Hello. Looking at purchasing my first secondary property. Would plan to keep my current primary residence and turn it into a rental. Not sure if its a good idea. Could you experts take a look and give your thoughts?
MY QUESTIONS / CONCERNS:
-ULTIMATE QUESTION: should I go for it? Please answer with a yes, no, or depends, and then explain.
-would it be best to wait off until say next year when I am able to put down more money?
-I am thinking in the shorter term - how should I be factoring in marriage in 2-3 yrs, having lots of kids in next 20-30 years, and wanting a stay-at-home wife / stay-at-home kids?
-would it be wiser, from that perspective, to aggressively rent my current place (filling bunk beds), pay down my mortgage faster OR finish the basement with an extra bedroom to increase value / make it more marketable for more roommates?
THE DATA
GENERAL SITUATION
-Money I have to play with for down payment or other invesments/future saving is 40k. That does NOT include my emergency fund
-make about $5500 / mo with main hustle after tax
-currently investing about 20% of that in ROTH (so take home is about $4000-$4400)
-current discretionary + need expenses not including $1,100 mortgage = about $3000 / mo
-I am well known in the town and have lots of good connections, especially with college students through the local Catholic Churches. If I work hard, it is not hard for me to find at least 1-3 renters at any one time
-I am located in Lincoln, NE
-in my late 20s
-only debt is current mortgage around $100k and some minimal student loans, all at about 4%
MY GOALS:
-to get into real estate
-to get married in next 2-3 years, God-willing
-long term: to being open to as many kids as possible. I want a large family.
-to contribute 15%-20% to ROTH INVESTMENTS
-have a stay-at-home wife and homeschool most of the kids
-supporting a stay at home wife and kids have made me thought about a career change away from tech to say, optometry. This would of course require me to go to school, and be in more debt
-get a small acreage (<2 acres) eventually
CURRENT HOUSE
-bought a little over a year ago at 4%. I will keep this current mortgage; the terms only require that I be in it for one year.
-bought at 167k. Likely is worth about 175k-200k in current market
-2 bed, 1 bath
-mortgage + escrow = $1100 / mo
-have one dedicated tenant/roommate who has been with me for a year and will stay with me. He pays $400-425 / mo
-I have had secondary tenants for an average of about 4 months. Whenever they move in, rent for present tenant and secondary tenant is $400
-in a decent part of town
-could finish basement for 20-30k, get an extra bedroom in there, making it easier to rent to secondary tenants more consistently rather than using the bunk bed they use now
NEW DEAL I FOUND
-bought for 160k in 2020
-being sold off market (FSBO)
-good area of town (I would say even better than where I am at)
-seller is thinking somewhere in the 185k range. Haven't made an offer yet
-I could, if I could it for say 180k, 15 yr mortgage would be about $1,500 / mo, 30 yr $1,200 / mo at 7.5%
-the only way I could do this is by putting 40k down
-my current roommate would move with me. I would raise his rent to $500
-has a garage
-biggest disadvantage for perceived value for me is the smaller kitchen
THEORETICAL RENTERS INFO
-two friends of mine who are getting married are very interested in renting my current property if I get a new property. We talked through the theoretical possibility and verbally agreed to the following policies
-the groom is cool with moving in as early as January 2024 to secure his spot 6 months before their wedding in May.
-groom would pay reduced rate of $625 until his bride moves in, then they would pay $1,200 / mo
-so in theory, after they both move in, I will cashflow $100 / mo on that property alone (mortgage is $1100). That is before factoring improvements / necessary repairs and the fact I would cover utilities.
-I know this couple to be solid, upstanding folks who keep their word and take good care of their living quarters and are prudent financially. I have a good idea of their financial situation too. So I would definitely have them for a year.
-they would be under lease from whenever groom moves in until 1 year after their wedding
PROPOSED STRATEGY:
-get new house, move in with current roommate. He pays $500 / mo
-groom moves into my old house, pays me $625 / mo
-once his bride moves in come May, they pay $1,200
-at that point, my budget until next June will look like $4200 TAKE HOME PAY - $3000 LIFE EXPENSES - $1100 MORTGAGE 1 - $1500 MORTGAGE 2 - $300 MORTGAGE 2 UTILITIES + $150 MORTGAGE 2 REPAIRS, ETC + $625 RENT FROM GROOM + $500 RENT FROM ROOMATE IN MORTGAGE 1 = $-725
-HOWEVER, I would plan to, for the first two quarters of next year, half my ROTH contributions down to 10%. This would up me about $800 / mo.
