All Forum Posts by: Michael Hyun

Hey Prachi - I've done airbnbs in both vacation rental areas as well as metropolitian areas, like San Jose. Just google Sacramento Short term regulations and go to the city website and read their requirements. Permits are needed for short term rentals. However, if youre looking to make solid cash flow, there are plenty of better markets.

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Originally posted by @Dan H.:

Originally posted by @Michael Hyun:

@Nicholas L. Yeah, totally understood. I'm not looking to cashflow while I live in the property, but a nice reduced rent would be good enough for me.

>If I bought a home at 900k (the mortgage would be something like $4500), and was able to "add a bedroom", then I could rent 3 bedrooms out for roughly $1200 each (rough estimate). My total rent would be $4500-3600 = $900 per month.

I think you have a lot to learn about residential buy and hold expenses. I believe in high rent markets the 50% rule is very conservative and the 50% rule does include PM which I always recommend in any projections.

Using the 50% rule, your long term cost for that room would be $4500 - $3600 * 0.5 (50% rule) = $2700/month. Is that a reduced rent.

if we use 40% because of no PM, $4500 - 3600 * 0.6 = $2340/month.

Make sure you understand residential buy n hold expenses before you purchase. The expenses are significantly higher for small unit count properties than most newbies believe.

Good luck

@Dan Heuschele Thanks for your input. Could you explain the reasoning behind this "50% rule"? Don't think I've heard of it before. Thanks

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@Anya Klymenko, I just had a lengthy post about this topic, itll definitely help you out! Check it out on my profile and comment on it!

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@Amit M. What you did is exactly what I hope to do. Thanks for that insight!

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Hmm that's interesting. The 120k does not include a 30k bonus at the beginning of the year, so hopefully that should allow me to buy a SFR in the 950k range? Also, @Johnny Hoang mentioned that he just needs to show the lease agreements, and he was able to buy another house hack property. How was this possible if banks don't accept House Hack rental incomes as a form of income? If they do not accept this as rental income, I'll never be able to buy a second house hack and my plan is no good.

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Originally posted by @Account Closed:

You say you saved two years of income and have $120K. So you are saving about 60K per year, so I would assume your gross is in the 80-90K/year. How will you qualify for $800K loan with $90K/year income? Thats the first hurdle. I don't know if the banks will count your projected rental income unless you have 2 years rental history. I may be wrong about that but that's how it used to be.

My salary is roughly 120k, but if the 2 year rental history caveat is true, that means I'll probably have to live in my first home for at least two years before I can buy the second home.

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Originally posted by @Syed H.:

Let me see if I am reading this correctly.... You make $60k/year and you expect to qualify for a $780k loan? Sure you can get a low downpayment loan, but your DTI will be insane. What bank will give you this loan?

My salary is about $120k a year, I've saved around $120k in two years. If I can break even on a house hack, wouldn't my DTI be 0%? I could be wrong, but this is what I thought

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@Account Closed Yeah, or if I can break even with an FHA loan, I might as well just keep the property for longer and then 1031, that way I don't have to live there. Thanks for the valuable feedback, as always!

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@Nicholas L. Yeah, totally understood. I'm not looking to cashflow while I live in the property, but a nice reduced rent would be good enough for me.

@Account Closed Would you suggest using the owner-occupied FHA loan for this first home purchase? Any suggestions on a better REI strategy? I noticed lots of Bay Area investors in the past decade made a lot of their cash flow from buying a home in the Bay Area and then taking their crazy amounts of cap gains and 1031 exchanging into other places where you can buy a good cashflowing property, and they'll go from like $1000 cashflow a month to like $8,000 a month by doing that. Not sure if I'm in the same position to do the same..

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Originally posted by @Nicholas L.:

@Michael Hyun congratulations on your cash position - that is commendable. One thing to keep in mind is that you'll be carrying an enormous amount of debt if you start off with a house in that price range. One way to think about it is - the more cash you put down, the less debt you have, but the more of your cash is tied up; the less cash you put down, the more cash you have in hand, but the more debt you have on your personal balance sheet when you go to buy another property. =)

Hey Nicholas, yes I understand this. So what would you recommend? (A) Go for an owner occupied FHA loan and save some of my 120k? The one benefit of FHA is I'll have more cash on hand if I want to buy a second home, but higher mortgage and PMI. Or (B) Put down all of my 120k and try to eliminate the PMI.

And lastly, will I be able to buy a second home if I have a home already? Won't my DTI be too high to even qualify for a second loan?

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All Forum Posts by: Michael Hyun

Michael Hyun has started 13 posts and replied 109 times.

Post: Short Term Rental Sacramento Area

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: First-time investor in SF Bay Area

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old

Post: 5-Year Bay Area Real Estate Investing Strategy for a 24 year Old