All Forum Posts by: Dion McNeeley

Hi @Daniel Gima,

I have focused on duplexes in an expensive market. (Tacoma WA) however my friend is going for houses with ADUs. The only time it has been an issue is lending. Some ADU's are hard to qualify loans for. So make sure you run places by your lender. If you haven't started working with one yet I would find one in the area and have a face to face to go over your strategy and see if they know of any zoning or loan qualifying issues for the area. I would also check with insurance companies about how they qualify ADU's. Each state and sometimes even cities can have different rules.

Both are good paths to use to start getting into real estate. One thing to also consider is to check the average rents in the area. When listing agents put the current or expected rents they can also state "buyer to verify" and the rents may not be what you can actually get. I have seen one place that actually had a lease in place for an elevated rent. The tenant did not pay a deposit and they added $200 a month to build up a deposit. If I didn't dig into the lease I would not have known the rent was actually lower. 

I hope this helps. 

Hi @Crystal Hogsed,

How you get started will depend on what your end goal is. Knowing what you want to have in ten years will give you a better idea of what to do first. 

Flipping is a job. Are you wanting a new job?

Buy and hold SFH or small multifamily takes longer to see returns but can be close to truly passive income. Are you patient and able to stay focused?

Multifamily can scale a lot faster but takes (in my opinion) a lot more knowledge and networking. 

There are even more ways to go. Once you have listened or read up and have a better idea where you want to end up it will be a lot easier to know what to study.

I am wanting passive income that doesn't require a lot of attention once in place. So I am working on small multifamily. I have 7 units so far and am adding another duplex this year. It all started with the first house hack. If renting rooms out the baby is a huge factor. I went with a duplex so it isn't as crucial since it isn't much different than living in a house or apartment. 

Good luck, I hope this helped. 

There is no restriction on using a conventional after the year in the FHA house. You can do a conventional 5% down the next year. You just can't have two FHA loans at a time.

Depending on the prices in the market you are in you may decide to save more than 5% down though. I keep saving 25% and then buying to make sure there is good cash flow.

You may want to refi out of the FHA to get rid of the mortgage insurance too though.

Hope this helps.

Great question @Jonathan Escobar. I am hoping someone chimes in with a good answer. I have often wondered the same thing. I have been doing 25% down loans so I haven't run into this problem. When helping people get into REI the first deal seems easy. I think sitting with a lender would help. Here is my interpretation of what I was told.

There are FHA loans for 3.5% down and you can only have one. There are lenders that will do 5% conventional owner occupied loans and you can get one of these after living in the place for over a year. 5% is a little more money but still doable if you work on your savings rate.

I hope this helps. 

Hi @Dallas Thomson, welcome to BP.

I am in the same area, mostly the east side of the narrows though. I primarily go for dulpexes but have one SFH. Maybe you will have better luck in the Port Orchard, Bremerton area. In Tacoma and Olympia the prices are a bit high for cash flow. It is still possible to find a good deal but there will be a lot of not good deals to sift through first. Many small multifamily places are going for well over what they appraise for. Seems cash buyers are willing to bet on appreciation. Finding lenders willing to loan over appraised values may be one of the challenges here.

When looking for a duplex I do not much consider comps except for making sure I can get the loan. I more look at the rents and what the PITI will be. If the cash on cash return is where I want it I do not really look at what other places went for.

Hope this helps. 

Hi @Mike Lattier,

I agree with every reply I see so far. There are a lot of stories of people getting to FI in a few years. I think you may have a stronger motivator than some younger people do. Increasing savings rate so you can invest is a lot easier if you are aware of the ticking clock. 

I have not been able to BRRRR anything yet because I am focused on cash flow over number of properties. I may be looking at it wrong but if you refi the cabin it will cash flow less. Maybe it depends on how fast you could save for the next deal. I like the Airbnb idea with the cabin though. This way you still have access to it for personal use.

I hope this helped. 

Hi @Alec Fenner,

I would start by looking at the property as an investment and not a house hack. I use the house hack to get into properties but the property should make sense once you move out. When looking for the place I would check the rents in the area. I look for a place just as if I were a tenant looking. Once you move out and all units are for rent, will the rent in the area be enough to cover the expenses and create some cash flow? Looking at it this way can help you decide if a deal is good or not. 

Hope this helps. 

Hi @Simone Williams,

I am still fairly new, watched about 200 hours of podcasts, read 40 books or so and only have 7 units I rent out. There are probably some people here on BP with direct knowledge of this type of loan. 

I am posting because with all the time I have spent learning, I have not heard anyone say this was a good thing to do. It seems like it is a gamble on what rates will do in the future and if you will be able to qualify for a loan when it comes time to refinance. Values may go up or down, your income level could change. 

Rates at the moment are extremely low when compared to historical rates. Qualifying for a loan is only part of the process. The seller also needs to accept your offer. What do you find to be the benefit to this loan instead of a traditional owner occupied loan? 

Hope this helps. 

Hi @Yoel Sarue,

Have you read "The richest man in Babylon"?

There are some good methods in this book for saving money even when you don't earn a lot. More methods than just skipping eating out or not going to Starbucks. If you aren't much of a reader the book is on audible and the audible version is even on YouTube for free.

This helped me a lot. When I started out I was a single parent with three kids making $17 an hour. It has taken ten years but I have 7 units and am looking for the next deal now. I wouldn't have been able to get started without what I learned in the book. 

Good luck. 

Here in WA there are over 20 offers on almost every SFH I have seen within a day or so. Not sure what it would take to make this a buyers market. There are too many buyers in this area. I think rates would have to go up 2-3 % before people would be priced out. I know several people with cash waiting for the correction. Seems I have been hearing prices will come down for over two years and they keep climbing.