All Forum Posts by: Melissa Hartvigsen

Quote from @Felix Lilly:

I am looking to invest in real estate for myself. Currently I am 26 and am working in healthcare. I wand to begin creating equity for myself and building my real estate portfolio. I am wondering what my first properties should be for investing in. I work in Portland OR, and would like to find a property to invest in in the greater Portland area. Prices here are quite high, but I am wondering if perhaps I should invest in a one bedroom condo first using a 3% down payment. That way I can start building my equity and possibly find a roommate to help subsidize my mortgage payments. 

But again, the hardest part for me is getting started. That's why I am posting this today so I can find some answers and possibly make some in person connections with other real estate investors. Thank you for reading this posting, and thank you in advance for your time.

Felix Lilly 

Hello Felix,

You are off to an awesome start! I built my portfolio here in the Portland Metro area by house hacking, my first two purchases were condos. I held onto them for several years, and used the equity in them to trade up to properties with more units and a higher value. It increased my cash flow.

Here in Portland, it is pretty hard to cash flow on a house hack for the first few years, especially with current interest rates. It may be worth considering a two bedroom if you can afford the payments. Then you can take on a roommate and reduce your mortgage while you are there. That strategy will help you save for your next down payment.

On my first condo I paid about $100 a month to the mortgage the first year it was a rental. I was okay with that because eight years later I had over $180,000 in equity to get my next property.  It is important to remember that the hack is your down payment savings. If you were a strict investor, you would have a higher interest rate and would have to put 15% down on a condo.

We have some amazing first time Home Buyer programs in Oregon Bond (has an option for a below market interest rate, or money for closing costs), Flex up to 5% for down payment or closing costs. I can connect you with lenders who offer those programs if you send me a private
message.

The other benefit of connecting with a lender is that you will know what loan programs are available to you, and what your payments will look like.

I am happy to chat more about my local experience if you are interested.

Cheers,
Melissa

Quote from @Irving Casas:

In 2020 after months of listening to BiggerPockets and analyzing deals. I focused on buying a duplex in Portland, Oregon.  On February 8th, 2021 I bought a duplex for $388,000. The tenants who were on a yearlong lease were paying $1,300.  I work as a realtor and night shift at a hospital as a respiratory therapist, I don't have my own family. Once I moved into the vacant side of the duplex, I realized I still only needed a room to sleep. I had reversed house hacked my entire adult life to save for my downpayment.  I rented the vacant room for $725.  My mortgage is $1750. My expenses include taxes, home insurance, water/sewer, 5% for vacancy and 10% for capital expenditures and maintenance. I can now save my entire paycheck and commission checks to save for the purchase of my next investment property. Even though I work quite a bit, I still find time for yoga in my backyard, snowboarding 1 hour away from my home, I'm 15 minutes from 3 beautiful rivers and 1.5 hours from the Oregon coast. Portland is a wonderful place to live. 

My tenants have lived in the duplex for 20 years and they are great. They treat the duplex as if it was their own home. 
Bigger pockets community, what advice do you have to keep a long-term tenant happy 

I think it’s amazing that you recognize the value of having a long-term tenant!  

Here’s what I do:

When I raise the rent, I keep the amount reasonable.

When my tenants sign a new lease, I usually offer them a small concession, like getting the carpet shampooed.

I do semi-annual inspections, so that I can catch maintenance items they might miss and take care of them.

When my tenants have a maintenance need that they report, I respond in a timely manner.

I usually send them a gift card to a local restaurant either for Thanksgiving or Christmas and thank them for their loyalty.

These practices have helped me keep my tenants.

Best wishes,

Melissa

Quote from @Josiah Horn:

My current home (SFH) I am splitting into a temporary "duplex" as the master has a private bath and separate entrance. I will be renting the remaining 3b1ba as an apartment until I save enough for my next property in approx 6months-1yr.

I would like to just rent it out as a standard apartment rent + utilities as to avoid wasteful practices with heat/electric. However as this is temporary can I just have them pay all of the utilities even though a heat vent goes to the in law suite and electric will be all on one meter. 

If you are receiving the benefit of electricity and heat, you should be splitting the cost with the tenants. I have a similar set up at my house and I rent out part of it. I split the bill based on the square footage I’m using, and have the tenants reimburse me for their portion.

I have seen other people split it up bills by percentage based on number of bedrooms. Which ever formula you decide on, it’s the one that you should stick to you for the duration of the tenancy. The important thing is that tenant shouldn’t be paying for all the utilities if you’re using a portion of them.

Cheers, 

Melissa 

Hi Ryan,

I have found that some people recommend a realtor because they are a friend/family member and not due to their experience. I don't have any referrals in your area but do have some questions you should use when interviewing realtors that will help you find someone with investment experience.

1. Do you own a home? If so, when was the last time you personally, did a real estate transaction? 

2. Do you invest in real estate and what is your strategy?

3. Do you work with investor clients? What type of deals to you help them with?

4. Do you have good contacts for lenders, wholesaler, contractors and other referral partners?

5. What is your availability to show me homes, and what is the best way to reach you? If they "do not work weekends or evenings", they may not be a good fit with you and your work schedule.

