All Forum Posts by: Kevin S.

@Curt Smith That's a good recommendation from your bank loan officer. I guess the only question I would have for him is how often is he seeing loans on small multi-family (2-4 units) being approved for a 95% LTV conventional? After reading @Cesar Avendano's post, it reminded me that the banker I was working with on my FHA loan mentioned something about his bank also requiring 15% down on a duplex (even owner-occupied) when going conventional. Please don't quote me on this, but I have a hazy recollection that he may have said that high a downpayment on duplexes/etc. is required by Fannie/Freddie (again, don't quote me on that one).

@Curt Smith Again, not an expert, but from what I've read online and in the FHA handbook, 1) you only have to owner occupy for 12 months on an FHA, but it's 24 months I believe before they will take into account the rental income, 2) like @Russell Brazil said, you can only ever have 1 FHA at a time, and 3) the 100 mile rule is still in play even after 2 years of owner occupancy if you're moving from one place to another and still holding on to the first as an investment.

If I'm wrong on #3 I'd love to be corrected (not a fan of this rule)

@Peace Lily To clarify, is the 3-plex you're wanting to purchase 100 mile or more away from your current duplex? I am in no way an FHA or duplex expert, but the reason I ask this is there's a rule (I only recently found out about) called the 100 mile rule with FHA where if you aren't moving at least 100 miles away from your last residence (and you keep it as an investment) then FHA won't consider the income from your first property. I.E. you would have to have the income, excluding rental income, to cover both mortgages.

I know that doesn't exactly address your question regarding the 3-plex being considered an investment property by FHA, have you talked with the loan officers about providing proof that your duplex is already fully rented out, to show your intentions of occupying the 3-plex? Also I agree with @Joe Jor that if you haven't already you might talk to local credit unions and see if they can help you out. Finally, if that fails you may see what the banks offer as far as low down-payment conventional home loans, I know when I was looking earlier in the year (June-July) there was an option for me to do conventional at 5% down payment.

@Upen Patel correct me if I'm wrong, but I'm pretty sure the 100 mile rule ONLY applies if you're moving from one FHA-loan property to another, which is why @Stephanie P. recommended they refinance into a conventional loan before moving. With a conventional loan on the 4-plex they shouldn't have a problem getting an FHA loan on another property that takes into account the 4-plex rental income.

@Nurzhan Abenov that's kinda what I figured, haha most people don't under-report their net profit

@Nurzhan Abenov Congrats on your first flip! Just a quick question, when I look at your numbers I'm seeing 127,000+5000+13500+6500+8800=160,800 in total expenses. Against a sales price of $179,000 that should leave you with a net profit of 18,200 not 13,500. Is there some expense line you left off or was your net profit actually 18,200?

@Colby Mulry I'm with @JD Martin, just evict them after their lease expires and find someone who'll pay you on time. Also, you should consider increasing your late fee (make sure to keep it to an amount allowed by your state) so that tenants are more likely to pay on-time to avoid it.

@Alexander N. when @Chris Mason says "a tad higher" regarding the standards for an FHA property, what he's saying is that an FHA loan requires the property be in livable condition PRIOR to closing on it (unless you do a 203k loan) so there is no way that you'd be able to close on a property needing any major work. As such, you'd most likely be required to be living in it within 60 days.

@Josh Crockett Everyone is different on what they look at CoC, CF, etc. but when I'm doing that I'm most concerned with cash flow since my strategy is long-term buy and hold. That being said, I still look to see a positive CoC %. If you're dead-set on making a down payment like you talked about, I'd be looking to get your CoC % above the average of the S&P 500 long-term (i.e. greater than 10% annual ROI) otherwise you might as well just invest the money in the market rather than RE.

@Josh Crockett What I'm saying is, when you analyze properties it's helpful to look at them like they were fully financed. If they cashflow then, that's great. If they don't cash flow when fully financed or it's break-even then the money you are putting down as your down payment (i.e. 25% in your case) is basically you purchasing the cashflow you get when you put that 25% down. Ideally you want properties that cashflow when fully financed because that means that if you spent $0 you would still cashflow.