All Forum Posts by: Kasey Ryan

HEY BP, hoping to bump again. Thanks for that info Kelly! So I talked to my agent and broker about this, and it looks like it's a go for the bank allowing a legally zoned 5 unit as long as it is only being used as a 4 unit to get FHA financing. We just need to have them take off the 5th set of meters for the 5th decommissioned unit.

The sellers agent mentioned the unit is already disconnected from all utilities. How difficult is it to then take off the meters from there? 

Bump? Still hoping to find info here. Been asking the few folks that I know, and searching endlessly online, but still cannot find any information on exactly what is required to decommission a unit...

Hey there BP community! So I've been searching for information and have not had any luck finding much of anything on this... recently a 5 unit has come up for sale in my target area of Illinois. 1 of the units is unoccupied....I am trying to use FHA financing, and so can only go up to 4 units.

I would like to contact the seller to see if they would be interested in decommissioning a unit, so that I could then get financing and make an offer. I read about this possibility in Brandon's inspirational story and I was hoping I could benefit in a similar way. 

BUT I want to know what exactly is necessary to decommission a unit before making first contact. It can't be as simple as just deciding it is decommissioned and telling everybody? I assume there must be a set list of criteria? Thanks for any and all info!

Thank you for the reply! 

One thing stood out for me, insurance you'd mentioned is 500-550. Is that per month?

I'd contacted an insurance agency about a few properties in my target area and they'd given me quotes right around the 100 a month mark. Should I be way re-thinking that?

Thank you for the details on common areas I'll need to evaluate those specifics on each property then.  As well as the specifics on the rest and the extra costs to think about.

Hello all!

I am still working on my first dealt here, and I wanted to ask you all for a 3 or 4 unit building:

How much is average for electric and heat? (common areas/the costs I pay)

How much is average for insurance?

How much is average for Water sewer garbage?

How much is average for Vacancy, Capex?

How much for vacancy? (%)

For more specific location info, I am looking in near chicago south western suburbs, brookfield, riverside, berywn, lyons, as well as maybe northern chicago suburbs such as evanston (not as much focusing on northern yet though).

I have been using numbers I found online already through research as well as asking in person at house tours, however I wanted the BP communities take on it as well. Thank you for any and all responses! :)

Hello again Bigger Pockets community!

I have been researching for a number of months now, and have filled up on some good knowledge. I have a few different lenders in place for FHA financing and am pre-approved up to various amounts. I have a Realtor in the area I've been using. I'm looking to buy a 4 unit and live in 1.

At this point, I'd like to expand the team a little more. I'm having real trouble finding the good properties and the right prices and wrapping my head around which areas are good/bad/high demand/high employment/etc...I also find there are not a lot of available 3-4 units on the MLS and hope they could lead me towards those investors whom might entertain an offer even if the property is not on the market.

I would like a reputable property management company in that area to lead me towards the right areas/properties, get any good tips, get more leads on team members, and most importantly to manage the property (at least screening and placing tenants) once I get it. 

1) Does this sound like a step in the right direction?

2) Any recommendations on what companies and/or specific employees to go with?

@Christian Bors 

Good point, if the rent is paying it all then why worry lol...

Oh very cool! Yes at first I was under the impression that the FHA was for first-time-homebuyers, but then I'd noticed, as you did, that there is no stipulation as to that. Since I am a first time homebuyer using FHA though, I plan on looking into other bonuses I may be able to secure. I woder if you or anybody else would know of any in particular I might take a look at?

@Will Porter:

Very cool Will, I'll connect with you and we can catch up with each others progress/ideas/tips/etc from time to time if you like? One thing I've been looking into is the NACA program as opposed to FHA. Still investigating it though, have a few reservations but it looks like they are at least legitimate however cumbersome.

@Christian Bors:

Thank you for the prompt response! I'm glad to hear it's working out well for you! I hope to also be in this boat soon! :) If you don't mind, I will likely take you up on that offer for questions with the strategy! When did you purchase it? Any plans of eventually refinancing to get rid of the MIP?

@Jon Holdman:

Thank you as well for the prompt response! I have learned quite a bit from your posts already, though we've have yet to post to each other. You seem to be a very prevalent figure here, and I thank you for all the great info you contribute to the real estate investment community.

Hello there Bigger Pockets Community,

Kasey Ryan here, new investor, new to real estate, new to BP.

I have been doing quite a bit or research and have stumbled across one particular question that I cannot seem to find an answer for, I'm very sorry if it is already answered elsewhere but I've looked and cannot find it.

I'm possibly going to use an FHA loan to purchase a multi-family property, live in one unit, and rent the rest. I'm using the 50% rule to estimate expenses besides the principle and interest. HOWEVER, I cannot find verification anywhere as to whether or not that should generally include the monthly mortgage insurance premiums that are tacked on to FHA loans or not. So... with that said... should it? Should I assume that 50% of the rents will go to expenses including the monthly mortgage premium or should I assume that will be over and above the expenses?

Since it is an additional 1.3% or so of the principle every year, I feel it changes the analysis substantially enough to warrant the question...

