All Forum Posts by: Isaac Passmore

Thanks I've reached out!

Hello,

At the end of the month I am closing on a primary residence that I intend to house hack. I am looking for insurance quotes for the PG County Maryland area. Can someone help point me to a good location to find home insurance brokers for my situation? 

Thanks,

-Isaac

So I have a bit of a "learning moment" on my hands with my first property. Back in 2020 I pulled the trigger and got a 3 bedroom SFH that I've been house hacking successfully. To get into my first deal I put 3.5% down and got a very nice rate of 3.375%. I also jointly purchased this property with my ex. Both of us are on the deed and both of us are on the mortgage. Fortunately, we are still on very good terms and consider each other to still be close friends. She wants nothing to do with this property and is supportive of me keeping it as a rental property. When the split happened, I bought her out of the property, without use of a lawyer, but both of us agree and understand that the money and ownership of the property is effectively 100% mine. However, nothing has been legally set in stone. So I'm in a bit of an issue and would like some guidance on what I could do to better protect myself and property as right now it is owned under our personal names and not in a trust or LLC.

I know that the property should be held in an LLC to limit my personal liability, however, how would you all recommend I get there given the following:

1) I don't want to refinance and lose my 3.375% mortgage - the numbers will not work for this property as is in the current interest rate environment. There is very little equity in the house and I would strongly like to hold the considerable debt during these inflationary times. 

2) I don't want to sell the property, it's in a great location and will cashflow when I move out to my next deal that I am closing on at the end of the month.

3) I don't want to be hit by the due on sale clause

4) I would strongly prefer that my ex's name no longer be attached to the property in any way.

The best I can think of is setting up an LLC that both me and my ex own and then deeding the property into that LLC. Then have my ex be removed from the LLC. I'm not sure if this would cause issues with the lender...

I also called the lender to ask if my ex could be taken off the mortgage without a refinance as I can now very easily show that I am capable of supporting the property independent of my ex. I was rejected and  it didn't seem like they were willing to work with me to find a solution. 

What recommendations do you have? 

Does anyone have recommendations for a property management company? What are some things I should be on the look out for? I need help filling and managing the property. Thanks

So if I occupy the unit and do the conversion while living there I'd be ok. 

If I were to move out at a later date would I be able to rent it out separately, assuming I isolate it and split the meters? 

So I'm seeing that a lot of SFHs in DC splitting the top and lower levels into two different spaces to rent out. Many of these basement units have what are called 'wet bars'. What do they mean when they say this? Is it simply just a sink and a mini-fridge? 

Do any of you know if there are any regulations or laws I should be aware of if I want to convert this 'wet bar' into a full kitchen which would include an oven and stove top?

@Mike Shahi

That's the 20% needed for the down payment. Multiply those numbers by 5 to get the actual asking price.

Is there any penalty for paying down a mortgage early? I'm trying to get started in DC and the down payments needed for a conventional loan is 20% however, for a standard duplex that's in the 140k-300k range. I'm not suggesting that any of those are good deals but that appears to be 20% of the asking price. 

Since this is my first deal I would like to have 30% of my cash reserves after closing since I don't know what to expect. In order to make this happen, I likely won't be able to reach that 20% down mark. This means I'll likely be subjected to PMI costs. (I don't know if I feel comfortable asking for outside money since I don't really know what I am doing yet and I'd feel absolutely awful if I couldn't come through for them)

My questions are, if I go the PMI route, is there any penalty for paying down a mortgage early? My thinking is pay extra each month in order to get out of that PMI condition sooner to help the property cash flow a bit better?

An additional motivation for doing this is that I plan on house hacking this first one. My plan is to find a place where the rent I'd be expected to get for that space would become my new rent. This new rent should be less than my current rent. My plan would be to continue paying my current rent towards the new mortgage while I live there until PMI is eliminated.

I know this answer will be different for each deal, but in general if a property already cash flows with PMI at the expected rental rates then getting rid of that PMI should be a priority to help increase cash flow sooner and allow me to pay less each month since there will be little motivation to pay extra.

How advisable is this to get started in DC?

@Jacques Herve how large of a difference between luxary condo and renting with roommates do you use when crunching the numbers?

Hi @Mark Cruse, can you expand on that? If I can get a brand new 3 bedroom townhouse near a metrostation for $300k-400k and rent out each room for $1000-$1200 a month when luxary 1bedrooms in the area go for$1400-1600, what am I missing?