All Forum Posts by: Joe Bauder

Starting off house hacking a 4-plex - doing it right!  Congrats and you are definitely on your way.

Thanks @Daniel Hennek - updated my post based on your comment, and you’re right.  I was trying to direct OP to the actual guidelines to discuss with his lender, and any “advice” of mine is only as good as the average internet comment, which is to say not good at all, not an expert in the field.

Here's your guide to qualification according to Fannie Mae.  Follow these requirements and you'll know if it qualifies for a second home mortgage.  You should be able to live in it for "some portion of the year" and rent out the remaining rooms as "rooms in a house" but you'd actually have to occupy it for "some portion of the year" but with the vague requirements from Fannie your lender could give you better guidance on that:

The table below provides the requirements for second home properties.

https://selling-guide.fanniema...

Irving,

Sounds like you're getting a great start.  Unless you're incredibly busy otherwise, you won't need a property manager since you live there and this is your only rental at this point.  I've also found that I'm well under the average vacancy as an owner-occupied duplex guy myself because I know my market intimately, I know the conditions of the premises well, etc., since I live right here, and I'm always available to show the place to prospective tenants when turnover time comes around.  You'll also be able to see and fix some issues very quickly yourself if you're handy at all.  Just try to set expectations from the get-go and take your time with the lease and try to foresee any issues with any shared space/resources.  Make sure tenants know when you are and aren't available but you'll probably be the most responsive landlord they've ever had since you live right there.  Make sure to respect tenants' privacy and give them all the proper notices before you enter the property to do repairs, inspections, etc.  Try to develop a go-to list of plumbers, handy persons, etc, *now* so you'll have them when things go wrong.  Best of luck, and you're definitely starting off right!  Keep track of every single expense, and work with an accountant to make sure you're not overpaying at tax time.       

Thanks - this is great advice for me too actually @Brian Garlington - I was almost Sally, but I figured, first things first - let me just finish the cash-out refi, even though it's taking 2+ months, before I look at investing the cash out anywhere else.

What @Will Fraser and @Arlen Chou said - I'm in Oakland, same live-in duplex situation, and farther along in the journey of appreciation and being able to unlock equity so just try to be patient - Arlen gives great advice to live below your means.  Unless you absolutely hate your tenants and they're not going anywhere, just refi with low or no closing costs to a lower rate if you can with rates being as low as they are and save the cash out refi until you have more equity.  At the age of 24, time is on your side and you can invest like others have mentioned and invest out of state if you can manage that.

Bigger Pockets Community,

     I'm closing on a conforming cash-out refi loan soon from Loan Depot sourced through Credible dot com, owner occupied duplex.  My rate lock expires in 6 days and I sent a detailed rebuttal with a lot of good points (in my mind) to my loan team but they're saying the only thing that will help the appeal is comps, not actual rent, not a number of things the appraiser missed, just comps and average rent for the market.  I have a realtor friend working on comps for me and I sent them some comps of my own, and some of the appraiser's comps were from around a year ago so didn't factor in the market appreciation from what I can tell.  I really feel that the home was objectively undervalued due to the appraiser's omissions.  Unfortunately, the team I was working with didn't tell me until very recently that the low appraisal was the reason for extra points on the loan - they were having trouble finding the right person at LD and frankly were not communicating well with me.  Now the rate lock expires in 6 days and I'm scrambling to demonstrate the home's value.  I had no idea and no warning that the appraised value would affect the loan (only 63.8% loan to appraised value) and it's adding about $4k to the closing costs.  I have no plans to sell and am buy and hold for the foreseeable future and want to use the cash out to start investing in more properties and for low-interest emergency funds for this and any other properties I invest in.  I don't want to pay any rate lock extension fees but I know that might be negotiable - I have a call with my mortgage team later today.

What would you do in this situation, and did I make any major mistakes here?  Should I eat the extra costs and proceed to close quickly with no rate lock extension?  I'm totally open to feedback and thanks in advance.

Subscribing to this thread, but also wanted to add the <10% occupancy versus time it is rented rule if you want to write off the mortgage interest as a personal secondary residence rather than rental business expense.  Not a CPA, but going from this article: https://www.investopedia.com/a...

Subscribing as I'm also looking in the same market but for something that will quality as a second home for tax purposes (I will live in an ADU or smallest unit of a multiplex for >10% of the year and my primary home, (duplex, 1 unit rented) is out of state. I know this situation almost definitely won't cash flow for the Portland property but I'm hoping the second home qualification gets me an ok interest rate and I'll make some of it up at tax time.) You don't mean "second home" as it applies for tax purposes, correct? This would be your primary residence? I'm also facing similar DTI concerns as you are for a conforming loan and am looking for a lender in that market that would be able to take the expected rent into account. Down payment and emergency fund for my second home would come from a cash-out refi that's closing around the end of this month on my primary. I'd have to play around with the down payment amounts and loan amounts with the lender to see what I can "afford" under a conforming loan - trying to keep rates as low as possible of course.

I don't quite understand the "convert my first house into a rental property" question - it sounds like you're renting it by the room already?  I would say if it cash flows it helps your DTI picture but hopefully some more seasoned investors chime in.

"If Biden wins and the Senate goes back to the Dems the long-term capital gains tax essentially doubles to 39.6%" - this is only for those who make over $1m per year and only if Dems control the Senate and House.  I'm just an owner occupied duplex owner in a high COL area looking to expand, but $1m per year in income seems like a princely sum from where I'm standing, and I would think if I had that kind of income I would have no idea how to spend it, but I guess I'll try to get to that number then see how I feel about it!