Thanks for any and all input!

-Kc

Hello there Bigger Pockets community!

Kasey Ryan here, I introduced myself a bit ago on the new member introductions forum. I've been doing more research, and have come to a point where I'd like some more exact numbers to crunch. My post became longer and longer as I got into it so I'm going to post my specific questions on the top right here. If you don't mind reading my extended blabbering below the questions, then please have at it :).

Any and all help greatly appreciated. I take criticism well; if something seems very flawed,  please don't hesitate to tell me.

A) about how much the property insurance would be on a 4 unit in Riverside, Illinois (while were talking about it, just in case, what about a 2 or 3?)

B) about how much the property tax would be for a 4 unit in Riverside, Illinois (what about a 2 or 3?)

C) If the "50% rule" includes property taxes or if I should account for those over and beyond the assumed 50% of then operating expenses

D) If the "50% rule" includes FHA mortgage insurance premiums or if I should account for those over and beyond the assumed 50% of rent operating expenses

E) I've seen online (rentometer) that average rent is 876 for single bedroom, but does anybody have some real numbers/experience/insight/etc. into how that accurate this is? Also,

F) Having never rented to anybody before, how easy is it to get the actual renters? Does riverside have a lot of renters? Is it worth getting somebody in faster and more long term if I make the rent 800? What about the places I see on there renting for 1000? Are landlords really pulling in 1000 when equivalent properties (single bedrooms) are renting for 800? If I could truly pull in 1000 a month for each 1 bedroom unit then I could afford a much larger mortgage and still break even...

G) Crunching the numbers I've been estimating for now (which I don't really trust, hence my post here) it seems that I should aim for a mortgage of about 210,000 if we assume that the FHA Mortgage Insurance and property taxes are included in the 50% rule. And that if the Mortgage insurance is NOT included in the 50% rule that I should aim for a mortgage of about 180,000. I've posted my math related to this point at the bottom of the post.

If it turns out that the property tax is not included in the 50% rule, then I have no idea how to begin doing the math...

All of this though, is again based on estimates that I am not so confident in, especially the rental income that I can expect from Riverside, Illinois (I've been using 850 so far as my estimate and working backwards from there to figure out how much house I can afford.)

To give you an idea on my strategy for right now: I want to use the FHA (maybe a 203k but I'm not sure if I should get into rehab's yet???) to purchase a property with 4 units. I will rent 3 of the units out, and use that rental income to pay for operating expenses and the mortgage. I do not need to make the property cash flow because I will be living in one unit. Having a "free" place to live will be cash flow enough for me. I would even be happy with a slight negative cash flow (paying out only 200 a month, for instance, instead of rent, or a full monthly mortgage payment.) This is because I am really just starting out. I'm 24 right now, recently graduated, and just now (on September 1st to be specific) starting my first salaried position after college.

End of main section.

Start of blabbering section and the math I used for point G) above.

I like the 3.5 down on the FHA and the fact that you can use prospective income from rent to help qualify. I've saved up some money for a down, and I'm in the process of getting a pre-approval from a couple banks that offer the FHA.

My girlfriend and I are interested in the Riverside, Illinois area in particular, so if anybody has some insight into that area it would be very helpful!

In my research I've come to find that the FHA loan has some hefty mortgage insurance that must be paid monthly (1.3% loan) as well. In addition to a one time 1.75% upon closing. This is in addition to the regular property insurance. In addition to property tax. In addition to the mortgage itself. With all of that cost, it seems like it would be hard to cash flow, or even hope to break even, with the homes I've been seeing thus far. (Still looking for the right deal, I know the majority out there simply will not work.) However, I realize that I really do not know any good idea of what numbers to run when estimating a deal. This is why I have the list of questions written above, I think that information would be most helpful to start getting a better analysis framework going.

The math I've done for G) is below:

Assuming MIP and property tax are included in 50 % rule, it seems I should aim for a mortgage of about 210,000

3 units at 850=2550

Assume 1275 for operating expenses (vacancy, evictions, utilities, advertising, tenant damage above security deposit, mortgage insurance, property taxes, regular insurance, repairs when things break down, etc...)

Assume 1275 to go toward the mortgage

Assume 6% mortgage at 30 years with a 210,000 loan=1259 monthly

If we assume that MIPs are NOT included (but property taxes are) it seems I should aim for a mortgage of about 180,000

3 units at 850=2550

Assume 1275 for operating expenses (vacancy, evictions, utilities, advertising, tenant damage above security deposit, regular insurance, property taxes, repairs when things break down, etc... bot NOT MIP's)

Assume 1275 for both the mortgage and the mortgage insurance

Monthly MIP 195 (Annual 1.3%-2340)

Assume 6% mortgage at 30 years with a 180,000 loan= 1080 

Monthly recurring total for Mortgage and MIP=1275

Does the math seem to be somewhat on point? Am I missing anything huge yet? Or making any little mistakes I may want to account for?

Sorry for the long post, I'm editing it now to put the real questions at the top and leave the extended blabbering for those of you who feel like reading the full thought process.

Thank you!

-Kasey Ryan