All Forum Posts by: Josephine Breign

Hi BP!

I own a 4plex that is currently coming out of forbearance, and need some advice on next steps. I've been offered a loan mod/partial claim by the mortgage company, but there is more than 20% equity in the property and would it be a better idea to just refinance? If anyone knows a mortgage broker or lender that can provide some advice, that would be so helpful. 

Thanks!

@Patrick Q. 

If you don't want PMI, see if you can do a 5% conventional loan instead. These days the PMI (known as MIP for FHA loans) on an FHA loan sticks for the life of the loan or until you refi out. At least with a conventional, you may be able to get rid of it once you reach 80% LTV.

Cash offers will always be tempting for the seller. The only way I've found to counter this is to bid higher. So yes, you'll be paying quite a bit over asking, especially in a hot area like jersey city. Think of it as the cost of entry to get your investing journey started. Make sure it still makes sense for you of course. If you go FHA, the lender will make sure for you, as in, if your rents don't cover your mortgage and then some, you won't qualify for the house. 

Also, think strategically about which unit you want to renovate and live in first. I would go for the one that is most run down and in need of repair. 

And a word about legacy tenants. If your property comes with tenants, you have one opportunity to ask them to leave: you can ask for some units to be delivered vacant. Ask for the rent roll so you can determine which tenants are good and worth keeping, and which ones are delinquent and should be asked to move out before you take control of the property. 

All this is speaking from a personal perspective, I was in your position a few years ago. There's so much I wish I had known and asked about before I started. But as they say, the only way you can do it sometimes is to jump first and figure it out as you go. Good luck!

Hi BP,

I'm in the process of house hacking and renovating a multifamily property, and I have a question regarding when and how to refinance. There's a couple things I'd like to accomplish with the refinance, which I'll list here: 

1. Cash out. There's not a ton of money in (I bought with FHA) but the property has appreciated and I've added value with renovations.

2. Get rid of PMI

3. Refinance into an LLC after I move out.

So as I'm currently living in the property, I understand that I could potentially get a higher percentage loan (80-95%), than if I moved out and it was a pure investment property (75%). This is what is tripping me up. Ideally I would refinance while still living in it so I can take out 80-95%. But then if I move out shortly after, will I be able to refinance again into an LLC?

Is there something I'm missing here? Any advice would be greatly appreciated!

What if you had renovations last year and reported a loss? 

@Shawn Mcenteer I'll look into some renovation loans that go with conventional 5% down, thanks for the advice! There's definitely some creativity needed on some of these properties lol!

@Ryan B. Interesting! I'm not exactly sure how much she's getting right now per unit, but she says it covers the expenses and has a bit of cash flow at the moment, so I'm guessing upper 5000, maybe 6000. And yes, the utilities are all on the tenants, so there's that. 

She's asked me not to share the location of the property, suffice to say its in Northern NJ, near the NJ transit lines. The area is full of people who commute to NY for work. 

I remember when she first bought it, she had to pay much more over asking because it was hard to be competitive with an FHA loan against cash offers. So that made me think maybe she overpaid and it wasn't a good deal.

Which bring me to what @Shawn Mcenteer is saying, would it be better to go with conventional financing instead? What is the lowest I would be able to put for a down payment? I liked the FHA loan because the low down payment would allow me to save my capital for renovations. Nothing I've looked at so far would be a good deal unless I made considerable improvements to justify a higher rent. Yes, I was thinking a multifam if I can find one!

Thank you for your thoughts!

Hi BP! 

Newbie here trying to analyze a deal. It seems like what constitutes a good investment ranges widely depending on where the property is and what your goals are. I have a good friend who bought a fourplex multifamily property a couple years ago in New Jersey. She was telling me the numbers, and I can't honestly say if I understood how good (or not good) her investment was. 

Purchase Price: 650,000

Loan: FHA

Rate: 3.75% 

Down payment plus closing costs: 55,000

Renovation costs: 200,000

Rental Income per month: 8700

She's currently living in one unit (house hack), and renovations are not done yet. So these numbers are what it's going to be once the renos are done and she moves out. According to her, the mortgage and expenses are about 4900. It's high because there is MIP mortgage insurance and taxes are high in NJ. She's planning to refinance into a conventional once the property has appreciated, but I don't understand how this helps because doesn't it make her mortgage payment bigger and eat into her cash flow?

To me it seems like the price for the house was pretty high, and she's had to wait several years to do the renovations (to save up money, and also wait for tenant turnover). But then again after all is said and done almost 46k a year in profit seems pretty great. 

So, is this a good deal?

Any thoughts would be really appreciated. I'm eager to start investing, but I want to make sure I get some valuable thoughts first.

Thank you!