All Forum Posts by: Logan McKay Zylstra

Good question. I am not a loan professional, but I feel educated enough to speak on this. The best way to finance a second conventional loan is the same process as how you got your first one. You will be occupying the property so you can get a primary residence loan (lower interest rate compared to an investment property).

When getting the loan for your second home, they will only be able to count 75% of the rents in your first property. So you will likely be looking at that first property as a net negative on paper. However, you have a good income so I don't see that being an issue for you when it comes to getting approved.

I'm sure most lenders would be happy to provide value to you and help you with your situation in order to try to win your business.

Personally speaking, I am not a fan. I think most of the time people forget that they even have a home warranty in the first place. In addition, your tenants will need the furnace, water heater, or whatever is broken fixed in a timely manner. Which in my experience home warranties aren't capable of doing.

If you are waiting for a market correction, it will definitely cost you in the long run.

An example:

Buy a house now with 10% down at a $525,000 purchase price with an interest rate of 4.5%.

Payment: $3,162

Buy a house now with 10% at a $488,250 purchase price with an interest rate of 6%.

Payment: $3,390

The FED has told us that they will be increasing rates again at the beginning of May, with other hikes in interest rates to follow. There is a misconception between the purchase price and interest rates from the way that I see it. Interest rates affect mortgage payments much more than the loan amount does.

At a 5% interest rate, the difference in a $1,000 increase in a loan amount is only about $5 per month. On the flip side, while you are waiting for the market to correct and drop by $10,000, you are only saving yourself $50 in monthly payments. Meanwhile, interest rates will only continue to rise, counteracting any perceived benefit of waiting for prices to fall.

My goal is to try to live for almost free in my house hacks and then be able to cash flow once I move out. In some markets, you can cash flow, but I don't think that is the norm. I didn't check your math, but $1,000 a month in cash flow for only 40k invested isn't a bad return at all.

I personally would recommend investing in the market where you live to start.

Side note: Conventional loans start at 5%. If you have the capital, I would definitely put down the 5% to avoid the FHA insurance.

Those who watch the Salt Lake City market may notice the lack of existing condos and condo development projects in SLC. It seems odd as SLC is booming with cranes and large multifamily projects being built across the city and suburbs.

There are a few reasons for this. The most apparent reason for the lack of condos is the time it took the sell the hundreds of condo units in City Creek (a downtown mall next to Temple Square). Although this project was completed in 2012 when the nation was coming out of the last recession, it still took considerable time to sell out these units. Interesting side note, the developer built the footings but didn't complete the last planned tower.

Another reason for the lack of condo developments is the builder’s liability. Unless you are a builder, you don’t really consider the risk of a defect in the building.

Lastly, Utahns are used to very large homes, as Utah has the highest average size of homes in the country. I think most Utahns look at a larger single-family house and opt to buy that rather than a smaller condo in the city. As downtown continues to grow, I believe that this will continue to change and more people will want to live a city lifestyle.

I don't mean to be overcritical, but having worked in commercial RE and owning residential units I personally do not see any advantages of service. It seems it would be much easier for me to 1031 into something else. It seems too nuanced for me to even consider. Also, would the investor have to accept the "net equity" you deem fair? I don't see why anyone would get into this program unless they have a bad property to trade/

Again, I don't mean to be too harsh, but it seems like you are trying to provide a service that commercial RE brokers already do. While the brokers may not offer something full service like how you are, I think it would be cheaper and smarter to do it yourself.

That is about where rates are.

I would use that capital to BRRR. The biggest pain point with 100k is scale, but if you successfully use those funds for a couple of BRRRs, you're off to the races.

If you live in a house for 2 years, you do not have to pay capital gains tax when you sell (up to 250k or 500k if you file jointly).

BP actually launched a new podcast talking about the current conditions of the market and left an Easter egg for an AWESOME, free resource. I would listen to that one and use that resource as a starting point.