$-725 + 800 = UP $25 FOR THE FIRST 6 MONTHS
ONCE JUNE HITS, and couple starts paying me $1200 / mo
$25 + $600 = UP $625 / MO ONCE JUNE OF 2024 HITS
-after that, I would start contributing to my ROTH about 15%-20% again
ADVANTAGES I SEE
-new 3 bedder residence is easier to get another roommate in (you don't have to use a bunk bed). If this happens, I am only paying $200-$500 on the new property, with the rent income on old property going towards said old property's mortgage. I am building equity for cheap.
-if I break the zoning laws where I live (which is no more than 3 unrelated ppl living together at a time), new property could easily house up to four or five of us including bunks, which would cash flow $300-$800 / mo. Everyone really breaks the zoning laws in this area - the police don't really care - they are mostly antiquated. I have to search my own conscience there though
-if something goes wrong and no one is renting from me, I can theoretically stop contributing partially or fully to ROTH every month and just about afford both properties myself. I of course definitely want to be contributing to some paper investments for diversification
Overall, after factoring in my base income sans expenses sans ROTH contributions plus rent income, owning both properties would have the potential to get me up $1,500 additional cash / mo best case scenerio (all units always full), or lose -$1700 / mo worst case
Currently, with my current property,
after factoring in my base income sans expenses sans ROTH contributions plus rent income, I am cash flowing up to $1200 / mo best case case (bunk in other room full), losing $0 / mo worst case
AGAIN, MY QUESTIONS / CONCERNS:
-would it be best to wait off until say next year when I am able to put down more money?
-I am thinking in the shorter term - how should I be factoring in marriage in 2-3 yrs, having lots of kids in next 20-30 years, and wanting a stay-at-home wife / stay-at-home kids?
-would it be wiser, from that perspective, to aggressively rent my current place (filling bunk beds), pay down my mortgage faster OR finish the basement with an extra bedroom to increase value / make it more marketable for more roommates?
Ultimately, I think it is worth going for it, because I am not even dating someone yet, I am confident I can get renters, I plan to hold the properties or trade up within next 5 - 10 years, and when I get married, I would have flexibility and diversification in that we would have two homes to choose from, and could rent out the other one.
@Jordan Zoucha Great problem to have, I think your just over thinking things. I don't think you should waite either. If the deal makes since now at 7.5% it will make since when rates are lower in the future. I am also n Lincoln, Ne just bought a 4 plex as my second house hack. I suggest you look into a program called NIFA Welcome Home that has down payment assistance. This can be used for up to 10k down on a owner occupied property at a 1% interest rate amortized out 10 years soooo free money. This can also be used for a second home you don't have to be a first time home buyer. If you play your cards right, I think you can get into another property and remodel the basement on your current home to get more cashflow out of it. There are loan programs with only 5- 10% down conventional on 1-4 units. Talk to a experienced loan officer, he or she will best guild you on the different paths you can take. Your welcome to Pm me and we can get in contact to discuss this further best of luck Jordan.
Please PM me! Is there a catch to this NIFA stuff? What advantage is in it for them, and where do they get the funds to take lending risks like that on their end?
It’s a state sponsored program. I’ll Pm you.
Hello. Looking at purchasing my first secondary property. Would plan to keep my current primary residence and turn it into a rental. Not sure if its a good idea. Could you experts take a look and give your thoughts?
MY QUESTIONS / CONCERNS:
-ULTIMATE QUESTION: should I go for it? Please answer with a yes, no, or depends, and then explain.
-would it be best to wait off until say next year when I am able to put down more money?
-I am thinking in the shorter term - how should I be factoring in marriage in 2-3 yrs, having lots of kids in next 20-30 years, and wanting a stay-at-home wife / stay-at-home kids?
-would it be wiser, from that perspective, to aggressively rent my current place (filling bunk beds), pay down my mortgage faster OR finish the basement with an extra bedroom to increase value / make it more marketable for more roommates?
