All Forum Posts by: Mohammed Abdullah

Mohammed, great idea to start with a house hack - this is how I began real estate investing as well! It seems like you have a great tenant considering that they have been there for 14 years. With that being said, handling a tenant who is a neighbor is a little different than a normal relationship. Make sure that you are more personable with them in this situation. As you acquire more properties, it will be important for you to know your lease, rules, and policies. You need to know these, communicate them effectively, and be conscious of making concessions. Also make sure to know your strategy for buying and selling. You may come across different investment opportunities where you will have to use different strategies. This will only give you more opportunities to grow your wealth!

@Mohammed Abdullah congrats you are going to learn a lot as you go and you’ll figure it all out!w

Quote from @Mohammed Abdullah:

Quote from @Dave Skow:

@Mohammed Abdullah- thanks for the  clarification ....7.5% rates for  a  1st/ 2nd combination loan is excellent ...I am  guessing its a  special  program that this  credit union offers 

yes it’s in house program allows us 0$ down payment. We actually received money back on closing today. We actually received more money back than what we spent on the duplex. The plan was to just refinance when we drop one point from 7.50 to 6.50 and so on. 

Just be mindful that this 2nd lien has a balloon on it.   So, when you refinance, try your hardest to consolidate.

In my (as recent as 3 months ago) experience, these loans aren't a foregone conclusion that they'll extend the term once it balloons.  These are portfolio loans and the ability to renew depends on the lending capacity of the bank/credit union at the time it comes due.  

Balloons are a great tool -- but a very risky one.   This is why we find a conventional or FHA loan are more frequently used for house-hacks because you won't have trouble with a balloon down the line. (A capital need 5-10 years down the line, when this becomes a rental property and loan-to-value terms are much more strict; is a quick way to kill momentum on new deals.)

Hope that long rant is helpful!  Always love talking through different scenarios.

@Mohammed Abdullah- thanks for the  clarification ....7.5% rates for  a  1st/ 2nd combination loan is excellent ...I am  guessing its a  special  program that this  credit union offers 

@Mohammed Abdullah- why dont you do one VA loan versus using 2 loans ? Fyi for the future- there are brand new loan programs that will allow 5% down on a MF property as long as you plan to live in it

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Quote from @Roseann Koefoed:

You're taking action and that's everything.  Props!  My best advice is do not wait to raise the rent and potentially remodel the other unit.  If they move out, you're remodeling and renting at a market rent faster leaving you in a position to refinance and scale faster.  If you're tight on cash, leverage an interest free credit card for the home depot purchases.  Also for major building improvements like windows, doors, roof, mold remediation, you may be able to find vendors that will give you a zero-interest loan to finance the costs forward.  

I wasted a lot of years on my first 3-flat not raising rents or doing the reno work needed.  Now I move as quickly through that phase as possible to refi and get my money back.  You'll scale much faster this way.

Also, look into the 203k loan program for future purchases (since you're willing to live there).

“you may be able to find vendors that will give you a zero-interest loan to finance the costs forward.”

Thank you for the reply and the input. What do you mean by this ?? Can you elaborate please 

What I meant was that many roof, window, siding or mold remediation companies will offer an interest-free (or low interest) option to pay for the work.  For example, I had siding replaced on two 4-unit buildings years ago through Window Works.  They offered interest-free financing to spread the cost over 3 years which helped quite a bit.  Point is that with good personal credit, you can take advantage of financing options to lessen your initial cash outlay.  

I'd add that sometimes even with smaller mom/pop contractors, I've been given the option to pay over 3-6 months.

Get started and keep building momentum!

You're taking action and that's everything.  Props!  My best advice is do not wait to raise the rent and potentially remodel the other unit.  If they move out, you're remodeling and renting at a market rent faster leaving you in a position to refinance and scale faster.  If you're tight on cash, leverage an interest free credit card for the home depot purchases.  Also for major building improvements like windows, doors, roof, mold remediation, you may be able to find vendors that will give you a zero-interest loan to finance the costs forward.  

I wasted a lot of years on my first 3-flat not raising rents or doing the reno work needed.  Now I move as quickly through that phase as possible to refi and get my money back.  You'll scale much faster this way.

Also, look into the 203k loan program for future purchases (since you're willing to live there).

Another strategy would be to short term rental or mid term rental them if they are in an ideal idea for either. 

Quote from @Mohammed Abdullah:

Hi everyone, New to the multi family investing, me and my wife are purchasing our first property it's a duplex in a very good location. ( in Johnston Iowa ) everything a tenant would ever need is only 10-20 minutes away. we are house hacking living in one side of the duplex. My plan is to live in it for a few years. One unit is remodeled and I want to do the same to the other unit Once the tenants move out. Increase in appreciation and equity and the tax benefits. We are using a VA loan it's the 80/20 2 loans.( no money down) no cash flow now but I believe it will cash flow once we update the unit, increase rent and refinance. It's 1025$ right now with a long term tenant of 14 years. Once I refinance in 4/5 years im hoping I have enough equity to use on another property( 4 plex or another duplex or maybe team up for something bigger) Does anyone see any flaws with my plan or adjusting needed ? Any tips? Any Feed back? Or has anyone house hacked in Des Moines? Any advice would be greatly appreciated

Thank You, 

 I see one flaw with your plan.  It's not a flaw but it's in the language you used. "I'm hoping I have enough equity to use on another property......"  

Here's the flaw and the tip. This is a data-driven business and while what has happened in the past is not promised for the future, data exist that shows how much properties like yours have appreciated in the past in your area.   Find that data and use it for planning purposes. Don't hope.