All Forum Posts by: Darrick Lowe

Do you think it is it necessary for me to meet all the tenants before putting in an offer?

The majority of multi-families I have been looking at have tenants in place without a lease.  They are paying month-to-month.  Tenants are well protected here in NY.  Let's assume that the Seller provides bank statements that shows the tenant is paying rent every month,  the Seller is not willing to provide the property vacant, and my goal is to buy and hold.  What other things should I request from the Seller when presenting an offer, if anything?  I have been informed to make sure they are not rent stabilized.  Should I include a contingency that says current tenants must sign a lease with me at or before closing, or is this going to kill the offer?  Or I could also have the Seller provide a notarized statement that states that tenants are free market on a month to month tenancy, with no protections or written agreements.  Though I am not sure how to protect myself should the tenant choose to destroy the apartment, for example.

In addition, if I rent out my current primary residence when I move to the multifam, would that disqualify me from getting a primary residence HEL?

I'm looking to put 5% down (50k) on a multifamily that I plan to move into as my primary. i'm having difficulty determining if I should get an FHA (95-5) or HEL (80-15-5). The HEL would come from my current primary residence which has a 3.5% interest rate with 20+ years left.

loan amount 950000

FHA 95-5 scenario) MIP=950,000*0.0175=$16625 up front. PMI =0.0085*950,000/12=$672 monthly.

HEL 80-15-5 scenario)  HEL closing cost on 150,000 = approximately $6000.  20yr at 6.25% = $1096 monthly

The calculation above is kind of comparing apples with oranges.  Are there other calculations I should do?  I'm hoping someone here on BP  can help me understand what metrics I can look at to make sure I pick the best option for me.  In addition, how would refinancing a few years down the road change the equation/outcome?

Thanks in advance!

It sounds like with HELOC (to pay for property 2), it's best to pay it off as soon as possible (1-3yrs). If you cannot pay it off, then consolidate it with the remaining balance of the property you took the equity out of (property 1) into a new mortgage. If I move into property 2 and it becomes my primary, and i convert property 1 to a rental, then the new mortgage on property 1 will get an interest rate based on a rental. In this scenario, it wouldn't make sense to get a HELOC unless I pay the 200k back promptly.

If I want to pay the 200k back over a long period of time, an HEL sounds like the better choice, though the interest rate is higher 6.25% 20yr.  I could try paying it back sooner, maybe 5 or 10 years, but this would significantly cut into cash flow.  Additional thoughts?

do you mean refinancing the HELOC and the first mortgage into a new primary mortgage?

I'm looking at a property that would require 200k downpayment + closing costs. This would dramatically deplete my liquid assets. I was thinking of getting a Home equity loan (HEL) or a HELOC on my primary residence which has just enough equity to pay the downpayment.

1) I've never taken out home equity before, and wanted to know how I chose between HEL (5,10, 20yr) or HELOC (10yr draw). One local bank said the HEL would have a fixed rate of 6.25% while the HELOC (80% LTV) is currently at 4.75% if i open a bank account.

2) In addition, I've seen recent posts of people finding HELOC with significantly lower rates (3%) and higher LTV (95%). I've called several local banks, and none of them come close. Is it completely dependent on location? I am in NYC.

3) What happens in interest rates skyrocket and I am on a HELOC? Are there some borrowing tricks down the road (like taking out another mortgage) that I can apply to protect myself from this?

4) Or should I just deplete the liquid assets I have.

I imagine the decision is going to be dependent on how interest rates change over the next 10yrs, but wanted to know if anyone has any suggestions on what they've done recently in similar situations.

I've been trying to invest in a multi-family home, but prices are so high compared to rents. The ROI is just difficult for landlords/investors. In addition, i am worried about taking on tenants from a still relatively low-income neighborhood. any advice?