All Forum Posts by: Account Closed

Has anyone used a MyCommunity Mortgage (Fannie Mae), or a Home Possible Mortgage (Freddie Mac) to purchase a 2-4 unit owner-occupied property?

Reading the guidelines, it seems like it's structured exactly like FHA loans in that there are low down payments (3%-5%), and you can use a portion of expected gross rents towards qualifying income. I haven't found any information about people actually doing this, but from reading the guidelines it seems to be doable.

For me, there seems to be two distinct advantages of MyCommunity and Home Possible. The first is that the FHA alternatives are going to cost less than FHA loans. The second is that the maximum loan limits are much higher with MyCommunity and Home Possible.

In my area, the difference in fourplexes priced between 500,000 and 700,000 is significant. 700,000+ would buy me a very nice building in a luxury community; a property I would desire to live in. 550,000 or less would buy me a property in areas that I don't want to live in. Through the FHA, I would have to buy a property on the lower end of the spectrum based on the maximum loan amounts for my city. Fannie and Freddie's alternatives have limits up to 800,000 for my city which would be more than enough to buy a property that I would actually want to live in.

Assuming these loans are underwritten similarly, and based on what I have available to put down and keep for reserves, I would be able to purchase a property above the 800,000 limit. As long as current and future rents on the property are near their market rate, it will be sufficient enough to qualify for the loan even though I may only be able to use 65% instead of 75% of rents.

 I know that I can buy a very nice, desirable place for around 700,000 in my area. They also have extremely healthy cash flows as they are luxury communities with A-class tenants. Luxury communities in my city are very scarce and these buildings don't come up for sale often. Rents are very high and very stable. Occupancy is minimal. I just missed 2 that sold last month for 700k and 713k.

Can someone help me out? Has anyone used the alternatives to FHA loans for owner-occupied multi-unit buildings?

Has anyone used a residential conventional mortgage to purchase an owner occupied multi-family property without having prior experience as a land lord?

I'm going to purchase a multi family property in Q1 2016. Keep in mind, this is my first property so I'm currently renting, and I have no qualifying experience as a land lord. I know that through an FHA loan, I will be allowed to use 75% of the gross rents on the other units and apply it toward my qualifying income, without needing prior experience as a landlord. Regarding conventional loans, it seems to me that the typical thought is that you must have 2 years of experience as a land lord before you are able to use future rents as qualifying income. I've found that Fannie Mae DOES have conventional residential loan programs in which I can use expected future rents as qualifying income, without any prior experience as a land lord.

A little bit more about my situation so that you can see why I'm asking these questions in the first place, and perhaps you can provide some more insight:

I'm kind of eying 4 unit properties but also obviously open to anything smaller as long as the numbers work.  My goal is at least to effectively live rent free, but I will favor properties that can offer the best net cash flow (including the amount of rent I'm saving by living in my own building). In my area, this is very doable.  The only other criteria I have is that I will not sacrifice my current standard of living. The only way I would move into a lower-grade property is if the cash flow is sufficient enough to justify it to myself. This is where I bump into my problem.

The FHA maximum on a 4 unit property in my area is approximately 520,000. This means I will probably be looking for properties in the 550,000 to 600,000 range. Properties of this value in my area are mostly below my current standard of living. I would not live in 80% of the properties in this price range no matter what return I was getting. The other 20% could meet my standard of living, but the numbers don't work out as often or as well. If I found the perfect deal I could make this work, but based on the number of units sold in the area I desire, it may take a year or two for that to happen, and time is not something I want to waste.

The properties that I would like to live in AND have healthy cash flows seem to be in the 700,000 to 900,000 range. Conventional financing has loan limits above 800,000 for 4 units in my area. So why not go conventional and buy something I'm happy to live in? Many times it seems that my potential yields are greater on these more valuable properties anyway (I'm assuming due to the level of competition).

But what about using rents as qualifying income with no land lord experience? This is the big kicker because a large portion of my qualifying income needs to come from future gross rents. This will ultimately determine the type of mortgage I can use and what type of property I can buy. I know for sure that Fannie Mae has programs that allow this, so what am I missing? Is this as possible as it seems on the surface? There must be some obstacle that I'm missing because I cannot find anything about this online. Just pieces all over the place. Why is this? Maybe it's hard to find lenders willing to do this?

As you can see, I'm completely stuck. My next move is completely dependent upon what type of mortgage I can qualify for. Can anyone please give me some insight? Has anyone done this?

Thank you in advance

Over the course of my career, I intend to own several properties with different partner(s). Assume that my partner(s) and I both have our own LLC's in which we own 100% of the property within them. If partner A and I decide to go in on an investment together, should we set up a new entity to own that particular property, or can we purchase the property through the two separate entities, without setting up a new entity? I'm guessing we should form a new entity to own that one property in-particular, and in that case, can and/or should my existing LLC own my share of the new entity?

Thank you in advance

Assume my partner and I form an LLC to purchase a multi-family property in which ownership is split down the middle 50/50. After some time, one or both of us decide to sell our share. A few questions for different scenarios. Bare in mind that some questions may be repetative, but due to the complexity of certain tax laws I just want to make sure I'm covered:

****Assume that the property has appreciated in value

1: I decide to sell my full 50% share to my partner. Will I still be able to utilize the 1031 exchange law by investing the funds into another property owned by a separate LLC

1A: If yes, can I put those funds towards equity on an already existing property in a different LLC?

2: I decide to sell 40% of my share and retain 10%. Do the same rules apply as in question 1 and 1A?

3: We both decide to sell our full shares. Can we both utilize the 1031 exchange as described above?

These questions stem from my confusion about the cash going in and out from one LLC to another. Can someone elaborate on this please? As well as touch on any other concepts or laws I might be overlooking.

Thank you in advance