THE DATA
GENERAL SITUATION
-Money I have to play with for down payment or other invesments/future saving is 40k. That does NOT include my emergency fund
-make about $5500 / mo with main hustle after tax
-currently investing about 20% of that in ROTH (so take home is about $4000-$4400)
-current discretionary + need expenses not including $1,100 mortgage = about $3000 / mo
-I am well known in the town and have lots of good connections, especially with college students through the local Catholic Churches. If I work hard, it is not hard for me to find at least 1-3 renters at any one time
-I am located in Lincoln, NE
-in my late 20s
-only debt is current mortgage around $100k and some minimal student loans, all at about 4%
MY GOALS:
-to get into real estate
-to get married in next 2-3 years, God-willing
-long term: to being open to as many kids as possible. I want a large family.
-to contribute 15%-20% to ROTH INVESTMENTS
-have a stay-at-home wife and homeschool most of the kids
-supporting a stay at home wife and kids have made me thought about a career change away from tech to say, optometry. This would of course require me to go to school, and be in more debt
-get a small acreage (<2 acres) eventually
CURRENT HOUSE
-bought a little over a year ago at 4%. I will keep this current mortgage; the terms only require that I be in it for one year.
-bought at 167k. Likely is worth about 175k-200k in current market
-2 bed, 1 bath
-mortgage + escrow = $1100 / mo
-have one dedicated tenant/roommate who has been with me for a year and will stay with me. He pays $400-425 / mo
-I have had secondary tenants for an average of about 4 months. Whenever they move in, rent for present tenant and secondary tenant is $400
-in a decent part of town
-could finish basement for 20-30k, get an extra bedroom in there, making it easier to rent to secondary tenants more consistently rather than using the bunk bed they use now
NEW DEAL I FOUND
-bought for 160k in 2020
-being sold off market (FSBO)
-good area of town (I would say even better than where I am at)
-seller is thinking somewhere in the 185k range. Haven't made an offer yet
-I could, if I could it for say 180k, 15 yr mortgage would be about $1,500 / mo, 30 yr $1,200 / mo at 7.5%
-the only way I could do this is by putting 40k down
-my current roommate would move with me. I would raise his rent to $500
-has a garage
-biggest disadvantage for perceived value for me is the smaller kitchen
THEORETICAL RENTERS INFO
-two friends of mine who are getting married are very interested in renting my current property if I get a new property. We talked through the theoretical possibility and verbally agreed to the following policies
-the groom is cool with moving in as early as January 2024 to secure his spot 6 months before their wedding in May.
-groom would pay reduced rate of $625 until his bride moves in, then they would pay $1,200 / mo
-so in theory, after they both move in, I will cashflow $100 / mo on that property alone (mortgage is $1100). That is before factoring improvements / necessary repairs and the fact I would cover utilities.
-I know this couple to be solid, upstanding folks who keep their word and take good care of their living quarters and are prudent financially. I have a good idea of their financial situation too. So I would definitely have them for a year.
-they would be under lease from whenever groom moves in until 1 year after their wedding
PROPOSED STRATEGY:
-get new house, move in with current roommate. He pays $500 / mo
-groom moves into my old house, pays me $625 / mo
-once his bride moves in come May, they pay $1,200
-at that point, my budget until next June will look like $4200 TAKE HOME PAY - $3000 LIFE EXPENSES - $1100 MORTGAGE 1 - $1500 MORTGAGE 2 - $300 MORTGAGE 2 UTILITIES + $150 MORTGAGE 2 REPAIRS, ETC + $625 RENT FROM GROOM + $500 RENT FROM ROOMATE IN MORTGAGE 1 = $-725
-HOWEVER, I would plan to, for the first two quarters of next year, half my ROTH contributions down to 10%. This would up me about $800 / mo.
$-725 + 800 = UP $25 FOR THE FIRST 6 MONTHS
ONCE JUNE HITS, and couple starts paying me $1200 / mo
$25 + $600 = UP $625 / MO ONCE JUNE OF 2024 HITS
-after that, I would start contributing to my ROTH about 15%-20% again
ADVANTAGES I SEE
-new 3 bedder residence is easier to get another roommate in (you don't have to use a bunk bed). If this happens, I am only paying $200-$500 on the new property, with the rent income on old property going towards said old property's mortgage. I am building equity for cheap.
