All Forum Posts by: Angela Jossy

If you had a duplex rental property with a great interest rate on its loan but you have the opportunity to sell it on a 1031 exchange to put down 20% on a great deal on a 4plex but the catch is the new (worse) interest rates, do you do it if you have 1% rule kind of cash flow anyway?

The dilemma is that if I don't get out of the FHA, I will have to stop the Airbnb at least 50% of the year. That $900 of cash flow will be cut in half. I'm also looking at putting in a DADU on the property. Then I could live there and do Airbnb but that's complicated. In January we will find out if the city council will amend their policy and allow these. I wanted to just get a tiny house but if its not a permanent fixture with plumbing and electrical then its not allowed to be used as a permanent dwelling. I may just have to wait for all this to shake down and see what I'm left with. I'm not even sure how I would finance the new addition. I feel like the financing side of real estate is the next area I need to get educated about. All I seem to hit are roadblocks.

Mine said I had to be there 6 months out of the year and I didn't start Airbnb until I had owned it 10 months. 

@Wayne Brooks I added a bedroom to an existing studio apartment.  There are still 2 units total. 

@Kevin Scott I bought the duplex for $199k on an FHA loan. I paid around $7000 out of pocket for down payment, closing costs, etc. I haven't added up all the costs for adding the bedroom yet. Let's just say it was $3000. I had friends helping so I didn't pay a lot. My biggest expense was the new carpet I put into that one-bedroom unit.

My appreciation is somewhere between $65k and 82k. 

I want to get out of the FHA but my broker said the only way I'm getting any cash is if I do an FHA refinance. Then even if I have enough cash from that to put down on a conventional loan for my next one, she doesn't think it would work because I would also need to have 6 months of reserve payments. She said I just don't have enough assets.

If I'm not talking to the right lender, who should I be talking to? 

@Curtis Bidwell I thought I was totally on track too! I'm kind of shocked by this giant roadblock. 

I've been working on the BRRRR strategy. I bought my first property, a duplex, and started househacking. I rented the larger 2 bd unit for $1200 to a family member. I remodeled part of the unfinished basement and turned the studio apartment into a one-bedroom. I decorated it and after owning it for 9 months, I put it on Airbnb to test the waters. I've been averaging around $1100 a month from that unit. Its booked solid until middle of January. I'm getting about $900 in rental income after the mortgage is paid. In December I will have owned it a year. I bought it on FHA. Three experts have told me that the property has increased in value somewhere between $65k and 81k. I thought I would do a cash out refinance to get out of FHA and use the cash to buy my next property. My mortgage broker is telling me that I won't get much cash out, my payments will be much higher and I can't do it anyway because I don't have 6 months of reserved mortgage payments. She said I could refinance as FHA and get cash but it still wouldn't be enough to put 20% down on my next property and I would not be able to Airbnb because I would have to live there as my primary residence. Plus, my payments would be higher so it wouldn't cash flow and if the market tanks, I could be upside down in my mortgage.

Where did I go wrong?  What angle am I not seeing? 

As I prepare to make my second real estate purchase, I need to find reliable help. This was one of the hardest lessons from my first purchase. The stress of using unreliable friends and friends of friends was unbearable. What sort of parameters do you set up when you hire someone to do little remodel jobs and/or be your on-call maintenance person should something go wrong with the rental property? I don't have enough properties to hire someone on salary. I'd probably need them a lot when I first buy it (depending on the property needs) and then  only occasionally. How do I secure a person to be there for us when we need it? Also, if its an individual and not a company, do you ask them to do a drug test? I ended up with 2 alcoholics, a drug addict and one guy who just disappeared and we suspect he might have been undocumented. This is one area I REALLY need to improve on. Any advice or referrals would be appreciated. I want to be fair to the person and also know I can rely on him/her. 

In my day job we use Moco for tenant screening. Its super easy. I just fax them the application and usually within 48 hours I have an answer if they passed our screening criteria or not. But Moco only works with large portfolios so I can't use them for the rental property I just bought. They have a sister company called Myscreeningreport.com but I don't like it as much because I have to send the renter to the website and the renter gets the response instead of me. If they don't pass, it could take them days or weeks to inform me and I could lose valuable time. What do you recommend for tenant screening?  