6. Will I be working with you, or is there a team? If there is a team, who is my primary contact?

7. How many transactions have you closed in the last 12 months?

8. Do you have referrals that I can contact?

9. May I have your license number? (Look up their license to make sure there are no open complaints or disciplinary actions against them.)

10. How many clients do you have actively searched for a home now? (If they have more than 3 buyers, and do not have a team, they may be too busy to give you the help you need).

11. If the seller does not pay your regular commission, will you require a payment from me?

I am sure you may have some questions of your own, and just wanted to give you a good start to finding the right fit for your investment journey.

Cheers,

Melissa

If you find a qualified co-signer, and get approved for the loan, then yes this will build up your credit history. Part of having good credit is having a mix of installment loans (like home loans) and revolving credit like a credit card.

The co-signer is not required to live at the property. Whether or not you qualify for a conventional loan or FHA loan would be up to the bank you get your loan from. The co-signer would not disqualify you from getting a FHA loan. Usually it is easier to qualify for a FHA loan.

Without knowing where the water is coming from it would be hard for anyone to tell you if this is a major issue.

Mold is a health and safety concern. Your realtor should help you get professional estimates on how much this will cost to address. It is important to find someone that will correct the water source in addition to remediating the mold.

This comes up frequently on real estate transactions, and I usually help my buyer clients negotiate to have the seller pay for this type of repair prior to closing. I also recommend that they required the seller use a contractor that is approved by my client to make sure the job is done by someone reputable.

I hope this helps!

Melissa

Jared,

What a great plan!  You would not be able to obtain a loan on your own until you meet the following:

1. Are at least 18 years old.

2. Have a steady income for at least 24 months.  

3. Have a credit score of at least 640. (The higher your score, the better your interest rate will be). 

Or you need to have a qualified co-signer. Generally speaking, the bank providing the loan will require the co-signer to also be on the title to the property with you.

Here is some basic advice:

1. Becoming a realtor. Most realtors are self-employed, and write off a lot of their expenses. Writing off everything you can might be tax smart, but does not help you qualify for a loan. I would suggest getting an entry level W2 job at a local real estate brokerage. You can learn a lot and possibly have your license paid for. This can be a reception job, marketing job, transaction coordinator, realtor assistant etc. 
2. Build your credit. One way to instantly get credit is to have a responsible adult with good credit and responsible credit card usage add you as an "authorized user" to their account. If this option is not available to you, you can get a secured card through your bank or credit union. They basically have you set up a savings account that will pay the bank if you default on the credit card. After 6 months to a year, you may be eligible for a regular credit card, and then they would close the account and send you the savings deposit back.
3. I recommend reading Dan Sheeks "First to A Million: A Teenager's Guide to Achieving Early Financial Independence. It will give you a more in-depth plan on all of the above.

Good luck! I think it is brilliant to start so early! :)
Melissa

Hi Cory,

I am relaying my experience.  Keep in mind, I am a realtor in Oregon, and on my most recent 1031 exchange I had about $12,000 in boot. I ended up paying capital gains on both federal and state. For the $12,000 I paid about $3,000 in taxes.  Each state has a different rate (some states don't tax capital gains) so I am not sure how that would impact you. It was not taxed ay my income tax rate.

I would confirm with a CPA just to be safe. Pennsylvania might have different rules than Oregon.

Best regards,

Melissa

@Kyler J Sloan

If you purchase the property as an investment with 20% down, you won’t be able to pull out 15% later.  Most lenders have a maximum loan to value of 65%, though I have seen a few go up to 75% for a cash out refinance.

To have the lender consider the home a primary residence for a refinance once it has been established as an investment property, you would have to live in it as your primary residence for a significant period of time (likely a year, possibly two). You should confirm this with the lender in advance so you know how long you have to wait.

Maybe you should consider purchasing the property as a primary residence with 5% down? The interest rate on the mortgage will likely be a full percent lower than the investment loan. You could use the remaining 15% to fund your ADU build.

Best wishes,

Melissa 

Hello,

If I were in your shoes, I would send this directly to my QI, and let them give me the breakdown. Mine did this for me multiple times when I wanted to run numbers on possible replacement properties and options.  They answered my questions. I ended up with a little boot, and gave me a reasonable estimate of what I might owe come tax time.  I live in Oregon and paid the state 9.9% in taxes on top of the federal rates.

Quoting a handout that my QI gave me: "The amount of Gain you pay depends on the State and the type of tax you are exposed to. Each State has its own State tax that is applied on top of the federal tax. Depending on the State of disposition and the type of Gain, combined rates can climb to more than 50% if Alternative Minimum Tax is applied (26-28%).

What does it cost?

Federal
Appreciation 20%* 
Depreciation 25%*

* The federal rates quoted are for properties held for more than a year and held for investment. Properties held for investment for less than a year or properties held for resale are taxed at normal income tax rates."

The gain is added to an investor’s income for a year and the appropriate tax rate applicable. In some cases, the Alternative Minimum Tax may apply to gains."

Best wishes,

Melissa