First time investor- feeling stuck

[Kimberly Gomez]

Hello!

As a first time investor/home-buyer I have been searching for about 5-6 months. I am looking to house hack a duplex pretty much anywhere in Los Angeles and have been pre-approved for $675k. I have seen the market slow down. However some new challenges are that most properties I'm finding are tenant occupied or need rehabs that are more than I can budget for.  My agent has now started sending me SFHs as an alternative option. My worry with that is not finding tenants to occupy those rooms. I'm not sure what to do here and am feeling very discouraged. 

Thank you all for any advise/tips.

[Erik Browning]

Hi @Kimberly Gomez here's a Loan Hack. I know you have your heart set on a duplex however the SFH may be the best option for the long term.

The reason I say this is because when you house hack a room and record that rental income on Schedule E of your taxes for 1 year or greater, the next property you purchase (if it's a multifamily) you can use the projected rents to help you qualify for the loan. The SFH is a stepping stone into the next property. Also, LA is an expensive, competitive market

Let's do an example:

- You purchase a SFH on Jan 1st of 2022
- In 2023 you do your taxes and put that you received rental income for all of 2022 (365 days) for your 2022 taxes.
- Since you've lived in the home for 1 year and demonstrated your ability to be a landlord, you can now use the subject property's current leases to help you qualify for more
- Your W2 job brings in $5000/month
- The subject property's leases brings in $3000/month
- Your combined purchasing power ($5000 + $3000) totals $8000/month

This means that you can afford more home for your next purchase that may allow for you to pick up a multifamily at a more desirable price range.

This is for Fannie Mae only (conventional purchases). If you have either FHA or VA, you must follow a different set of guidelines.

For anyone else that is considering something like this, you really need to have these discussion with a lender that understands your ultimate goal and familiar with investor strategy. Any lender will qualify you for an investment loan, however not all lenders know how to invest - choose wisely. That way, you can work as a team to develop a gameplan. 

Fannie Mae's Guideline