All Forum Posts by: Dustin Moon

So I bought my first house for $605k at 6.4% with a conventional loan 5% down. I pay $4100/mo not including utilities. 1 year appreciation according to all 3 real estate websites zillow, redfin, and realtor.com, my house is worth about $645k.

I've been house hacking by renting out my additional 2 bedrooms to mid term rentals (usually 6mo stays) and brought in about $9k for the first year. Charge about $900/mo per room. 

HOA doesn't allow short term rentals so I've been sticking with mid terms on furnished finder. I have been doing market research in my area. I see that I can charge about $3500/mo for the whole house.

Goal is to move out and find a quieter peace of land and use this house as a rental. Would love to hold for the long term. The area is projected to see growth doubling in the next several years. The issue I'm having is that the house doesn't cashflow unless I pay down the PMI and refinance. Hoping that the rates can stay around 6 or less by next year. If I do that I will most likely have to stay in the house an additional year to raise capital again for my next home.

So the question I'm asking is.. What would you do? Would you stay and put more money into the home so it would cashflow or use the equity built up in the home and find the property you really want?

Hey Dustin,

Right now, you want to be reaching out to everyone you can to see if you can get a better rate or some more attractive terms.

You don't want preapprovals from every lender, you really only want a full preapproval from the lender that you choose to work with through the process. Getting multiple preapprovals will impact your credit score if they aren't within a 2-week timespan. Make sure you plan accordingly when you've picked a lender. Another thing that's helpful is getting fully underwritten and preapproved. This will make it so that you can get through your contract period faster if that's something you want.

Questions you might consider asking a lender:

How long have you been in lending?

What's your current loan volume?

How can I expect to communicate with you / how frequently will you contact me?

What rate do you suspect you'll be able to lock me in at if I'm looking to close on a property in the next 90days?

Does your company offer any portfolio loans, 2-1, or 3-2-1 buydowns?

Do you offer any lender credits towards closing costs?

Do you own any investment properties?

Have you helped other investors with the type of investment that I'm looking to purchase?

Hope that helps!

Bonus: ask your agents and network for recommendations on lender, who they like working with and why!

Hi Dustin,

I suggest getting at least 3 rate quotes from a local lenders or your personal credit union if you belong to one. Honestly in my experience you will definitely need a preapproval to get an offer accepted. Also, you will feel better knowing what amount you can actually purchase. No sense making an offer on something that may be out of your range and would be heartbreak.

If you’re worried about dinging your credit score, typically when lenders are pulling your credit report for a mortgage, the credit reporting agencies do not ding your credit for pulling it multiple times. They know people shop around for rates.

Also, make sure you are completely upfront with all your debt and income and supply everything they need for verification.

Lastly, it’s important that any lender you choose should be able to answer all your questions in a way that you understand, don’t let them fast talk you and brush you off.

They should be able to explain which type of loan is right for you and why.

What the rate is and if it requires points to buy it down and options to buy down the rate. (The market has shifted and many sellers are offering to buy down the rate for the buyer, so negotiation is key during your due diligence time period.)

What down payment options you have? What the PMI will be depending on down payment?

Do you qualify for down payment assistance?

How long can you lock a rate?

What is the closing time frame?

Hope some of that helps and I'm happy to send over lender referrals if you like. Good luck!

@Dustin Moon I would research the topic a bit more, a lot of people would agree that an LLC for residential properties is an overkill. For an LLC to hold up in the extremely rare case it has to it needs to be able to demonstrate that it is indeed an independent business with it's own books and bank accounts etc. And it also prevents you from getting a residential loan, which has usually better terms than a commercial loan. Make sure your building is in good repair, especially stairs, handrails, the electrical system etc. , you have a good lease (not something home made from some attorney) and if you feel that's not enough get an umbrella insurance on top of your regular liability insurance.

@Dustin Moon start by finding a good agent: it's easy to find one, but hard to find a good one. You want someone who does more than 24 deals a year and also owns rental properties and can give you fist hand advice. A good agent will know most local lenders in town (plus contractors, inspectors, where to get a good lease, how to screen tenants etc) and can tell you which ones are good, because most are just average and some are really bad and screw up closings. Obviously you also want good rates and a loan product that fits your needs (most of our house hackers in Milwaukee use a 5% down conventional portfolio ARM loan with no PMI as opposed to an FHA with PMI for life and which is also not popular with sellers, because of their secondary inspection, especially on 100 year old duplxes..). By the way, you want a good lender AND a good loan officer - who you work with matters! You absolutely want to get your PA before looking at houses and it needs to be rock solid with all your documents reviewed, credit pulled and all income and assets verified. It's good for 4 months and easy to renew. And you want it to be as high as possible! In a competitive market you want to look like a strong buyer, that gives comfort to the seller. When I sit with sellers and present offers, not a single time a seller has said, let's counter back because they have a higher PA. But many times they are concerned about the buyers ability to pull it off. Good luck! House hacking is hands down the single best way you can get started in RE!