Good first property?

Question

Hello!

I put an offer on this home, and I would love your thoughts.

The seller is removing the shed as per my offer, with the final agreed price being $456k, which is a lower end price point for this incredibly hot market. I am using the VA loan to finance it at 2.5%

Personally, given our current rental price and the conditions surrounding it (current rent is $1800/month in a 2bd/1.5b) I feel like it could rent for around $2000 once the outside landscaping is compete.

I would love any and all suggestions. I am new to the real estate game, and would love all inputs!

Listing below:

https://www.redfin.com/WA/Anac...

Matthew Gibson · Answer

Hey Jaron! Thanks for the input! I am looking into the appreciation market for now, given the need to do additional landscaping, but there is no need for it to be a cashflow property right now because I will be here for the next two years. I have also listened to multiple podcasts, and they mention having multiple exit strategies. I am planning on the appreciation game as of now, and possibly refinance once we leave to get into the cashflow game, or do the landscaping before we leave to enter into the extended "live in flip" avenue. Right now, it wouldn't be a cashflowing property once I account for the cap rate and repairs, but the potential for this area will be increasing due to the increase in jobs associated on the island due the Naval squadron expansions on Whidbey Island.

Julie Marquez · Answer

@Matthew Gibson Hi Matthew! You're first deal isn't going to make you millions, but this one isn't going to leave you broke either. I think it's a little over priced. I just sold the home at 1210 14th Street for $423,000 with 10k in seller concessions, so I'd worry about yours appraising for $456k. This comp also had a beautiful updated kitchen and bathrooms, but with 3 bedrooms. The potential I see with homes in this neighborhood is the generous zoning. This lot could be subdivided into two lots or be a duplex lot as is. You could build an ADU on the property. I was hoping the shed could be a dwelling unit but the pictures of the foundation made it pretty obvious that there was nothing to be saved. I like the neighborhood but it doesn't scream "family friendly" to all. It for sure will appreciate by the time you want to sell and your VA loan product is too good to pass up. I think $2000 to rent the total house is doable, and I like the layout for having a roommate. Reach out if you have any other questions, I'm an investor and right here in Anacortes. And if it appraises for less you can always bring that back to the seller in hopes he will lower the price. How long have you been looking? There isn't a lot of inventory in Anacortes, but it is a great market!

David Zeek · Answer

Hello Matthew,

You mentioned using the VA loan, is this property for a primary residence? The VA loan requires the buyer to use the property as a primary residence for 12 months, or it can be considered mortgage fraud.

Matthew Gibson · Answer

Hey Julie!

I appreciate you taking time to reply! Small world! We put an offer on that house as well! Yeah, we have been looking for about 7 months, and the inventory has been scarce to say the least! We are actually having the she removed, and I am not sure what we will do for that area, if we will put a garage or an ADU yet. I was kind of worried about the appraisal coming in, but my realtor here seems to think it shouldn't be an issue, but the buyer seems really eager to sell, so I dont think we would have an issue with having to drop the price to equal the appraisal numbers. Do you have any property in Anacortes? I am really interested in the rental game up here, so I would love to see your numbers!

James Miller · Answer

Anacortes is awesome man. I have a duplex in oak harbor and the base in Hawaii being shut down was news to me, good news.

Matthew Gibson · Answer

Hey Ivy! I appreciate your input! I'll answer these questions to the best of my ability.

1) We offered $456k to get the seller to remove the shed before closing, otherwise I was going to offer the asking price and deal with the shed later. I felt the headache of dealing with that would have been more appropriately wrapped into the loan, so that's the route I took.

2) The market is incredibly hot, but the high appreciation rate (149%) is due to the US Navy closing down a base in Hawaii and relocating the assets to NAS Whidbey Island (30 minutes south of this location), with more future plans to expand the amount of squadrons on that Naval Air Station.

3) Yeah, renting the one bedroom out for $2000 is unattainable. I am planning on splitting the mortgage to househack until I get a new duty station, and then be able to rent out the two bedrooms for at least $2000/month hopefully. I apologize for the confusion on that.

4) I am going with the 0% down, but will be using my Basic Allowance for Housing to cover my half of the mortgage (splitting it in half with another roommate), setting aside ~$1500/month, and once the roommate moves out, I will increase that up to ~$2500/month.

Ivy Sanmiguel · Answer

Hello @Matthew Gibson, I just took a look at the mentioned property and a few things struck me as possible red flags:

1) It's listed for $449K and seller has agreed on $456K with you.

2) It was last sold in 2017 for $180K. I assume a lot of improvements have been made because the house looks beautiful. However from $180K to $449K we are talking about 149% appreciation!

3) If you are house hacking in the house as your primary residence (required*), you'd only be able to rent 1 bedroom officially which wouldn't amount to $2,000 but more realistically to around $1,300 according to median in the area.

4) Assuming $0 down and 2.5% interest rate for 30yrs, you'd be looking roughly at about $2,300/mo. payments, or $1,000/mo. net payments including taxes and insurance which is still very reasonable.

With this being said, how much $$ are you planning to put as down payment or do you have as a budget for an investment property?

Let's chat. All the best,

Jaron Walling · Answer

Are you aiming for future appreciation, cash-flow, or a live-in flip? The numbers don't work as a cash-flow rental property based on my knowledge. I can't speak for the other strategies.

Cheers man

Matthew Gibson · Answer

Hello David!

Yes, I will be househacking this home until my time in Anacortes is up around 2023.

Good first property?

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