-if I break the zoning laws where I live (which is no more than 3 unrelated ppl living together at a time), new property could easily house up to four or five of us including bunks, which would cash flow $300-$800 / mo. Everyone really breaks the zoning laws in this area - the police don't really care - they are mostly antiquated. I have to search my own conscience there though
-if something goes wrong and no one is renting from me, I can theoretically stop contributing partially or fully to ROTH every month and just about afford both properties myself. I of course definitely want to be contributing to some paper investments for diversification
Overall, after factoring in my base income sans expenses sans ROTH contributions plus rent income, owning both properties would have the potential to get me up $1,500 additional cash / mo best case scenerio (all units always full), or lose -$1700 / mo worst case
Currently, with my current property,
after factoring in my base income sans expenses sans ROTH contributions plus rent income, I am cash flowing up to $1200 / mo best case case (bunk in other room full), losing $0 / mo worst case
AGAIN, MY QUESTIONS / CONCERNS:
-would it be best to wait off until say next year when I am able to put down more money?
-I am thinking in the shorter term - how should I be factoring in marriage in 2-3 yrs, having lots of kids in next 20-30 years, and wanting a stay-at-home wife / stay-at-home kids?
-would it be wiser, from that perspective, to aggressively rent my current place (filling bunk beds), pay down my mortgage faster OR finish the basement with an extra bedroom to increase value / make it more marketable for more roommates?
Ultimately, I think it is worth going for it, because I am not even dating someone yet, I am confident I can get renters, I plan to hold the properties or trade up within next 5 - 10 years, and when I get married, I would have flexibility and diversification in that we would have two homes to choose from, and could rent out the other one.
@Jordan Zoucha Great problem to have, I think your just over thinking things. I don't think you should waite either. If the deal makes since now at 7.5% it will make since when rates are lower in the future. I am also n Lincoln, Ne just bought a 4 plex as my second house hack. I suggest you look into a program called NIFA Welcome Home that has down payment assistance. This can be used for up to 10k down on a owner occupied property at a 1% interest rate amortized out 10 years soooo free money. This can also be used for a second home you don't have to be a first time home buyer. If you play your cards right, I think you can get into another property and remodel the basement on your current home to get more cashflow out of it. There are loan programs with only 5- 10% down conventional on 1-4 units. Talk to a experienced loan officer, he or she will best guild you on the different paths you can take. Your welcome to Pm me and we can get in contact to discuss this further best of luck Jordan.
Talk to a good mortgage broker or find a good loan officer. If you went to school and are going into your field of study that can be used as your two year work history. That’s what I did. Don’t let one loan officer get you down even if you get reject which I doubt, shop around!
Hi everyone, my name is Carsen. I'm planning on getting into my first multifamily house hack this year in Lincoln, NE, with gifted money. My grandfather recently passed away, and some money has been given to my parents. They are open to me using it as a down payment.
The plan is to use a 5% FHA loan, live in it for a year, and continue investing from there.
Is this possible with gifted money? Is there anything I need to be careful of when dealing with gifted money and FHA loans? What problems might I run into? and is there anything I should be paying attention to/how would you approach the situation?
It's difficult finding anything on these forums with someone in a similar situation. I appreciate the help.
Hey Carsen, I am currently a year into my first house hack, looking at purchasing my next one. I am also in Lincoln, Ne. You shouldn't have any issue with that money being gifted. I was required to have reserves on my duplex since this was my first rental property, 6 months of reserves to be exact. My loan officer suggested to have my parents gift me money as long as they sign a letter saying there is no obligation to pay them back. So I used that as my reserve. She even mentioned once I closed I could just give them the money back. I didn't have to pay taxes on that either since I can receive up to 15k tax free a year from my parents. I did end up giving it back 2 months later. Of course check with your loan officer first. I also suggest looking into NIFA. It is a Nebraska specific program designed to help first time home buyers buy their first home. It also allows for up to 4 unit properties. They will help with up to 10k towards your down payment at 1% interest rate. You can't beat that. If your low income you might not have to pay 5k of that back. This will allow you to use more of your capital for future deals or rehab. Also consider going conventional on your first property. I got a 5% down conventional on my duplex. This will allow you to move out sooner and not have to re-finance if you wanna house hack again into another property. Your offers will also be more competitive compared to FHA offers. If you have any further questions don't hesitate to PM me hope this helps.
