All Forum Posts by: Jordan H.

TSP does have employer matching. They match dollar for dollar up to 5%. TSP also has the lowest expenses anywhere (0.03%, 3 cents per $100). This is because TSP uses forfeited money (from people leaving before their matches are fully vested) to pay down the plan's expense. TSP also offers a Roth option. The down side is the limited number of funds to invest in.

 I 100% agree with this. While it's important to have a long term goal, the small steps are what get you there.

@Rahdia Green 

You do not need a car to be a real estate investor. You will need access to potential properties though. Whether that means Metro, car sharing, or a cab is up to you.

I live in DC and plan to buy my first property in DC. I don't own a car and rely on Metro from 99% of my transportation needs. To those who say it looks bad to arrive at a potential property in anything other than your own vehicle don't understand my market. Owning a vehicle is not a sign of wealth or ability to purchase a property. While owning a vehicle is certainly more convenient, I hope to obtain my first property then buy a car. To me, it makes sense financially and that is my prime motivation.

Your situation is different in that you live farther outside the city.  But I would not take on a partner for the sake of transportation. Renting a car is far cheaper.

@Paul Spangler

It sounds like you live in a tough market. It's not uncommon to need a below market price to be cash flow positive. That's why most investors seek unlisted properties. I've read about investors having success in making "low"offers on houses that have been listed for several months. I've also read about buyers making low offers every 30-60 days and having this offer accepted after being rejected several times.

This 85% rule suggests your expenses will be 15% of your gross rental income. From what I've read, this is far too low. BP suggests 10% for maintenance and capital expenses and 10% for vacancy. At this point, you've already exhausted your cash flow and now you're paying for the investment instead of it paying you.

I'm curious where your broker got this 85% rule. This seems like an investment rule, which contradicts FHA's mission of guaranteeing owner occupied housing. Regardless, the 50% rule I learned on BP is far more strict.

I considered using a mortgage broker but since I only plan on using an FHA loan for my first property, I thought paying a broker would be a waste of money. I figured all FHA lenders would follow the same rules. In this case it seems your broker is adding an unnecessary layer of complication. Can anyone confirm that a broker can add value to a buyer seeking an FHA loan?

A second issue is buying a property where 85% of gross rents fail to cover the mortgage. That sounds like a bad idea. Perhaps you should focus on four plexes since they seem to be cash flow positive while the duplexes aren't. 

You don't need a portfolio loan to build a portfolio of rental properties. I think the term "portfolio lender" is more clear. You can own 10 properties with mortgages from 10 different lenders, one (or more) of which is a portfolio lender.

From my understanding, only a conforming mortgage can be packaged and sold off. A confirming loan is one that fits Fannie's and Freddie's standards. I believe these are the only mortgages the big national banks will do. A smaller community bank often holds the mortgages they write and do not package and sell them. Because they don't intend to sell these mortgages, they don't have to meet the standards. For instance, a portfolio lender may write a mortgage for someone with a 700 credit score where a larger bank may not.

In short, portfolio lenders can be more flexible and may "bend the rules" to make a loan they consider a good investment. I personally feel building a relationship with a local portfolio lender is a good move, but not necessary to obtaining a portfolio of rental properties. 

I think you should sell.

I can't speak for Cal but it seems his point is not to settle for realized losses based on the potential for gains through appreciation.

@Jamal Atwell 

I considered investing out of state, but it seemed like a difficult way to learn. Even though DC is expensive, I believe there are opportunities, depending on your priorities. You could buy a 2-3br in College Park and rent the other rooms to students. Or find a rowhouse in DC and finish the basement as a rental unit. Young and no kids? Live in the basement and rent the main floors. You could look for a duplex and live in one side and rent the other.

In any case, the most important goal is to buy low. In DC, this often means finding a property that needs some work. Fortunately, the area has plenty of older houses in various conditions.

@Ann Bellamy 

Thanks for the reply!

@Ann Bellamy 

I'm getting started just like @Stephanie Birkhimer . I'm currently looking for a multi unit property and talking to mortgage lenders. My question is how to begin building a relationship with a lender that will benefit my future goals.

Does receiving a conventional loan for an owner occupied multi unit improve my ability to get a loan from the same bank/lender for a newly formed LLC in the future? If new LLCs require a personal guarantee, does my past performance on a personal mortgage come into play? I'm trying to maximize my future options, so I'm looking for a bank that does FHA, conventional, and commercial loans. Is this a valid idea or am I just wasting my time?

I'm looking to use a FHA loan on the first multi unit in hopes that I can save my cash and be that much closer to a second property. The second (and subsequent) properties would likely require larger down payments (and even larger down payments if purchased through an LLC).