Buy a rental property now?

Question

Hi All,

I'm a newbie who wants to get started in real estate. Currently, I'm looking into a duplex in the East Bay of the SF Bay Area that's just been fully renovated and one of the units has just been filled with a tenant paying a market rent.

I'd use an FHA loan, and as far as I can tell, the numbers indicate that if I can get another market rent in the vacant unit that the property should cashflow somewhere around $300-$500 per month.

A lot of videos I've watched on YouTube are suggesting waiting until mortgage forbearance expires, but I know that's going to be at least another 7 months, and I feel as though there's always going to be many reasons not to get started, and considering that the numbers make sense (i.e. that the property should cash flow from day 1) and considering that it's just been fully renovated so O&M costs should be minimal for the next several years, I feel like I should just get going and get started.

Also of note, I am planning on using an FHA loan, which does required owner occupancy for a year, but not actually living in it. My realtor says he knows a bunch of people who have done this and they just have their mail sent there and it's never been an issue. Thoughts on this plan?

Any advice would be appreciated.

Joseph Gisler · Answer

@Teddy Smith hi Teddy, the penalty for lying on an FHA mortgage is a Federal crime of up to 5 years in prison and a $250,000 fine. Not saying you will get caught but if you do, is it worth that?

I’m getting close to buying my first investment as well with an FHA and all this mess is not holding me back as long as the numbers work! Good luck my friend!!

Teddy Smith · Answer

@eddie brady

@Eddie Brady a lot of folks are saying that when mortgage forbearance ends that there will be a ton of foreclosures that hit the market, dropping prices. So that one should wait to buy until that happens

Eddie Brady · Answer

Hi Teddy. I'm not sure what mortgage forbearance would have to do with your investment. That's for those who truly can't pay their mortgage and highly discouraged otherwise. Rates are at historic lows so there's no better time than now. Make sure you are accounting for all expenses in your calculations of cash flow (use BP calculators) and be conservative with them. If they still look great, go for it.

Also, I've never seen issues arise from not living in a property that is supposed to be owner-occupied, but you are signing binding documents at closing stating you will do it. So, be careful what you say on here!

Buy a rental property now?

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