All Forum Posts by: Dru Steeby

The problem is that duplexes and anything up to 4-plexes are appraised based on the sales of "similar" single family properties in the area. In the market, we all know that rent does not correlate 1:1 with home values. This creates markets where owning a duplex does not make sense, because the rent on a duplex would not justify buying that duplex for cost of single family homes. If they were appraised differently, that might solve the issue. 

@Joseph Weisenbloom 

I recently got an Owner Occupied Duplex with FHA because of the 3.5% down. The bank told me that if I were to go with a conventional loan they required minimum 15% down. Good to know that other banks may give 5% down!

@Joseph Weisenbloom What do you mean by Owner Occupied Loan? Did they give you a conventional loan at 5% because you were occupying? Or is it an FHA loan?

I bought a house that was estimated to be built in the 1920's and was converted into a duplex in 2003. I just learned (about two months after closing) that the property was illegally converted and it was not "grandfathered-in" as a duplex that is sitting in a Single Family Zoned property. Right now I am at risk for the city to tell me to convert it back to a single family property. I personally believe the risk is very low, but there is still the chance. When they converted, they did not split up the electrical or the HVAC, and I'm hesitant to complete the conversion now that there is a chance of having to change it back. Lesson learned for next time though! 

Thanks Wayne. I plan on calling them tomorrow to ask these questions. I think the reason they couldn't sell it on the secondary market is because permits were not correctly pulled when they converted this house from a single family to a duplex. I think I got really lucky here. 

I got a letter the other day in the mail stating that my bank was unable to sell my recently acquired FHA loan to the secondary market, therefore, that bank will be servicing the loan. The letter also states that the up front mortgage insurance would be returned to me by being applied to the principal and the monthly insurance premium charge is dropped. This leaves me with a few questions:

1.) Is my loan no longer considered an FHA loan?
2.) If I wanted to get my up front insurance back in cash instead of applied to the principal, is that something that I could ask for? I would much rather put that money into a better investment opportunity. 
3.) Are there any legal implications that I should be aware of?

Has anyone else gone through something like this in the past?

Thanks!

I've done some reading and google searching and I can't seem to find an answer for this.

Simple example, two scenarios:

1.) I go to lowes and buy $100 worth of tax deductible items for my rental property. I report that as a deduction on my individual tax return.

2.) I go to lowes and buy the same $100 of stuff. I have an LLC set up to take care of the business and I write that off as a business expense.

I know that LLC's are taxed on the PROFIT that they make, but what exactly constitutes profit? I know at the heart of it that "profit = revenue - expenses", but what exactly can count as an expense? Is there any benefit to doing an LLC as opposed to not in an owner-occupied scenario?

Thank you!

@Jean Bolger ,Thank you! No it's not in Ann Arbor, it's a little east of there.

@Nick Payton , this post by @Brandon Turner is a great read about calculating cash flow:

http://www.biggerpockets.com/renewsblog/2014/06/14/how-to-calculate-cash-flow-rental/

@Nick Payton , not sure if the 50% rule counts escrow as an after mortgage expense, but here is the breakdown:

Mortgage payment: $388
Escrow: $237

total: $625

Expenses:
Utilities: $250
Maintenance: $107
5% vacancy: $70
CapEx: $110

total: $537

We'll see how well those numbers match up with reality in the next few months or so, with these numbers my cash flow is closer to $250 a month than $300, guess I got too excited in my original post =).

If Escrow counts towards expenses (taxes and insurance) then I meet the 50% rule for sure. If it doesn't then I am just shy. It does meet the 2% rule though.