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All Forum Posts by: Brittany Bailey

Brittany Bailey has started 1 posts and replied 7 times.

Post: Multifamily House Hacking in San Diego

Brittany BaileyPosted
  • San Diego, CA
  • Posts 8
  • Votes 2

I am trying to do the exact same thing and having difficulty - it seems like every multifamily on the market has rents that are undermarket, and getting financing where they discount rents to 75% isn't helping. I'm trying to stay in the metro area, but it so far all the 2-4 units I've found seem to be cash negative once I work in the debt financing. If you can get a big enough downpayment, you may be able to get the numbers to work. 

Thank you @Matt R. for your insight into the market. I agree that San Diego is great for long term, but it's just hard getting into the market right now. Nothing I can find is meeting these FHA requirements and max loan amounts.

Yes, @Chris Mason, those are all valid points. I understand we are not in a bubble, but it seems like there is a lot of buying on speculation. I've lost out on several offers due to them being up-bid way over asking. It's a littler nerve-racking for my first purchase. 

Hi @alex Craig, count me in!
Hi there, I am new to Bigger Pockets and am so excited to find this resource! I have a question regarding the prices of multifamily in San Diego. My husband and I are ready to buy our first home and would like to do an owner occupied 2-4 unit property. We have $40k that we are comfortable putting down plus ~$10k for closing costs. We have FHA financing. Our lender has told us that for both FHA and Conventional, only 75% of the current rents or potential rents (the lowest number is used) is considered for underwriting, and given max FHA loan amounts, for a 3-4 unit, the purchase price would need to be $900k and generate a gross of $8000 in rents. For a duplex of $700k, it would need $3k in gross rents. My question is this: so far in looking at deals (limiting search to center city area- no further east than Normal Heights), it seems most of the duplexes I've seen are listed in the $800-900k range (outside of FHA guidelines) and the 3-4 units are in the $900-1.2 million+ range and don't come anywhere near $8k in gross rents needed to finance. Everything I've looked at it points toward prices hundreds of thousands of dollars over what the rents would suggest, and negative cash flow. How are these properties getting sold? Is it larger downpayment that makes the numbers make sense, or are buyers taking a hit in cash flow for the potential appreciation?

Like many have said, there are a lot of benefits to Section 8 tenants- they tend to be lower turnover, you're always paid on time and payments are insured by the government. 

In my experience as a former property manager, Section 8 has different and additional paperwork - you use their lease agreement, and repairs become complicated as they have specific requirements such as how many inches from the ceiling a smoke detector can be placed. Your property manager will have to relay all of that to the handyman, and in my experience, handymen get annoyed as they don't see the logic in those specific requirements. Additionally, Section 8 does yearly inspections ( a good thing in my opinion) and will send a repairs list to you that sometimes involves very trivial repairs (cabinet hinge loose, etc). Overall, I don't think these slight annoyances should mean that you preclude an entire class of potential tenants, but they're something to consider.

The one thing that I will say is a very real drawback is that Section 8 has to review and approve your proposed rent increases - and they will not approve anything more than a $25-50 increase. In some markets, this might be totally fine. In my market of San Diego, with rents increasing hand over fist, this meant that our Section 8 properties (especially because these were longterm tenants), were always hundreds of dollars under market.

Following for advice. I'm in a similar situation, the market in San Diego is crazy and the 4-plexes I've seen are in the 1.2-1.5 million range. From the simple screening I've done, the rents don't seem to support the property for that number and there would be negative cash flow.

No. Student loan late payments I understand, but a monthly recurring utility? Definitely not. Hard pass.