All Forum Posts by: JT Spangler

So, there's a lot of info there, but there's also a lot missing. First of all, unless I'm mistaken, you can't use an FHA loan for an investment property unless you're planning to owner-occupy. Secondly, FHA loans don't have conventional PMI; they have instead MIP, which is paid in some combination of upfront points and potentially some extra monthly expenses.

You can do a lot of reading about the different loan types, advantages, and disadvantages here and elsewhere. I just read a good summary of them in Brandon's book on investing with low or no money down (available here on the site). 

If you're planning to owner-occupy, FHA is probably a good way to go, but realize that not all properties qualify for an FHA loan, so you're limiting yourself. You can also go 5% down on a conventional loan if you owner-occupy, and you'll have ten times more properties to choose from (this is what I did on the place I closed on two weeks ago).

If you're  NOT planning to owner-occupy, you're gonna want to get really creative, because you don't have the reserves to buy anything but a 40k house (in good condition). So you'll need a partner, seller-financing, or something unconventional.

Lenders will definitely quote you different rates: it's worth shopping around. They should be able to tell you what rate you'd qualify for if you know your credit scores and 1099/W2 income (which means they won't have to pull your credit to tell you, which means it shouldn't hurt you). Some lenders loan their own money and some sell the loans to giant companies like Chase, which somewhat limits what they're able to tweak on the loan. I've used Movement Mortgage in Nashville recently, and they were excellent. PM me and I'll give you the contact info for the guy over there I used. He knew his stuff, closed quickly, and saved me some cash on the mortgage payment and on closing.

Insurance: call a few brokers and tell them what you're doing and get them to give you a quote. I have a great State Farm agent in Nashville, but on this latest property Safeco quoted half what he did for the same coverage, so I went with them.

@Johnathan Butler I definitely understand the appeal of investing where you live (which is why I own two houses in Nashville and none in Clarksville), but since you're a military guy (and thus likely to be moved all over the place every two years), you might give some consideration to investing in an area you're familiar with where the cost of entry isn't so high. Two big advantages you have I already see is access to VA loans (which are fantastic), and a good knowledge of at least one (and probably a handful besides) military town, which equals access to a strong tenant base and knowledge of rents and incomes in that area.

Just a few things to kick around. Best of luck with the move. :)

If you have that much cash on hand, you might look at your investment and life goals to see whether it's critical that you begin investing in CT (a state with insanely high taxes and home values). 

@Johnathan Butler

Let me ask a silly question: why not invest in Clarksville? For 200k there you can buy a quad that cashflows. I'm down the road and I've been tempted by several deals in that area.

On the one hand, your cash flow is low, but that's to be expected since you're not putting much of your own cash into it (aka it's heavily financed).

On the other hand, you're buying at retail, with a HML rate that just doesn't seem to be right, so I would be concerned about your exit strategies.

I think you need to talk to this lender, and explore the option of a sub2 with the lender there as a backup if the loan gets called.

 See, developing a tiny home village is what I really think would be awesome. In a place like Denver, I bet you could get a zoning variance and approval for one, not to mention tons of press. That said, I suspect it's a loser from an investment standpoint, because of the costs involved. But maybe I'm wrong! Maybe it's possible to do it with some combination of a trailer park business model crossed with a new construction suburban development model.

Like, have a few "spaces" for rent nightly/weekly/monthly for tinyhouses on trailers, and a few lots for sale/rent to permanent residents. You provide a few common areas/community features (Laundry area/meeting room/garden/aquaculture/greenhouse), and they pay an HOA fee for that and other stuff. You seller-finance the construction of the permanent houses (and keep one as a 'model home'), but retain the ownership of the land itself to avoid permitting headaches.

It's an out there idea, but I love it.

Yeah, the quick look seems like there's not enough equity there for the seller to meet where you need to be on price. 

That said, you have an important advantage here: no/little competition on the listing, because you found them, and a motivated seller who's an absentee landlord. Maybe stay in contact with them over the next few months and remind them that they'll never get retail price on the house if the tenants keep tearing it up while not paying rent on time. They may come down to the point where the deal starts to look better.

She definitely has a vested interest in referring you to her broker, but it's not necessarily a nefarious one. She doesn't get paid until the deal closes, so if she knows a broker who closes consistently and has some flexibility with loan terms she's gonna want people to use them. In this case, that benefits you, too (most likely). 

I would be much more suspicious if she was directing you to her home inspector.

My uneducated guess is that if you look hard enough, you can find someone to lend you money on any asset, including land. Whether it's easy to find that lender is probably the real question. I own some land, too, and if I wanted to take a line of credit on it my first call would be to the bank that I financed it through. My second call would be to the agent who brokered the deal, who sells lots of land. Maybe that's a start?

 With what little info we've been given, I'm not sure what you're basing that on. A rent of $1200 and a mortgage of $1100 makes for an ABYSMAL rental.

That said, the mortgage seems to be awfully high for the amount of money you owe. If you want to consider this as a rental, OP, I think step 1 is speaking with a few banks/lenders about a refi (ask about one without a closing, so you don't have to absorb the soft costs). If you get a mortgage on 135k @ 4.25% for 30 years, your mortgage payment is $664. Now you have a potentially attractive rental property, though depending on your area and equity it may still make more sense to sell and do some house-hacking (aka, buy yourself a duplex/tri/quad with Owner Occupant financing and live in one unit while renting the others out.