I created a new post with alot more details. Here is the headline of that post if you want to jump to that one and get more info: 

Need help analyzing this duplex deal

I'm in escrow for a cute little duplex in Tacoma. This is officially my FIRST real estate transaction. Its a 2 bedroom on top and a studio on the bottom. I think I have opportunity for forced appreciation because the lower studio unit has tons of underutilized space and I can possibly create two bedrooms down there. Also the rent for both units was way too low for that area. They were charging $450 for the studio and I charge $783 for studios at the building I manage and that is a 60% low income tax credit property. The 2 bedroom unit is currently rented for $750 and that included utilities which are $484 per month. In my building we charge $929 for 2 bedrooms and they don't get a yard, washer & drier in the unit or a parking spot. Also I checked craigslist for 2 bedroom houses for rent in that zip code and found that they range from $1200-$2000. This house has a huge fenced yard with a vegetable garden. When looking at the layout of the neighboring homes I see that the land I'm getting with this house actually could be split into two lots. All the adjacent properties have two homes on that same amount of land. This means someday if I wanted to I could potentially build a second duplex.

I have an FHA loan so I need to owner occupy until I can refinance. I think I'm going to take the studio and while I live there build out the under used space and rent the upstairs for $1200.00. I have an apartment at the building I manage so for 7 days out of the month I could stay there and rent out the studio on airbnb to bring in some extra cash. That is why I'm figuring on $2040 monthly income. I didn't factor this into the deal analysis but I am also going to rent out one of the bedrooms of my apartment (in the building I manage) which will get me to the househacking goal.

Apartment rent (after roommate pays)	($177)
Apt utilities	-30
House 2 bd rental income	$1,200
House studio airbnb potential (7@$120)	840
House utilities 1/3 of $484	-161.32
mortgage	-1450
Potential profit:	$222

Here is the deal analysis on the Bigger Pockets calculator for buy and hold: 

https://www.biggerpockets.com/buy_and_hold_results...

I already had the inspections done. Sewer scope came up perfect. Home inspection only had minor things which my realtor has just asked the seller to handle (pending response):

Items To Be Addressed:

1. There are several areas of moisture damaged wood on the exterior siding/trim that need to be repaired/replaced. This will prevent further damage or attracting wood destroying organisms. 2. Carbon monoxide alarms are missing. As of January 1, 2013 state law requires carbon monoxide alarms to be installed in all residences when they are sold. They are required within 10 feet of all bedrooms, and one per habitable floor. 3. Recommend installing proper rain caps/spark arrestor's over all exposed chimney flue's. 4. The TPR valve drain line should terminate no more than 4 to 6 inches off of a concrete floor, or terminate to the exterior when surrounding materials could be damaged if failure occurred. The TPR valve drain line may also be missing, and the wrong size pipe is used in the drain line. (water heater)  5. Recommend maintenance painting on all exterior trim and siding where it is peeling, or there is no paint present. 6. Recommend a licensed contractor further evaluate the drywall on the south basement living room wall for moisture damage, and insect damage. The wall cavity may need to be opened, and their main be repairs needed on the wall framing. 7. Although not required when the house was built, it is recommended that outlets in kitchens, bathrooms, garage is, and on the exterior of the house be GFCI protected. Recommend upgrading outlets to GFCI outlets in these areas. 8. There are several ungrounded three prong outlets in the home. They need to be changed back to two prong outlets, or upgraded to GFCI outlet. 9. Recommend installing a working bathroom exhaust fan in both units. 10. The house is equipped with a federal Pacific electrical panel (FPE). These panels have had several safety issues in the past and need to be further evaluated by a licensed electrician. They will recommend repair or replacement if needed. 11. Recommend repairing loose toilet on the second floor, and repairing the plumbing leaks on the basement bathroom sink valve stems. 12. Recommend repairing the cracks in the shower wall and caulking maintenance in the shower.

13. The basement shower stall and plumbing fixtures were in in poor condition and should be replaced. 

Here are my questions: 

1) Do I have a deal? 
2) What advice do you have based on what I've told you I plan to do? 
3) What potential problems am I possibly not seeing? 
4) How difficult would it be to have the utilities separately metered? 
5) How much would it cost and how difficult would it be to have an old oil furnace removed? It's not being used at all and just taking up space. I want to keep the duct-work in case I need it later. 

Thanks for reading all of that!!