. 

We decided to selected a few potential tenants who had vouches. My wife did the showing. We found a woman who had good job history and some like overall a good person. We decided to give her a shot. We the pandemic going on and in our area for renters it seem like most people had to restart with their job situation. A lot of candidates was inconsistant with their work history. 

We almost at the finish line with our Housing Programs tenants. We did everything we need to do including our new tenants. the move in date is may 1. 

Numbers :

PITI $1,117

Asking rent - $1,849

Section8 portion - $1,643

Tenant portion - $206

Net Cash flow without Repairs/Maintenance - $732 monthly