All Forum Posts by: David K.

As far as I can tell from online government programs (Fannie, Fred, HUD FHA), if you are an investor you must put down 25% on a duplex purchase. If you live there and make is your primary residence you can get very low down payment terms but you will, of course, have to pay mortgage insurance. As such, this is only a good play for those who want to live at the property for a year. I don't even look at duplexes due to the fact that they are priced so high per unit and they are not a great return for the risk. Consider if you have one vacancy - that's 50% of your income gone.

There are some banks that will loan 20% down on a duplex for owner non occupied. 

What banks are these and what sort of terms do they offer? 

Loans for non owner occuppied 2 Unit? Where do I go?

FHA needs owner occupied for the special rates and lower downpayment options. 25% down is needed.

I am only considering buying this for special circumstances as I would never consider a 2 unit due to the high per unit cost and the wierd place it occupies in the non owner occupied investment loan world. 

Are there any banks or special programs out there that do good rates and terms on these units?

I don't consider duplexes, which are often highly priced per unit, to be a good use of funds. One tenant leaves or is a problem that is 50% of your income gone - and it is highly likely you will lose money that month if not for the year. It is better to wait and save for a larger unit property. 

It sounds like you are good with the rehabing. I'd take that requirement to live there more seriously than you seem to be. You do have to show intent to live there at the very least. 

20% - 25% down depending on what the bank requires for a DSCR. Likely is a 25 year amortization with a baloon note of 5-10 years.

Banks will often see what a property could make to help qualify you. You have to find commercial lenders. In short, you come up with a good down payment to show the bank you have 'skin in the game', the bank determines if the deal is something you will make money on and pay them. 

REITS are your best bet currently. This allows you to partner up with seasoned pros at a low cost. 

Real estate requires large upfront costs and money to back it up.

The cap rates on current real estate offerings are just too low for a new person to get involved without a LOT of cash back up. 

If you get in, make certain you keep heavy reserves - which may mean you make NO spendable income for the forseeable future. 

At the amount of money you seem to be putting down, you are required to live there for a period of time to avoid your note being pulled and other potential legal problems. 9K for renovations to a C class property - I hope you planned on doing the work yourself mostly. 20K is more reasonable - per side. Otherwise, it is likely you will not be able to attract the type of higher paying tenants you need. 

Personally, I never consider duplexes, experience has shown the math rarely works well. That said, you really should be very cautious going forward and put aside money to cover your tail. Even if you DO make $600 a month, which is unlikely for a good period of time, it is not a lot of money to cover you if you have a vacancy or major repair expense. 

At $8K you will HAVE to move in to qualify for low downpayment loans. At a 3% downpayment, with $8K you potentially could qualify for a $260,000 multi - if you can find one that makes financial sense. Duplexes rarely work when you run the numbers - so we are looking at a 3 or 4 unit. 

Now you have a good $2400 a month on that you need to be covering - taxes, insurance, maintanance, mortgage. On top of that, you will likely have to renovate a unit or two to attract tenants. Yes, even more up front money out of your pocket. 

Now, let's say we do hit a recession. You just bought this and you have few reserves and one tenant wont pay or moves out and you cant rent it. Instant massive loss of income --- AND you are working your tail off keeping the property updated and clean. 

Now, lets say we do hit a recession, later and you find your property just dipped in value - you will be kicking yourself for not waiting. 

That $8K was hard earned from you, right? I just would caution you not to blow it in something you do not have enough capital to save the investment if you hit a hard recession. This is why I recommend a REIT.... there is so much less risk involved now for you in a REIT. When the recession hits, cash it out and buy a property for a far lower price. Fair warning, save your cash up for a recession.... banks will not be lending or will be requiring much more down.

I hate to say it but I honestly think the market is too hot to easily find deals for new unexperienced buyers (even experienced buyers). That said, expect a LOT of work and searching to find something that works in this particular market. Will will be better off investing in a Real Estate Investment Trust for now, until the market cools down. 

10% for a PM is outragiously high for a large multi fam - although it does contain a good cushion for all the stuff you DONT find. You should include 5% reserve fund. 

I've never heard of that. Switch lenders.