New to BP and Real Estate investing!

[Chris Mitchell]

Hey all! I'm in Albany, Oregon and I'm very new to Real Estate investing but have been looking into it for a while now. I've listened to many PodCasts and read/listened to a lot of books related to the topic and am eager to get started and learn. 

The only experience I have is owning a house and househacking the rooms to subsidize my income. My realtors business partner helped me figure out how to acquire rental forms and do background checks and that's about as far as I've gotten. My overall goal for now is to acquire a second property and start cash flowing!  

I admit I have been getting overwhelmed just thinking about everything that goes into real estate investing, so I am trying to limit my goal to obtaining a rental property and probably don't want to get involved in anything else like BRRRR or Fix and Flip.

Here is my current situation: I have ~$50k cash in savings. I am considering refinancing my house (FHA loan to conventional) and am currently talking to my loan officer about options. I'm guessing I have about 70-100k equity in my house (owe 172k value is 240-275). I have a 401k with $38k in it but from what I understand the options I have for taking a loan out of it are not good. Lastly I have a Roth IRA with $12k in it and as far as I know the options for taking money out of it are also not good.

My current thought is refinance my house and find a multi-family property to owner occupy. Still not sure if I want to try to manage the properties myself or hire a property manager. I've been told its easy to get caught up in a legal battle with tenants due to the equal housing laws in Oregon. With all that being said, what are your guys thoughts? Any information is helpful! Also, should I be posting this on multiple forum categories?

Thanks,

Chris
 

[Julee Felsman]

Hi Chris!

Fellow investor and loan officer here... also in Oregon.  I started my career as an investor by moving out of my own first home, keeping it, and moving into a duplex. That was a long time ago (20+ years), but I can say, with the benefit of hindsight, that it was the best thing I did to set myself up for the future.  

Future me thanks long-ago me for taking the scary plunge. Future you will do the same!  :)

Putting on my loan officer hat for a minute, there are a couple of things you should talk to your loan officer about:

1) When you refi a place, to get the best terms, you will need to sign documents saying you intend to stay for a year before you move out. Make sure you are comfortable abiding by that timeline or ask about the loan options for refinancing your place as a rental.

2) If you plan to buy your next plex with an FHA loan (a great option as it allows 3.5% down), make sure you can qualify without rental income from your current place. FHA has a rule that forbids counting rent on a "departing residence" unless you are moving 100 miles or more.

3) FHA has some rules around 3 and 4 unit properties you should understand. They require that you have 3 months of payment in savings after you close and that the property pass a 'self-sufficiency' test -- 75% of the market rents (per the appraiser) all of the units (including the one you are going to live in) must equal or exceed the new payment (loan, taxes, insurance and mortgage insurance). Appraisers have to use entire buildings as comps, and there are often a limited number of comps from which to chose (especially 3-unit properties).  Duplexes don't have these extra rules

You might want to see if you can qualify for a Freddie Mac program called "home possible" that allows you to put 5% down on up to 4 units. The income limits for the program were just significantly reduced, so it's harder to use now. but if our income (including the projected rent from the other units in the building you are planning on buying) are below the limit for your area, it's a good option.

Good luck to you!  Feel free to PM me any questions you have!

Julee