All Forum Posts by: Katherine Serrell

So this is tricky. I am living in my 3rd househack now I ran into this as well more than once. Basically to make someone believe you are not trying to use the FHA loan "as a vehicle for obtaining investment properties" you have to have a "jump" i.e. the underwriters ask themselves "Why would someone want to buy a not-so-amazing quadplex in a not-so-amazing area when they already own a perfectly good, updated 2 bedroom condo in a great area close to work?" In my experience, this is also true for other types of financing for primary residences.

For this reason, many people start with a multifamily home then "jump" to a better quality one in a better area or to a townhome, small single family home, etc. Then, the next "jump" might be a larger single family home or a single family home with a garage, a single family home walking distance from work, a home with a backyard etc etc. 

You basically just have to be able to justify the move with something tangible.  

Your options are:

1. Buy something that is a "jump" and househack that ..so in your case, buy a single family or a townhome.

2. Refiance your condo into a commercial loan or investment property loan

3. Call, call, and call lenders until you find someone who thinks they can get this through underwriting. In my experience, its very unlikely. 

If you want a business bank account you can open an LLC without tranferring any property. Think of it as your bank accounts would be for your "property management company" and roll with that. Then you would also be in a position to use commercial loans, credit, etc in the future and if you were to want to transfer the properties now or in the future to an LLC you would already have one. The only downside is you have to pay the fees for the LLC and annual filing which are usually pretty low (maybe $100-200 a year or less). Otherwise, you are limited to using personal accounts or opening new personal accounts.

1. A building technician or structual engineer should be brought out to evauate the problem before you get to blinly digging up your yard or drilling into what might be perfectly good contrete. They charge a nominal fee to come take a look (100-500 depending on how detailed you want them to be) and they arnt going to try and upsell you on expensive construction project since they are literally just paid to write up the report. This way you get a clear answer from someone with actual master degree-level training who has to sign off with a seal, license, and insurance backing them up versus some random contractor. If you plan on cheaping out on anything dont cheap out on this. 

2. Building tech or structual engineer can take a peek while they are there or reccomened who should. 

3. Find popular, trendy, similar architecture/age properties on Zillow, airbnb, etc and see what styles, designs, finshes etc they went with. You dont need to reinvent the wheel. Interior designers arent worth it for your intent and purpose in my opinion. 

4. Id ask a local GC what they would reccommend. Not sure about this one. 

5. Encountered this before. You often cant just "flatten" a driveway (even if it looks like you can). This could cause water run-off issues that would lead to water pooling or eroding soil around the house (or your neighbors). That can lead to all kinds of foundation issues not to mention washing away your yard/landscape. Id also have the structural engineer or building tech take a look while they are there evaluating the water problem and they can at a minimum point you in the right direction. Again, not something to cheap out on.

I would find a different tenant...Its not worth the trouble. Im almost certain that if they dont have a social security number they dont have a credit score and you dont want to be the guinea pig finding out if they will pay on time. Also, if they dont have a driver's license and your not close to very accessible, relaible transportation ... how will they get to work to make money to pay rent? 

Personally, I would contact a local real estate litigation attorney for a free or minimal cost ($100-150) and see what steps they reccommend. Specifically, I would ask if you needed to start the eviction process. Evictions there take several weeks from what I have heard so best to get ahead of it. I would also have him email the realtor and the realtor's broker-in-charge and inform them of the situation and see what they reccomend. 

1. Yes they absolutely did

2. He needs to contact his insurance company and inform them!!! They may need to alter the policy temporaily to make sure he is covered since there is a "tenant" there. 

3. The sellers cover the damage but good luck getting them to pay it. You would have to take them to small claims court and even then you would still have to collect the money post-ruling which could get tricky depending on the laws. 

If you really wanted to you could contact your real estate commission and see what your options are as well. The realtor truly dropped the ball (could definitly argue negligence) and if push comes to shove the real estate brokerage/firm likely has measures to take care of this. They should have done a $0 leaseback or an addendum (depending on how the state's purchase contracts are written). 

Not offering legal advice becuase I am in fact not a lawyer but I was in a situation where a realtor also dropped tha ball when I was first starting out and my attorney said if I end up in a lawsuit the realtor's brokerage has insurance for this purpose and we would name the insurance as a party in the lawsuit and they would handle it that way. That gave me some peace of mind. The realtor ended up handeling it after I basically said (and made it very clearn) this was her mess and according to my attorney she needed to clean it up. I really didnt want to be pushy but thats what I ultimately had to do. 

In addition to BP books, podcasts, forums, etc... A great way to get pointed in the right direction and make connections and build your team (realtor, lender, contractor, insurance agent, mentors, etc) in your local market is to attend real estate meet ups and talk to the people who have specific knowledge applicable to your market, strategy, etc.

Not true at all. You just cant have more than one FHA loans at the same time... So if you bought your first property with an FHA loan, you would need to refinance it into a different loan type (commercial, conventional, etc) or sell the property if you wanted to use another FHA loan since you can only have one FHA loan at a time.

If you have lived in your primary residence for 12 months or more you can always rent that out and buy another primary with 3.5-5% down. I've bought 3 deals this way (0% down, 3.5% down, and 5% down). Just something to consider!

You should be able to do a 1031 exchange which basically means that as long as the property your selling is a rental/investment property (even if it was formerly your home) and you are using the proceeds to invest in more real estate FOR BUSINESS (i.e. NOT to expand your own backyard) you don't have to pay any tax on those proceeds.

Before you go down that rabbit hole, you would want to get a good CPA who has had experience doing these transactions because its not a 1031 exchange unless there is someone involved as a "qualified intermediary" to oversee and help plan the transaction. 

Hi Nef!

Congrats on your journey!

1. Depends on the market but there is enough pie to go around even in competitive markets where good deals are hard to find. If you have trouble getting started or scaling in your local market, you can always invest elsewhere. 

2. "turbulent financial times" are never-ending and there isnt a perfect market or perfect time to buy. When rates were 2.5%, people didnt want to get started because there was "too much competition" and they "didnt want to overpay" and now the same people are saying they dont wont to get started because "rates are too high" or "I am going to wait until rates fall again" etc etc etc. My point is...there isnt the perfect time to buy....you just have to buy what makes sense today with the decision-making knowledge you have available. That being said -  It is still a great time to get started... I just wouldnt get started with some luxury million-dollar airbnb and instead I would buy something more recession-proof (single family, multifamily,  househack, etc)

3. If you buy a house or multifamily to househack, you cant put it in an LLC since you are buying it with a residential loan as a primary residence. DISCLAIMER: I am NOT a lawyer but my understanding is LLC's only offer one "layer" of protection and honestly a good insurance policy/commercial insurance policy with an umbrella liability policy will do you more good than an LLC will. The only people who win when you open up an LLC for every property is your lawyer, accountant, and the banks. Any lawyer will tell you that ultimately if you do something grossly negligent, malicious, etc it doesnt matter if you have an LLC or not - its bad news. I personally didnt start an LLC until I bought my 4th property.