All Forum Posts by: Cory Carlson

Hi Mitch, 

Welcome to the forums. While I believe you to have enough cash to do an FHA on a small-plex of some sort, all your qualification questions can be addressed with a local lender. Perhaps start with your bank and shop around a little. They will spell out exactly what you can and cannot qualify for. I do recommend you find a lender contact that is familiar with the house hack strategy. Most loan officers who solely focus on single family (or just the type of business they get) do not understand the nuances with the small-plex strategy.

I have a feeling the conversation will guide you to need to have a co-signer. Thats okay, when i bought my first house (at 22) i needed one too. 

I would think line 16 covers that lawyers interpretation? Yes, the buyer does not own the property so cannot give a notice, but the seller has the  right to give notice given the buyer has proposed they do intend to occupy. This is directly out of SB 608. 

SB 608, Page 4, Line(s) 4-7, Paragraph 8 "If the tenancy is for occupancy in a dwelling unit that is located in the same building or on the same property as the landlord's primary residence, and the building or the property contains not more than two dwelling units, the landlord may terminate the tenancy at any time after the first year of occupancy: 

I'll just attach a screen shot. I interpret this as, buyer is able to request the seller/landlord gives notice for duplex's. 3

@Oscar Cardenas Hey Oscar, 

I work with house hack clients all over the state and am running into many of the issues you've presented here. By the way, I'm working with two owner occupied buyers and an investor with about $400k buying power in Salem, so lets network a little. 

There are a couple points I want to bring up here and my interpretation of the Oregon Tenant/Landlord laws: 

1. For single family and duplexes SB 608 requires 60 days notice. So following closing, a buyer with owner occupied financing can give notice the day of closing if the lender does not require a notice in hand. 

2. For 3-4 units, yes notice needs to be given during the transaction process if the tenant. I either negotiate this to be done following the removal of the inspection contingency and open up the context for the potential of non-refundable EM. Have you done this? Again (and as you know), there is an exception that allows the seller to give notice if the buyer intends to occupy. 

3. I totally agree working with first time house-hack buyers is extremely difficult (albeit sort of my niche). Not only educating them on the RE process, but the associated return metrics from buy/hold and owner occupied personal financing. 

4. I am finding the owner occupied buyers are willing to pay more and i explain this to my buyers as the "price for terms" or "terms for price" scenario. If you want the owner to give the tenant notice prior to closing (terms), you need to come in strong (price). This is making my investor specific buyers with limited capital (<$150,000) less competitive with the sellers who are focused on price or have been poorly advised by their residential broker. 

I am also finding a lot of these small multifamily properties are SO far being a good investment. Using the income approach and actually accounting for expenses from an appraiser/underwriters perspective (realistic expense load - management, reserves, repair/maint/turnover/, etc) these are all WAY priced out. I am watching 2-4 unit properties fly off the market in days THOUSANDS in the red zone. 

If you are a small plex owner and interested in moving your money into the commercial and apartment market(s) NOW IS THE TIME. ^this is really our niche, helping investors quantify their current position in the portfolio and make a calculated decision on where to place the capital/equity. This is how I generally get my listings, investors selling several single families and moving their money into a higher asset value/yielding property. 

We should hop on a phone call again and discuss. 

@mario 

@Mario Delegato what are some of the other expenses? Have you asked for rent roll, ytd expenses and the 2019 operating statement? 

- Looking for taxes, insurance, repair/maint/turnover, landscaping, management (if applicable) and reserves. These need to be accounted for in the buy/hold scenario. 

- Are you pre-approved for the 5% conventional down? If you're over the income limits the home possible/home ready loan program will not apply and you will actually need 15%. 

- What rate/pmi have you been quoted at? Or have you? I can use my calculator and make some guesses for illustration purposes.

I will put together an in-depth analysis that I use for my house hack clients if you can give me the above information. Here is a sample: 

@Sammie Xiao

Not far off what we're quoting for our multifamily acquisition loans. I've seen a bit lower rate but 70% LTV is hard to come by right now, especially in any sort of secondary market.

I’d shop a little, maybe contact a commercial mortgage broker and they can leverage a few local places.

@Celia Moore I find with first time investors to analyze deals that are actually on the market place and to back into a strategy that works with your available capital. That way we see what real attainable returns are and coming up with a strategy to dig up coming soons/off market deals that work with your capital. Once you're familiar with the return metrics we can hit the ground running and skip the missing the opportunity phase, coined "paralysis by analysis". 

What strategies are you considering and in what market(s)?

I charge 5% of the sales price lol 

I have lots of questions here. Can you give us some details about your goals? Is this a rehab project turning into a buy/hold? What are you looking to analyze? The returns after its done and stabilized (buy/hold), the returns on the rehab post-cash out? (ie. the return on your invested $4X0,000k, based on its ARV) I would be happy to put a buy/hold return together for you but need some breakdowns on the financials.

Most of your expenses look close with the exception of insurance and taxes, those seem low for an 18-unit. The county will likely reassess after significant work is done and taxes will go up. 

While I am not all that familiar with BiggerPockets analysis templates, this deal certainly has potential. Do you have a broker vetting the area's CAP, market rent and expense load from an underwriters guidelines?

What are market rents and are the units the same size? I would need gross monthly income projections and your effective tax rate to put an illustrative analysis with my software together for you. 

Here is an analysis that shows the many return metrics associated with real estate investing. This is based on the investors "invested equity", assuming its a new acquisition. The same analysis can be run on a property already owned. Just because the cash is tied up in the asset, does not mean it's not yours. Beyond cashflow, there are after tax benefits (sometimes), pay down on the loan and an appreciating asset. Using these return metrics in a way that meets your goals is whole other conversation.