All Forum Posts by: Keino Chichester

Hi, I'm considering listing a 7' Tall, 2 br basement unit on AirBnB and wanted to know what's the occupancy rate and at what price point for similar listing in Brooklyn. 

I'm thinking of listing at $75/night and expecting 80% occupancy rate. 

Here are some facts about the unit: 

It's about 3 blocks from the subway (C train)

Fully rennovated

Washer & Dryer 

Kitchenette: electric stove, refrigerator, Microwave

Large backyard which i plan on building a deck and pergola with outdoor lighting. 

Private Entrance front and back.

If anyone can let me know if this is realistic to expect that would be great! 

Hi @David Eiges,

First I must say: If you can qualify for an FHA loan which is only 3.5% down-payment, I think that would be a better product since you plan on using the property as your primary residence. I also know that other banks have other programs that are similar, (~5% down-payment) that would also be a good option for a primary residence. The catch is the PMI which sucks but it still results in higher cash on cash return generally. I just refinanced out of an FHA loan and my payment went from $2858 to $2399. Same interest rate and same 30 year fixed term. You can always refi if it appreciates or you recapture the principle to the standard 75% or 80% LTV.

An I believe your lender is referring to the fact that owner-occupied properties are viewed as lower risk for Banks' Underwriters thus the terms are more favorable. (Lower interest rates, lower required down-payments. 

I hope this help you figure out what questions to ask your lender the next time you speak. 

keep us updated!

@Shiyear Woodbury

I will second @Kim Younkin 's advice to not undertake more than a 4 unit as your first property. I know it's exciting to go big, skip some steps but there are fundamentals you need to learn and a 12 unit is too much of a risk. Before you assume more risk = more reward in this scenario, consider this: An FHA / 203k financed property generally have a way better Cash-on-cash return even with the PMI. I'd advise you to take the 4 unit route and let it brew for a few years. You can save the cash flow for a future investment or reinvest in the same property in the form of improvement that would force the appreciation for a refinance of your own in ~2 years. All the while using only 3.5% as down-payment which would be a small part of your parent's 60k equity. Just make sure you are buying at a price point (after initial repairs) that allows for a decent cash flow after PITI and you'll be okay.

I hope this helps. Keep us posted on your progress.

Good move on financing. I plan on leveraging wherever I can for the same reason, better ROI!

2.2M in Virginia I suspect will get you a nice anchor property. 

You mentioned "it turns out there was a tax lean" did she not disclose it to you when she signed? If not is it not her responsibility to pay  for the proceeds? If you agreed to take it as it, that's a whole other thing. But i'm guessing its not that big since you are still hyper lol

@Brandon Vu

There's a saying that goes; the best time to plant a tree is 20 years ago. The second best time is NOW. 

I believe if you purchase your house as if it's an investment property (purchase it according to market rent) It doesn't really matter if the price drops, you could be under water if the market crashes but your payments will be the same if the loan term is fixed. Thus, any rents you collect will have a positive cash flow which would only get better over time since you live in a pretty stable market. In most cashes, it's cheaper to buy than to rent especially when its a 2-4 unit property. You can spend a few years paying rent and waiting for a good time. Or you can buy now and get paid while building equity via principle recapture. 

good luck!

Keep us updated

@Levi T.

Sweet equity play!

Is it a cash purchase or do you plan on financing?

@Samantha Klein

@Craig Moore

I share your concern about having "too many doors". I think it's easier if its a 10 unit Multi than 10x SFH. My strategy is to keep folding them into each other while maintaining 5-10 physical properties. Sell off the earlier SFH or duplex and get 4-6 units. Then fold those into 10-12, etc. You can even start your own management company to take care of them when they reach a reasonable size. All while making some extra money as PM for other third parties which would help with keeping things "passive"

good luck!

Hey Jeff. In my opinion, if you can, you should secure a 2-4 unit multifamily using an FHA Loan. After that you can refinance when you hit the 80/85% LTV via appreciation and/or principle recapture. I know you don't have the credit but if you have a close family member that have the income, you can work something out, share it as a primary residence while you build. And in most Markets, that wont even use half of your 50k. Meanwhile you are saving on paying rent.

I agree with Jassem. When I purchased my duplex I made sure that if I were to rent out both units I would at least break even. Since a refinance (out of an FHA) and rent for my location increased i'm now looking at a 9600 NOI. And if I chose to rent 1 like i do now, I pay $1000 of the mortgage personally for a unit that is going for $1800-$2000 in my neighborhood. Considering I only put 17k for down-payment and maybe 25k improvements (not repairs), that's ~23% potential cash on cash return. Not to mention it has 250k Equity. Just throwing another number in there, my principle recapture is about $7500 per annum. All of which I would have missed if i were still trying to save 100s of 1000s of dollars.

I'm glad I made the move when I did with my meager stack of cash rather than waiting to save big bucks in order to buy  a multi-million dollar MF property. I would have been bleeding money in the form of rent payments as I wait for that moment which may never come. 

Just my 3 cents

@Paxton J. I don't know much about your market but I would say use the HELOC first before the withdrawal period ends. Cash is more flexible so you may want to keep that on hand or spend it last. With 200k as 25% down-payment, you can get up to 800k property, You can then evaluate the Potential Income (Rents) and expenses (debt, utilities, maintenance, etc) of properties at that price point in your area to see if it it worth it. But I know for a fact that you can get more than $1000 with what you have.

One example, I know of someone who purchased a Rochester SFH for 55k (35k then 20k rehab) it now rents for 1300/mo.

Keep us updated with the journey. I myself have access to 100k HELOC and am brainstorming on what moves to make next.