@Conner Olsen i appreciate your response. I will definitely look into furnish finder and similar mid-term stays!
Hello bigger pockets members. I was wondering if anyone is doing mid term/short term rentals in Lincoln NE. I recently did a full rehab on a duplex and am looking into possibly doing a mid-term rental on one of the units. I would consider short-term rental but leaning mostly on midterm. Would appreciate feed back on how your venture is going thanks in advance.
Thank you! What I'm finding is that conventional single family loans I can get for ~5% down but once I start looking at conventional loans for 2 unit they go up to ~15% down and higher the more units the property
You should consider shopping around for a different loan officer maybe a broker. I closed on a duplex with 5% down December of last year. Am looking for my next house hack and my loan officer mentioned I could get approved on a 5% down 2-4 units as well. She even mentioned she could factor rents from the current unit I live in to lower my debt to income ratio. Don’t give up and settle for something you don’t wanna live in either.
Hello,
I live in Massachusetts and currently have a loan out on my primary residence which is a 2 bedroom condo. I recently applied to get pre-approved for an FHA loan to purchase a multi-family home which I was going to move into as my new primary residence. The loan was denied because of the below clause:
(b) FHA-Insured Mortgages on Principal Residences
FHA will not insure more than one Property as a Principal Residence for any Borrower, except as noted below. FHA will not insure a Mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties, even if the Property to be insured will be the only one owned using FHA mortgage insurance
I know a lot of people use FHA for multi-family but is it always the first loan they take out? Has anyone else ran into this hurdle? Any way I can still use an FHA loan without paying off the entirety of my current loan first? Is this something lender specific?
Thanks!
I couldn't go down the FHA route because I bought my house hack last year during a sellers market. Sellers wouldn't even take a FHA buyer seriously because that property has to pass a FHA inspection to get approved.Now that it is more of a buyers market depending on your local market you might be okay with FHA. If there is still a ton of competition in your area look into conventional. I just talked to my loan officer and there are 3.5% down on Conventional as well for a personal residence. Just something to look into.
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $235,000
Cash invested: $15,000
Currently house hacking this duplex. Using 5% down conventional. I took advantage of a program called NIFA that helped me with 10k towards the Downpayment. The 10k was borrows at a 1% interest rate for 10 years. This property now covers 70% of my mortgage including property tax and insurance. Once I move out and rent out my units this property is guaranteed to cashflow.
What made you interested in investing in this type of deal?
Good area as well as the potential for higher rents. Great apportioning for sweat equity.
How did you find this deal and how did you negotiate it?
MLS. I purchased this property in December of 2021. A very challenge time for buyers. In order for seller to take me seriously I had to go conventional instead of FHA. I also had to wave inspection contingencies big risk but minimized it by inspecting the property myself throughly
How did you finance this deal?
Convenient 5% down as well as Downpayment assistance from NIFA.
How did you add value to the deal?
I fixed issues my tenant had. I fixed the shower as well as added new appliances (since old ones weren’t working properly) in order to justify raising to market rents.
What was the outcome?
I am now building equity as well as saving money to buy my next house hack.
Lessons learned? Challenges?
Having system in place in order to have future deal transition smoothly.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Got a great team together. My agent especialices in multi-family that was huge advantage.
Hello biggerpockets members, I just closed on my first rental property. I will be house hacking this property so one of the tenants has to go. The tenant that has to go has been in this property for 15+ years. Unfortunate this tenant has never been changed a security deposit by the previous landlord. I now have to give this tenant a 30 day notice of non-renewal.The unfortunate part is this tenant had to move out all their belongings by January 31st in Nebraska, which if you didn't know we get lots of snow at this time. I wouldn’t like to do this but I have to since this is an owner occupied property. My question is should I give some kind of Incentive to have this unit cleaned out by the 31st of January?