All Forum Posts by: Eric Guiltinan

@Joe Garro

I second (or third) that.  I just signed a tenant to a lease starting Nov. 1st.  I was a little surprised by the lack of interest compared to the summer time.  I ended up decreasing the listing a little below what I had hoped.  I think part of it is the 3x rent requirement but I'd rather leave it empty than budge on that.  I was actually surprised by the amount of attention I got from sites like Trulia and Zillow.  Nowadays craigslist is so full of spam from large apartment complexes and scams that tenants interested in SFRs struggle to find something legitimate.  I still use it though.

I don't charge for the background check if they take the place.  You could do that by applying a credit to the first months rent on cozy.

Just because your tenants are nice to you doesn't mean they actually want to be your friend.  I was a tenant for a long time and I definitely didn't want any gifts from my landlord.  Well, except a discount on rent.

Also, I think you are potentially wading into legal problems if you only give gifts to certain tenants or gifts of different value to different tenants.  I could see a landlord standing in front of a judge saying they just so happened to be "friends" with only some of their tenants.

@Mike Austin

I think the main pro for using an 80/15/5 loan for your first purchase is that it would give you the option for an FHA loan for your second purchase. Using an FHA loan for the second purchase is particularly useful because if you have good credit you can carry a significantly higher DTI. Since you will be living in your first place you will have to carry some debt when you go to qualify for your next place. This is basically what I did and it worked out well for me. If you goal is to buy several places you need to be thinking out at least one property.

Of course, leveraging yourself to this degree is also very risky.  You are much more likely to be underwater if the market turns around.  This means that getting places that have positive cash flow is incredibly important.

I wouldn't worry about limiting the amount of loans you'd be eligible for.  By the time that happens you'll be able to pay off the 15% or refinance out of it.

You definitely do not need a PM. If you can't handle one unit that is right next to your unit then you probably have no business being in this game. I've gotten tons of valuable experience managing my units and when I eventually hire a PM I'll know what to expect of them. You also do not need an LLC. Your home owners insurance comes with 500k liability insurance. That's plenty for you right now. Also, like @Thomas S. said, you need to familiarize yourself with South Carolina landlord/tenant laws.  Many states require that the security deposit be held in a separate bank account from the rent.  That isn't the case for owners in Texas but it is for PMs in Texas.  Either way you should get a separate account for accounting purposes.  It doesn't need to be a fancy business account.  Just any regular checking account will do.

Finally, as one duplex house hacker to another, I suggest you get the tenant set up with an online rent collection.  I use cozy.co and really like it but just search the forums and you'll get others advice.  Sometimes the most awkward part of the landlord/neighbor relationship is the collection of rents.

Most banks will only go up to 4 but mortgage brokers who sell directly to Fannie can do up to 10 loans. There is no limit per year. Each bank will have slightly different guidelines but they are generally going to be Fannie's guidelines or slightly stricter. I wouldn't worry a lot about the maximum number of loans. The thing most likely to prevent you from getting many houses is going to be your debt to income (DTI). For a conventional loan this is generally going to be 43%. Keep a close eye on this as you are acquiring properties. You need to know exactly how the rental income will be handled by the bank, how it needs to be reported on your taxes, and how much room your DTI has left for the next purchase. Always be looking one ahead, at least. I suggest searching the forums for some of your questions. These topics have been covered in depth.

I suppose my main piece of advice is that if you rent out a room in your house and you need that income to qualify for your next place then make sure you make it as official as possible.  Sign a lease, collect a deposit, and most importantly, report it on your taxes.

@David Ivy

David, seems we were typing at the same time.  Thanks for the info.  I'll try a credit union and see what they say.

So, I've done some more digging on this and it seems the law isn't very clear. I thought I'd share what I found in case other people stumble upon this in the future. First off, home equity loans and HELOC's on investment properties in Texas are forbidden. You can do a cash out refinance but not an equity loan or line of credit. There are several threads on BP with people in Texas looking for them and receiving some misinformation so I thought I'd put that out there.

Second, owner occupied multi-families seem to fall into a sort of legal limbo.  They are homesteaded but they also have income producing units, which might not be allowed because the rent could be perceived as "additional collateral" that you are putting up for the loan.  "Additional collateral" is forbidden.

The Independent Bankers Association of Texas says maybe it's allowed and to only do it if you can get a Title company to take responsibility.

https://www.ibat.org/legal-ease/2009/14/home-equit...

But I also found a training ppt from "American Title" in Houston and they say that not only will they not insure a home equity loan on an owner occupied duplex but that you also can't even get a conventional refinance as long as you live in it.  This leaves an owner occupant of a multi with no choice to access equity except to move or sell.

https://www.ibat.org/legal-ease/2009/14/home-equit...

It is frustrating to have these sort of restrictions put in place.  Especially since my situation seems to fall between the cracks.  Also, a little ironic that this comes out of Texas.

Hi BP,

This question goes out to all the Texas mortgage brokers and bankers out there. I have a duplex in Austin Texas that I would like to leverage for the purchase of another property. I lived in the duplex for one year after purchasing. I'd prefer to do a home equity loan instead of a refinance so that I do not have to give up my owner occupant rate. I understand that Article XVI, Section 50 of the Texas constitution forbids home equity loans on non owner occupied properties (only homesteads are allowed). If I were to move back into one side of the duplex could I take out a home equity loan? If so, would the appropriate LTV be 85%, 80%, or 75%? I believe my current LTV to be about 59%.

I've read that there are some issues with getting a home equity loan on a property that is generating rent.  Something about "additional collateral" which I don't fully understand.  I homesteaded the property when I lived in it and at the time TCAD wanted to know the square footage of each side.  I believe I technically only homesteaded 50% of the property.  At least I definitely only got 50% of the homestead tax exemption.  

I bought an occupied duplex that I needed to live in.  The owner offered the tenants 1k to break the lease and leave and they took it.  I would think it wouldn't take much money to make this group of students abandon it considering they still have 9 months to find a place.

It's a worse alternative but, at least in Texas, an owner can break a lease if he/she plans to occupy the property.  Since these people don't even live there yet that would be super easy to do after you close.

@Account Closed

Hi Maricruz,

You should spend some time looking for a low down payment conventional loan like Loubert is doing. You might be able to find a program available to first time home buyers that will allow it. I was able to buy my first duplex with a 5% down conventional through a special program at US Bank. You will only have this opportunity for your first purchase. The great thing is that if you do that you will be eligible for an FHA loan on your next place. That's what I did for my 2nd duplex and I had no problem getting FHA financing. Once I had those two I was able to save up for a more substantial down payment for my 3rd. You can achieve amazing cash-on-cash returns when putting down 5% and 3.5% down payments. You just have to be willing to live in them.