All Forum Posts by: Andy D.

@Glenn Zhao Yes, that's going to be rather expensive. I don't know about 7 unit buildings but for one story you can already end up in the area of some $6k and even more. So I guess your's would run towards $13-16k maybe?

K&T is, on its own, not necessarily more prone to being dangerous than modern wiring. The issues typically arise out of "add ons" after a totally fine K&T wiring was initially installed way back when: people add, typically in a haphazard way, modern wiring to the old K&T wiring, possibly even messing up the breaker system by adding higher amps circuit breakers etc. This could easily put too much load on the (old) wiring, leading to failure and possibly fire. Don't forget that most structures are built out of wood! What do you use to keep a fire running? ;-)

Also, today's ever increasing use of electricity most likely puts too much load on the old system which was never designed to handle this high usage/load (= amps = heat).

I think there is one very simple answer to your questions and it has nothing to do with finding a different insurance provider: You are renting this place out to other people. Imagine what happens if there is indeed an incident related to this old wiring. It doesn't always have to be a fire.

@Chris Luger I can tell you from experience that issues with the HOA during the time when trying to sell will make the sale process veeeery cumbersome, lengthy and possibly will cost you a decent chunk of money for various reasons.

With respect of the building currently being unwarranted: you didn't say why. Can this be "fixed"? Then again, having a building be considered warranted under the F/F rules at day X can easily change at day Y! Owner-occupied ratio no longer met, HOA being sued etc.

So in essence it's a gamble anyway when hoping for a future sale process being smooth when talking about Condos. But: no risk no fun...

If the HOA is in good standing and everything else looks ok and you think you can find a lender and you are ok with the current cash flow (room to increase rent?): why not go for it.

One should never invest into something anyway if one is in potential need of the money spent on the investment. And if the money is not needed then there is no need/rush to sell the investment and any issues related to lending (e.g. unwarranted, not FHA/VA eligible) for a potential buyer during the time of the planned sale shouldn't be an issue as you can simply sit it out.

@Jay Helms Have no tips other than what is being communicated here. In essence it's really three ways of going about, I guess:

1) save up money and when you have enough for a downpayment go find something to buy or

2) find a partner who will give you money or

3) find a private lender

Depending how far in you are, though, a fourth option might be available: pull out equity from a property that has appreciated and use that money to buy more. With that you're in essence back at #1 though...

And as @Chris Tracy said: not wanting to borrow money (at least when it's from a bank) is probably a no-go when trying to get started. Those who have a few million lying around and go in all-cash are probably the exception. ;-)

That I can't buy more and hold more. :-D

Well, I can, but doing this long distance has its unique challenges, if I may say so.

Other than that I have nothing that frustrates me. On the contrary, I thoroughly enjoy it!

@Kimberly H. I hear you... So far I have been lucky, although my CPA also didn't mention this! Damnit. And with respect to insurance companies: don't even get me started on that one! One really has to check everything. But, as they say, being a landlord is running your own business. And a boss has to manage his/her people. Now we shall get back to managing. :-)

@Kimberly H. Indeed, I just looked this up and for amounts to be reported in (only!) Box 7 of a 1099-MISC the new deadline is - also for electronic filing! - 31 Jan 2017.

At least this is what I am reading.

When owner-occupied you could go FHA with 3.5% down, but there are limits as regards the loan amount (limits depend on the region). You could do owner-occupied with an investment property when "hous hacking". Do a search here on BP, for instance.

On the other hand, the higher the loan, the higher the monthly payment will be. So from an investment return point of view it might not work when looking at the figures. As you are hopefully aware, the mortgage payment is not the only thing you will need to factor in with respect to monthly costs. There is vacancy, repairs, management, CapEx etc and with an FHA at 3.5 you would also have MI as an added cost.

So typically, most investors - if they even finance at all - go with 25-30% down. And this is what most lenders will, indeed, require from you.

Regarding the interest rate being higher for multifamily: that would be true when looking at 5+ doors because then you will be in the commercial lending spere. And they are, typically, more expensive when looking at the interest rate. If you don't go over 4 doors then you are still in the realm of conforming loans, i.e. Freddie/Fannie and then you have the "normal" interest rates. These will, however, always be higher for investment properties compared to owner-occupied. At least this is what I have seen over the years.

I'm with @Gail K.. Timing for B doesn't seem too bad either with his fiancee coming back mid March, meaning she can help pack and prepare a move. Granted, they will not be able to buy a house in two weeks time so this most likely means that they will have to find something m2m till they find a place to buy and move into it. Nonetheless, not exactly a "being in a bind" situation for them.

So I would do as Gail said and tell A that they can move into unit B (have they actually already said that they want to live there?! Maybe they don't like it!) and get the new tenant into unit A. That can happen anyway, even if current tenant A does not want to move into unit B, simply because they will no longer be able to afford unit A. So secure new tenant for unit A, show old tenant A unit B and if they like it, give notice to B and make old tenant A sign new lease for unit B.

I'm actually wondering about this myself as I'm also looking into 5+ units which would entail a CL. Typically I'd say one would just refinance after those say 10 years. However, with the likelihood of interest rates by then having gone up significantly, there is an obvious risk of the property then possibly no longer cash-flowing properly. Especially when factoring in the added 10 years of age for the building and everything associated with it. In other words: CapEx becomes more of a reality at that point. And with the 20 year amortization one wouldn't have significantly reduced the principal.

Saving up cash during those 10 years to pay off of the remaining balance might on the one hand be simply not possible (at least not with the money coming from that property itself/alone) and on the other hand also not really something I can envision I'd do over such a long period of time as I'd be sitting on a lot of cash that wouldn't do anything for me during that period while saving up. I'd rather use that money after maybe 2-3 years to buy something else that provides even more income.

One could of course just sell the place but that might not be of interest if it cash flows nicely and otherwise doesn't have any real issues.

Others might bank on sufficient appreciation but that would, I guess, again mean a loan to make use of this appreciation: back to the higher interest rate aspect.

So yeah, how do people go about this?

Deanna, while I typically agree with your posts, the one above I find not practical to a certain degree, plus it portrays a "policing" attitude. A landlord should not need to constantly "police" the premises and fine tenants and/or others. That's trying to cure the disease, really. It should start with screening. And if that didn't work, resulting in issues requiring the removal of unauthorized verhicles and such: get rid of the tenant. Don't goof around by fining "guests".

Also, while apparently you and Greg are big fans of M2M: I have never had any issues with non-m2m leases. I therefore cannot subscribe to m2m being the solution to everything. It simply is not.