All Forum Posts by: Derrick Dill

Not sure if there are multifamily properties within range, but might be an option if so. 

In regards to your first bolded statement, FHA will want you to "owner-occupy".

I started out like you, and that first property put me in great position financially. If I were in your shoes, I would go for the large single family. Get 1 with a 2 car garage that you can convert into a JADU, and a large enough LOT that you can put an additional ADU in the back (one day). I recently purchased a property with a: living room, family room, dining room, and "converted" the family room into a bedroom, could consider targeting a similar property and using as one of those as an extra room.

Good luck, your off to a great start and have taken big steps already

Purchased 5bedroom/5bath 2400 sqft single family home in Hayward (foothills, near CSUEB), CA for 880k. Built in 1980s, but owner had deferred maintenance, and selling as-is. House is SFR, but has 2 1bedroom/1bath units that have separate entrances in the back with their own kitchen/living room. I put ~10k into the fixes to make it FHA compliant (Fire extinguishers, fire/c02 alarms, removing drywall that blocked the doors from "main house" to other units).

The 2 back units have inherited tenants renting at 1500$/month (slightly below market rent), the main house (3bd/3ba) was renting for 2700$, and the tenants had moved out so I could move in (per FHA guidelines). I re-painted the main house, added sound proofing to the drywall, refinished the bathrooms, added new light fixtures, and just finished converting the 2 car garage into its own unit, one of the bathrooms is downstairs near the garage door, so instead of adding a bathroom in the converted garage, I simply gave them that bathroom (cut down significantly in costs as well). The main house has a: living room, dining room, family room, kitchen, that I felt was a crazy amount of space for them. I put a door separating the main house and gave the garage unit the family room, making the garage unit a 2bedroom/1bathroom, main house a :3bedroom/2bathroom with living room, dining room, kitchen.

My wife likes all the space in the garage conversion and wants to move in there instead of the main house.

Numbers:

FHA mortgage impounded account (including property, taxes, insurance etc.) @ 2.65% - 4700$/mo

Utilities/internet - ~300$/month

Mortgage impound + utilities = ~5000$

Up unit in back - 1500$

down unit in back - 1500$

Main house: (finishing up furnishing main house, expecting) ~3000$/month for 3bedroom/2bath

all units = 1500$ + 1500$ + 3000$ (expected)= 6000$ - 5000$ = 1000$ cash flow (rough, not including maintenance, vacancies, etc.)

When my wife and I move out in a few years I expect the 2bed/1ba garage unit to rent for at least 2000$. Ill look to refinance and get out of PMI when possible, and should be able to get mortgage down to 4000$ as well.

I ordered a boxabl casita to put in the backyard that is supposed to arrive around end of year.

I bought in January 2021 in East bay. Put in several offers on several properties. My "standard" offer was 50k above list. Properties were gone within days 50k+ above list. Took me 6 months to get a property above list that needed work.

Mass exodus out of California to frozen tundra in Texas though

The units were set-up like this prior to my purchase. FHA actually wouldn't allow the units to be separated, so I had to put a door to connect the units since it's technically single-family.

Traffic is at its best for as long as I can remember, I hope this exodus keeps going strong! 

 All have separate entry. 3bd/2ba main house with entry on left side. 1bd/1ba w/ own separate kitchen on right side (bottom), 1bd/1ba w/own separate kitchen right side (upstairs). Garage entrance on right side (before both 1bd/1ba units). Large security gate on each right and left side prior to their access for own private entrances

Wanted to share my story with you since it's very applicable.

2016 I bought a duplex in southern California, house hacked for 440k. Rents brought in 2200$ while I lived there, and mortgage was 2800$. When I moved out rents are 3200$, and mortgage is still the same (I can refinance and bring it down to 1800$ now, get rid of PMI). It was appraised last year at 605k (went up 150k+ in those 4 years)

from 2016-2020 I bought 4 rental properties out of state. 3 in different cities in Ohio, 1 in Kansas city, MO. They all cash-flow a couple hundred after all expenses and I refinanced them all recently to 15 year loans. They appraised 10-30k above what I got them (~100k range).

2021 I bought a 5bd/5ba in Hayward (bay area) for 880k. I don't have enough for 20% down, so just used FHA loan 3.5%, paying killer PMI puts me at 4.7k/month mortgage including taxes/insurance etc. I rent 1bd/1ba w/kitchen for 1500$, rent 1bd/1ba w/kitchen for 1000$ (old lady on social security, can definitely bump up rent), the garage is being converted and will be done by March 2021 and I expect to rent for minimum 1500$. I might live in the converted garage and rent out the "main house" 3bd/2ba w/ kitchen, living room, family room for 2500$+.

Let's say I live in the newly converted garage: 2500$ (main house) + 1500$ (1bd/1ba w/kitchen) + 1000$ (1bd/1ba w/ kitchen, old lady on social security). = 5000$ - 4700$ (mortgage payment) = +300$ cash flow/month to live in the bay area. The previous tenants have been grandfathered in, and I'm confident I could get higher rents. The main house estimate is also conservative as the place has been deep-cleaned and freshly painted (going on right now).

If I want to live in the main house master bedroom I can get more cash flow since I would get more from renting the garage to someone else.

It took me several months to find this deal, but they're out there. I closed last month, during the midst of the pandemic, in the super-competitive bay area with a not-very competitive FHA loan.

Hey Vu,

I just bought in Hayward (closing this week). I initially pursued FHA 203k, but with how competitive the market is, I ended up with just FHA. You need a very specific fixer-upper without many offers to make FHA 203k work in this market. IF you try for a property that is very desirable, you're going to get out-bid by conventional/cash offers.

If your completely set on 203k, there is FHA 203k approved contractor in Livermore from their website you can pursue (I haven't personally had any interaction with him, just know he's approved). You should definitely have 2 months worth of paystubs before pursuing lender.

You can start your initial vetting process with lenders as only a few offer 203k in general. You want a lender who is experienced/confident with the process. I looked up who has completed the most last year in the Bay area.

I ended up with a 5bd/5ba near the school. There are 2 1bd/1ba w/kitchenettes that are separate from the main (3bd/3ba) house that are rented out for 3k. I'll move in with my fiance in the master, rent out the other 2 bedrooms, and house-hack to be living free in the bay area after everything's settled.

let me know if you have any questions

There is rent assistance program that will pay back rent, here is the release from the government: https://financialservices.hous...

Have you considered a garage conversion on a traditional 2 car garage instead? I have a house with a bathroom downstairs (attached to garage), I'm gonna knock down the wall, add a kitchenette and have a JADU there. I'll add another one in the backyard later