All Forum Posts by: Lin Ding

@Shawn Mcenteer I thought PMI incurs as long as I'm putting less than 20% down.

To increase rent revenue, I'll need to raise the rent on the long-term rental and rent 3 other bedrooms by room via mid-term rental or STR is what I'm thinking plus I'm househacking. I hope to refinance to a lower rate in next few years if possible.

@Shawn Mcenteer 
Yes I'm using 3.5% FHA. My pmi is around $700. How much down payment is usually needed for the low money down conventional loans without PMI you mentioned?

This house is also renovated and roof, water heater and appliances are pretty new. That's also why for the high price tag. A lot of houses I looked in the JC area are either old/outdated or in bad shape and need tons of work. I was looking for turnkey house that need minimum work so I can pretty much rent out on Day1.

Thanks all! I know some areas of NJ, rent control applies. There's no rent control in this area I'm buying. But my attorney did say 30-day notice before the 1st of rent increase is needed. So I guess I can only increase rent on Jan 1.

Quote from @Leo R.:

@Lin Ding you mentioned that you plan to refi in the future...the problem is, nobody knows when (or if) rates will go down (and in fact, they might be elevated for a long time).  ...the last time we had inflation this bad (late 70s/early 80s), rates rose and didn't come back down for a fairly long time (years)  --here's a graph of mortgage rates going back to the 70s:  https://fred.stlouisfed.org/se...

I think all buyers these days need to be able to live with the property indefinitely at the rate they're buying it at right now. ...If a property doesn't pencil out at the rate it's being bought at, then it probably doesn't pencil out, period.

Thank you Leo. Yeah I agree. No one knows at this point. This is just an expensive market and has a lot of uncertainties during this time.

Quote from @Mike Wood:

@Lin Ding  If the seller agreed to repairs, don't delay closing just for them to be completed (unless they affect your financing).  If they are not done at closing, have the closing company hold back money in escrow until the agreed upon repairs are complete.

Dont worry about exact prices and interest rates.  If you like the house and the area, stick with it.  No one can time the market perfectly.

 Thanks Mike! They seller agreed to escrow until the patio work is completed and free and clear. 

Quote from @Nate Sanow:

Hey there. You are wise to have some caution, that’s always a little good. But one thing I’ll say is that everything about the appraisal doesn’t really matter for the long term. Yes, appraisals matter. But market value matters more. 

Would you be paying more in rent if you didn’t acquire this? Or a similar amount? Then, it’s a good deal. 

Thanks Nate! I agree. Appraisal only speaks to the how much people are willing to pay at that time and it can be changed with the comps used. What do you use to evaluate market value? Rent revenue? Even if Jersey City has the highest rent growth in the country but the rent growth is slowing. I can't imagine it keeps going up like this and definitely can't compete w Manhattan. There are a lot of new construction apartment buildings built and being built all around the city.

I just do rough numbers here, say I can raise the rent on Unit 1 to $2400 and get $3000 from the 3 bedrooms in the duplex, that's $5400 total. I'll pay about $1000 a month to live there and accumulate equity. But this is when I'm optimistic with the numbers. I'm not sure if I can get that much on rent.

Hi BP community, I can't seem to come to peace with myself right now so I'm seeking some wisdom and to see if I'm crazy doing this or I'm just overthinking it.

This is a 2-family house in Jersey City (Unit 1 is currently rented, has 3 bedrooms and 1 full bath; Unit 2 is vacant which is the one I plan on moving into and house hack, has 4 small bedrooms and 3 full baths). It was listed or $849K. We first negotiated to $835K plus got the seller to offer $15K concession because some repairs are needed (est. $15-20K) per the inspection. However, the appraisal came back for $815K in early Oct this year. Seller had received appraisal for it at $865K in June so he wasn't happy about the lower appraisal, but he agreed to lower price to $815K without any concessions. Then my agent worked with the lender and they got the appraisal updated to $900K two weeks later. The lender told me they can lend me more money considering the higher appraisal, up to the re-appraised value ($900K) or anywhere in between (1st appraisal $815K- updated appraisal $900K). I wasn't too confident about the updated appraisal $900K, because I saw in the updated report, the higher comp they used to swap out one of the comps in the original appraisal was sold in Feb2022 (we were in Oct2022). So I decided to go with the $835K purchase price w seller offering $15K concession. I hope that was the right move instead of purchasing at $815K w/o seller concession cuz then I would still have to come out of pocket for the closing cost.

Now I'm getting nervous if this is a good deal or not. I know unit 1 that's currently rented is below market rent and the lease is coming up in end of November. I want to raise the rent to close to $2400 however it's a big jump from where they're at $1850.

With the duplex I'm going to househack, I'm thinking to rent out by room (maybe mid-term rental) and I have 3 small bedrooms can be rented out, or do STR. However I'm not sure how much offset that'll bring cuz it's a brand new market for me (never lived in Jersey City before). Any idea or advice anyone has to give?

