All Forum Posts by: Cody Beard

What is the minimum occupancy for a USDA loan before you can rent it? Is it similar to FHA being that it's a full year?

My wife and I are ready to begin investing. I have researched and studied up on all of the tactics and finances of everything, but something I just recently thought of was the taxes. Can you deduct mortgage insurance on a rental property? What are the tax ramifications of a rental?

Guys relax. I’m not worried about posting this to the internet because I would not do this anyway. Just provoking discussion. I conduct business legally and do not intend on breaking the law. I wasn’t asking if I should try to do this and not get caught. Just wondered what people thought about how common this crime is and likelihood of someone getting away with it. as stated in the intro - completely hypothetical. 

Please understand that this is just a hypothetical curiosity question/discussion, the action described below is illegal and I know that, just having a discussion!

I have looked at several properties lately and a few days ago I jokingly said to my partner "wouldn't it be nice if you could buy a rental with an FHA loan and not have to live in it?"

That made me think - what's stopping someone from doing that? We all know that it's against the FHA regulations and of course the "law", but (hypothetically) could a person not buy a second home with an FHA - as long as they qualify - under the presumption that they will move in and live there....but not? I'm certain there is some something in place to ensure that doesn't happen, or else everyone would do it! ...or do they? Could there be a whole slew of "investors" out there taking advantage of the FHA system? Of course you can only get four mortgages under FHA but someone could buy four multi families under FHA and rent them "illegally" and have a nice rental income.

If you think about it, how hard would it be to have a good tenet move in and rent the house from you for a year without the FHA knowing about it. As long as you don't have to serve an eviction notice or anything that attracts attention to the fact that you are renting, it seems unlikely the FHA would ever know. Just thought that was an interesting thought and wanted to share :)

"Of course this is all hypothetical, isn't it Tom? - of course, professor"

Seriously though.

MY wife and I have lived in our house for almost 2 years. We saw a home for sale a few days ago that caught our attention and we are considering the idea of moving but trying to keep our current home to rent. I believe we could qualify for doing so but I had a few concerns that I wanted to get some advice on.

Our mortgage is $910. A house right around the corner from us rents for $1100, but it is a good bit smaller. We are in an area where there are several apartment communities and townhomes and rental properties. My question is how much margin does there need to be between mortgage payment and rent? I feel like it would be hard to find a renter above $1250 or $1300. Another question I have is should I pay for the utilities or have the renter do that? The average bill for water/electricity/sewer and garbage is between $150-$160 per month.

I'm worries that with such a small margin between rent and mortgage that it may not be worth it. Granted all of the big items have been replaced since we bought our home. HVAC, Water Heater, all new appliances, remodeled bathroom. So I don't expect any big expenditures or repairs. But my MAIN concern really is to include utilities in rent or no?

What do you guys suggest?

Say I bought and rehabbed a property with a HML and all the numbers work and everything is fine, and I'm ready to refinance. By doing a very simple and not exact DTI calculation I'm coming to 50% on myself, but 24% with my spouse's income included. Is that the way that it works for a refinance? They take both our income's and both our debts and calculate DTI?

I just spoke with a lender about refinancing and I'm worried that by myself I would not meet the DTI requirements. I ran the numbers several different ways and came up with a percentage between 40 and 50% DTI. But since my spouse and I have the same debt other that student loans, which is minimal, our monthly debt pretty much stays the same, but our monthly income doubles almost. Leaving me with a much lower dti.

I initially planned to leave my wife's name off of my investment ventures so that if something went wrong and I go bankrupt, it's just my credit that's affected and not both of ours. How do you guys handle investment properties and spouses? Include them? or Leave them off so that if you go bankrupt or something at least SHE/HE could still get a loan for something if needed?

I’m close to buying my foray property which I will be using a Brrrr strategy on. The numbers work and everything looks good, but I don’t know a whole lot about refinancing. My question is, will my student loan debt possibly affect my debt to income ratio and keep me from qualifying for a refi? Other than student loans, the only other debt I have is a house and a car. No credit card debt. 

It's through an auction company. they require 20% down and 30 days to close.

I meant to put that in the post. I live in a pretty cheap market. Average sale is 180K. That's a nice 3 or four bedroom. This particular home is in an area that is...odd. It's in walking distance to a university...and walking distance to the Ghetto lol. down the street in either direction are homes that value at 250-300K as well as homes that are 50-60K. The area is mostly college students. Cheap houses that used to be in the ghetto now turned into student rentals.

What happens if I can't close on an auction? Do I lose money? Or am I just SOL and lose my shot at the property?

The House:

There is a duplex in my home town about to go up for auction next week. I've reached out to my realtor and got some comps and a good idea of the value of the home. It's already rented out and brings about $950 gross /month. The value of the home based on comps is between $50k and $55k. I'm planning on doing a Brrrr style strategy, but with not very much rehab. I may need to add a new HVAC and maybe a few cosmetic things, but someone already lives in it so it can't be that bad! My realtor is going to get me in to take a look at it too so that's great! I didn't know you could do that on auctioned homes.

Financing:

I've contacted a hard money lender that I feel fairly comfortable using. WCAP Lending is the company. I felt pretty comfortable after talking with them over the phone. I could get 50K as a line of credit with 12-18 months 0% interest. My plan is pay no more than 27,500 for the home at auction. That gives me enough room for surprise capital expenditures and gives me a little comfort on my first deal. And of course afterwards I will re-fi in 12 months or so and take a regular mortgage with 25% + equity built in.

The part I'm worried about is the auction. I have a good understanding of buying a home in a more traditional way. But I've never done an auction, never been to an auction and have no idea what to expect. By running the numbers I know how much I can pay for the home. The other concern is the timing with the hard money lender. The auction company requires 20% down and 30 days to close. I can do the 20% but here's the catch. The lender says I can qualify for between 25 and 150K. He said $50K seems to be a popular amount for new investors and as long as you have a good credit score it shouldn't be a problem. BUT it's not guaranteed. It takes two weeks to be approved and get access to the money. I don't want to go ahead and get approved because the 0% interest starts as soon as I'm approved. So My idea was go to the auction and see if I can even get it for that, then pay the down payment and start the loan process which takes up to two weeks. My question is what happens if for some reason I don't get the amount I need? Do I get some kind of penalization? Or does the house just go back up for auction?

This will be my first deal and I've just got the newbie butterflies. I feel like this would work but there are just a few things I'm not 100% sure about. If anyone else thinks this is a good or bad deal please let me know! I appreciate any help and advice anyone has :)