All Forum Posts by: Matthew Brill

Regarding credit, per mortgage qualification, you need a score over 620 (conventional) or 580 (fha). Lower scores get higher interest rates (and thus higher mortgage payments). Best rates over 740.

Regarding cash, $8000 is a great start but it will all depend on the size of the loan. And don't forget you'll also need cash for closing costs and reserves. Ultimately, your monthly income and DTI ratio will determine how much of a monthly payment (and therefore loan amount) you can afford.

The best thing is to get one! Using the FHA for the quad might be a more efficient use of capital but it's not worth delaying your first deal or passing up on a good deal.

I like your plan. I would go with the FHA as long as the numbers pencil out. You can essentially get 2 assets for the price of 1! The lender should be happy to give you the 3.5% down payment and see you have all those reserves in the bank. The only thing that would be better would be getting the FHA on a value add property, use the extra funds for a rehab, and then refi into a conventional loan and get to use the FHA loan again to repeat.

An FHA is an owner occupied loan, meaning you have to live in the property to be able to get the loan. This is a separate loan product from conventional (Fannie Mae and Freddie Mac loans). Conventional loans can be owner occupied or non-owner occupied. If you get an owner occupied conventional loan it will have a lower interest rate and potentially higher LTV than a non-owner occupied loan conventional loan.

The first thing would be to make sure you are within the rules of the HOA. Some can be very strict and restrictive regarding renters and parking. Also keep in mind that the HOA can enforce assessments at any time (lump sum and/or monthly).

You will be saving up for another down payment, it's just a matter of what the LTV of your next purchase is. If you go conventional you will need a larger down payment. Or if you qualify (refinance out of FHA or otherwise), you can use the FHA product again. Your first property will become a traditional rental property, hopefully cash flow positive when renting out all the units.

If you were to refinance, then yes you would have to intend to live in the house another year. If you are to purchase a value add property you can potentially get enough forced appreciation to refinance into a non-owner occupied loan.

Best next step is to start contacting some local lenders with the goal of getting a pre-approval letter. They will ask you for your finances and then let you know if you can get a mortgage and for how much.

You should definitely have a CPA do this for you. I am not a CPA. 

You would break the all the costs of the property into fourths. 1/4 is your primary (depreciation and other expenses don't factor in) and the other 3/4 is a rental. So your depreciation each year would be 1/27.5 of 3/4 of the improvement only (property value - land value). You would also take 3/4 of PITI and 100% of the expenses of your 3 rental units (none of the expenses to the unit you occupy) and that would be expenses for your rental business. Gross income minus those rental business expenses will be your net income (or loss). From there you subtract the depreciation amount to get your taxable income (likely negative), and that will flow through to your personal tax return. The degree to whether you can use it or not will depend on your personal AGI as detailed by @Ashish Acharya. 

You could still house hack if you are looking to get in with a low down payment. You won't necessarily save on your expenses, but it gets you another asset with less cash out of pocket. You could even find a property with some land and potentially park your mobile home there.