All Forum Posts by: Matthew Porcelli

I have somewhat of an oddball question/situation to pose. I own a home and occupy the upstairs (3 beds and 1 bath) and unfinished portion of the basement. I have a finished portion of the basement which I rent out as a 1/1. This space is considered an illegal apartment because it is not permitted and according to my understanding cannot be permitted due to ceiling height and lack of egress windows. There is access to "my space" via a door which I keep unlocked in the event of an emergency. 

I will eventually move out and would like to keep this house as a rental. 

My questions are: 

Can I maintain the illegal basement apartment and also rent out the space that I am using and do it legally, with lease protections, and treat it as an investment property in the eyes of the IRS/banks (for DTI purposes)?

Or should I rent out the entire house as a 3/2 with a finished basement/bonus room?

Or just sell and use equity (approx 200k) to buy myself another home and a Section 8 rental?

My main goals are protection from liability in case something happens while I am renting this home (if I can), legally reporting income so I can maintain a healthy DTI, while making the most of the equity I have.

I can probably get $2800 monthly for a 3/1 and am currently getting $1550 for the 1/1 for a total of $4350 (I would have to pay electric and water, assuming $300/mo).

I can likely rent whole house for $3000 and the tenants will pay their own utilities. 

My monthly mortgage with my current homeowner's insurance is $2200/mo. I know the insurance would be different as a rental.

Was able to rent a recently vacated space to an EMT who was living at home with a parent but did not want to bring the virus home inadvertently. 

I am fairly certain my tenant will remain employed for the foreseeable future being an EMT

Investment Info:

Single-family residence buy & hold investment in Holbrook.

Purchase price: $365,000
Cash invested: $20,000

An apartment in my primary residence.
Upgraded when purchased to command the highest rent possible.
Looking to expand to other buy and hold rentals in the Long Island area, possibly with the BRRRR method.

What made you interested in investing in this type of deal?

I wanted to buy a house (to begin building equity) but knew I'd need some additional form of income to be able to afford it.

How did you find this deal and how did you negotiate it?

Through a real estate agent.
Not much negotiating involved.

How did you finance this deal?

Mortgate

Lessons learned? Challenges?

Patience. This was my first house and I had a specific goal in mind. I visited about 100 houses for sale in a 6 month period.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My agent Kyle Kollegger was very dedicated and helpful. A pleasure to work with