I'm doing 3.5% down on this house. My mortgage payment will be around $6300. I won't cash flow positive with this house, but that's on 6.125% interest rate. Hope to be able to refinance in the future to lower monthly expense. But Robuilt also said in the BP podcast that cash flow creates financial freedom but appreciation creates wealth. What do you all think? Any chance I'm buying it too expensive now than buying later as the market keeps going down? This price is after the market has been going up for the past 3 years. We're now in a correction. Is this a bubble market?

There's also another thing with the house. The seller has an open permit for the patio that's not up to code. The seller agreed to work on the patio and close the permit, but that work hasn't started yet cuz they're waiting on the city's approval before they start. However my interest rate lock period is until early December. I'm thinking about this now as market is dropping. That offered price was made 2 months ago and appraisal was done in Oct. If we can only close in December, the house value may go down even more. Am I just thinking too much here? What do you think?

This is an old house built in 1910. The inspector found an unused oil tank underground. The seller agreed to take it out and remediate the soil. Has anyone had experience with houses that had oil tank removed? Any potential issue?

Sorry, I know this is a long post. This has been going on for a while now since I put an offer on it in September. Appreciate all of you and this awesome community! Looking forward to hearing anyone has to say!

Quote from @Josh Starner:

Hey Lin, 

I would roll the closing costs via a seller's concession into the purchase price and go into the deal with a greater level of liquidity in the event something comes up in personally or professionally. Also, with the new home there will most likely be some additional repairs that will want or need to be made that may require that extra cash. 

Best of luck to you!

Thank you so much Josh! That's what I decided to do. But I'm now thinking what to do now as I'm still waiting (see my comment to Brandon)

Quote from @Brandon Beardt:

Quote from @Lin Ding:

Hi BP community,

Let me describe this long story short. So this house I'm buying is a 2-unit small multifamily which I plan on house hacking. It was listed for $850K, and we agreed to $835K purchase during attorney review (attorney is required in the state of NJ). During the inspection, we found an extensive list of things that need repairing due to the unprofessional workmanship of the previous owner. The seller agreed after negotiation to give us $10K in credit towards closing to do the repairs. Then the appraisal came back with appraisal value of $815K. Then the seller refused to lower the purchase price and give us the credit. The seller made us to choose between 1) lowering the purchase price to $815K, and 2) keeping the price at 835K but offering $10k credit.

I didn't want to cover the $20K in price difference as the house was under appraised. Just before I was going to accept the lowered price $815K and waive any credits, the lender came back to me and said they did a re-appraisal which ended up being much higher - $900K. So the lender is saying I can borrow more because the house is re-appraised more, so now I can roll some closing cost into the loan and I have more money to work with to do the repairs needed.

I was planning on using cash to cover the repairs and closing (in the lowered purchase price scenario). But now with the higher appraisal, by borrowing more I'll pay more interest and my monthly payment will increase but I get to keep money in my bank. If I invest that money in stock market, the market is in the negative now. But I guess I can save up for the next property.

All you experienced RE investors have more experience and I'd like to hear what you would do in this situation.

Thank you so much in advance!

Lin

 Hi Lin,

The lender is offering to lend based on the higher appraised value ($900K) instead of the lower sales price of the property ($835K)? Is that correct?

Hi Brandon, thanks for responding. Yes the lender did offer to lend up to the re-appraised value ($900k) or anywhere in between (1st appraisal $815k - updated $900k). I wasn't too confident about the updated appraisal $900k because I saw the comp sold in Feb2022 was used to swap out one of the comps in the original appraisal. So I went with the $835K purchase price w seller offering $15K concession. I hope that was the right move instead of purchasing at $815k w/o seller concession cuz then I'll still have to come out of pocket for the closing cost.

Now I'm getting nervous if this is a good deal or not. I know the unit that's currently rented is below market rent and the lease is coming up in end of November. I want to raise the rent to close to $2400 however it's a big jump from where they're at $1850. With the duplex I'm going to househack, I'm thinking to rent out by room (maybe mid-term rental) and I have 3 small bedrooms can be rented out, or do STR. However I'm not sure how much revenue that'll bring cuz it's a brand new market for me (never lived in Jersey City before). Any idea or advice anyone has to give?

There's also another issue with the house. The seller has an open permit for the patio that's not up to code. The seller agreed to work on the patio and close the permit, but that work hasn't started yet cuz they're waiting on the city's approval before they start. However my interest rate lock period is until early December. I'm thinking about this now as market is dropping. That offered price was made 2 months ago and appraisal was done in Oct. If we can only close in December, the house value may have gone down even more. Am I just thinking too much here? Anyone?

According to the lender, the higher appraisal gives me to the option to borrow more now. So it comes down to if I want to spend more at closing and repairs out of pocket or if I spend less for closing and repairs with the seller credit but my monthly payment would be higher (like $100 more).

The lender and my agent both advise me to go with the higher purchase price w seller credit so that I'm less out of pocket to invest that money in the bank on something else or save up for the next house. I do have to stay in this for 1 year though before I can move to the next one for low down payment. Thoughts?