All Forum Posts by: Matt Hintzke

@David Clinton III Thanks for all the info! I will definitely read more about title companies and how they can help in the process. Sounds like it could really be of use!

@Al 

@Al Wilson would you mind explaining? I am curious to know why it would be so bad.

@David Clinton III That is a very creative way to find deals, however I am not totally sure what a title company is and how I would go about approaching them.  Typically, companies don't just give out the contact information of their clients, so it seems out of the ordinary for a place like that to do this. Is that a normal thing to do or will I seem to be out of the norm for these guys? Thanks for the help!

@Landon Eskew Well the issue with the out of town FHA is I would have to live at the residence for a year, correct? I don't think it is very possible for me and my gf to just get up and live somewhere else with our jobs. If I did go out of town, I would expect to pay the full 20% down and start renting out right off the bat, which is why I think an FHA near Seattle is really my only option if I want to enter the market in the next year or 2.

@Landon Eskew Thanks for the advice.  I keep seeing different people saying "this way is the best" or "no, this way is better" which is expected seeing how everyone has their own ways of investing. However, this just makes my decisions even harder because I cannot get a good grasp on what my goals should be prior to purchasing.

I can see how including many investors into the equation can make it difficult, but what if we simplified the scenario by just using 2 investors, me and a friend.  It makes it a lot easier to split 50/50 on things like expenses, but still halves our individual requirement for a down payment which means I can get into the market in half the time.

I am eager, of course.. but that doesn't mean I am eager to just buy any old property and expect a return.  I'm more eager to learn and understand 100% what my goal is before I even make a purchase. I want to know what all my different options are when trying to finance the investment and then what it is going to take to get there.

Many people would just say budget and save until I can afford a 20% down payment on a property all by myself. In this area, that is over 100K in cash which could easily take 5-10 years to accumulate with other debts like student loans, car loans, rent, marriage, etc to pay for even if I do slim my spending down to just the necessities.

Excuse my potential bad use of terminology here as I am very new to REI and am trying to get creative on my financing strategies.

Basically, I have been looking into REI around the Seattle area (I live in Redmond, Wa) and want to get into the market while its still on the rise and while I am young (I'm 25). The issues I have come across are:

1) Finding a MFH in an area I can live (close to mine and gf's work) in order to qualify for an FHA loan has been pretty rough. There just aren't a ton of MFH on the market for a reasonable price

2) Investing out of this market (say, Spokane, where its cheaper) is hard as well because I have to purchase and manage a property that is hours away by car, and this being my first investment, I'm not sure how well it would work to be so far away.

So I'm sort of generalizing my concerns, so maybe someone has suggestions on how I can achieve #1 given my sitation.

This leads me to this idea. Create an LLC or some kind of legal entity where I can pool together funds from friends and family to make investment purchases. Esentially it would be a small scale REIT, so instead of having to put down $50k on a loan myself, I get 10 friends/peers to put down $5k each and make the same purchase.

Obviously there are legal ramifications for doing such a thing such as properly dispersing profits, etc, but is this something people do? Can it be done? Is it legal? Are there any major issues with trying to crowd fund the investment in such a way?

Any suggestions are welcome! Thanks

@Adrian Chu Hey Adrian,  I think I am starting to get very different sets of opinions about what can and can't be done in a market like Seattle's.  I would love to hear about your experience/success in this market if you could help me out. I know there are many different ways of financing and niches to enter that many investors have different thoughts on, and I would like to hear from as many people that I can. Especially if they are from this area and know how to work it :)

Thanks!

@Edward Seid Thanks for the tips, however, I don't think I am following you 100%. What did you mean when you said you are getting an estimate of ~$3k/month? If MFH don't cashflow well here and FHA loans will be hard to cashflow, then what would you suggest doing? I cannot afford a $100,000 down payment (if I don't use FHA), but it sounds like house hacking isn't going to work out very well in this market unless I come across a treasure chest of a deal.

@Account Closed Ok thanks! So if I were to use a real-life example here:

Property: Link

4 bedroom, 2 bath 1800 sq/ft

If we were to look into this $500,000 @ 3.5% FHA we would be paying only $17.5K down and would set is up for an approximate monthly mortgage of $2,145 (this is estimated by realtor.com, not sure if this would reflect an FHA). If we use the 50% rule here, (and pretend im not living here as well), and look at other rents around the area for the same size/quality of property, I think I could charge at least $1400 a month/per unit. This would amount to $2800 a month in total revenue. If 50%, or $1400, is used for expenses then that only leaves $1400 for mortgage + profit. If the mortgage truly is $2,145 then I would be hemorrhaging money the minute some big expense comes up before I will only have 25% of the revenue to use for expenses which sounds terrible.

If we use the 2% rule, then that means that for $500,000 property, each property costs $250,000 which means the rent should be about $5,000/month which is absolutely INSANE!

So....

Is this just a really bad property? Am I estimating the mortgage incorrectly? This property isn't even close to being a property with cash flow based on the numbers I am using. Any suggestions on how I am calculating/filtering properties are welcome! I might be doing something wrong or maybe I just need to find better deals.

Update:

Even when looking at the mortgage of this property using a %20 down payment, they still estimate mortgage at $1769 which would still be much more that %50 of the estimated rent.  What am I doing wrong here? Thanks!

@Account Closed Thanks for the info Raymond! I actually already have that book coming from Amazon as we speak :) As for the FHA, I think you are right in that it sounds like the best choice. Here are what I think my options are at this point in time:

1) Use FHA loan to purchase a multi-family and have myself and my gf live at the residence.

PROS: Much more affordable down-payment and I can get started pretty much any time with a DP that low

CONS: I'm forced to live at the residence which means I have to find a property in an area that both my gf and I can commute to work from that is reasonable. Higher monthly mortgages due to FHA and lower DP means I have to increase my rent to get any cash-flow. Is this risky?

2) Don't use an FHA and instead look at the Spokane, Wa market. My gf's family are all from Spokane so I would have pretty good knowledge base and could ask about different areas (maybe even find a relative that is in RE).

PROS: Could purchase without using FHA and would be able to do 20% on something close to 200-300K.

CONS: Its 4.5 hours away by car, so managing the property could be difficult (however, I could once again leverage my gf's family all being in Spokane and use one as a "handyman" if I really needed).

Those seem to be my only 2 options when it comes to purchasing a MFH. Does this sound about right? Would anyone recommend why one would be a better choice than the other?

Thanks!