All Forum Posts by: Michael Hunt

 Im under contract in Ohio. While it's not a complete list, here are some things I researched and learned about that's different from where my other investments are:

Landscaping costs (lots of grass) 

Crawl space or basement integrity considerations including operable sump pumps

Majority of properties, especially multifamily are old. A trace amount of properties are under 30years old

Property taxes are often much higher by comparison

You may have to pay for snow plowing

Gutters

Lead paint certification requirements in certain areas

Radon gas

Arkansas is a landlord friendly state! Duplexes do very well here. I see a lot of out of state investors looking here because of our price points. SFR and multi family is still very affordable in central Arkansas.

@Michael Hunt Hmmm, there's a little more to this than meets the eye.  The posts above are correct with that we want to work with a lender that uses the rental income to help us qualify but there's a little nuance thing to what you are saying.  Let' me explain some if you don't mind:

1. A commercial/portfolio/DSCR style loan will lend to your business entity. Your partnership/LLC is the actual borrower. This means that loan is NOT under your name. The property would ALSO not be under your name - but rather the company name. However, to go this route you MAY have a little higher rate (or some other feature that may not be as attractive as a "conventional" loan). Don't get dissuaded by this. Use this loan type. This is the preferred loan type if you are in a partnership with someone on real estate since you will be splitting profits according to your partnership. I'm saying it like this because...

2. A conventional loan (from Fannie Mae or Freddie Mac) will put the loan in your personal name.  The property will be in your personal name.  That doesn't sound like that big of a difference except that they hold 100% of the payment against you.  Even if you have multiple borrowers, ALL borrowers have 100% of the payment held against them.  This is a big problem if you are splitting the profits.   You'll have 100% of the debt....but only 50% of the profits.  It will look like you are taking a loss.

So even though that commercial loan route might seem a little more negative with the rate or prepayment penalty or whatever, that's the route you will want to go.  

Now when it comes time to get your own, primary home - going conventional is fine!  That's no issue, there's no profits to split or anything like that with your primary home.  So going with a traditional loan on your primary home is no problem just as long as that investment property is structured properly.

I hope all of that makes sense.

Buying an investment property prior to buying your first home is not a problem.

The lender will give you credit for the rental income on your investment property, which means that the debt associated with that property will have little to no impact on your debt-to-income ratio. 

Max DTI ratio is going to be ~45% when you go to buy your primary in SoCal.

If you're making $350k per year, that is $29,166 per month.

Assuming you put 20% down on your new $800k home, and assuming rates are around 6.5%, your mortgage payment will be ~$5,000 per month when you include taxes and insurance (taxes are high out there in SoCal!)

$5,000 / $29,166 = 17.14% front end debt-to-income rate.