All Forum Posts by: Michael T.

@Rene Garcia yes by purchasing a 3/4 multi-unit you would essentially reduce your taxes, however, you do have to live in one of the units in order to get the FHA loan.

Basically, the FHA self sufficiency test is that the fair market rent exceeds the mortgage. So... if the rents you receive are lower than the actual mortgage it won't pass.

As @Russell Brazil mentioned the FHA self sufficiency test is more difficult to achieve in high cost areas such as; Los Angeles, DC, NY, etc. It's not impossible that the property won't pass the test but it is more difficult. You can put down a larger down payment on the property so it potentially passes the test.

There is also the Home Possible Program that would potentially allow you to qualify for a 3/4 multi-unit, however, similar to FHA it requires you to live in the property and it is limited to certain locations. Below is a link to these locations in California.

http://www.freddiemac.com/homepossible/eligibility...

@Chris Mason a lender here in California would be able to give better guidance in regards to the Home Possible Program and FHA.

You could also invest in an Opportunity Zone.  This is a new program that promotes investing in economically-distressed areas.  While the benefits of the Opportunity Zone may not be as much in the near term (unless you buy a multi-unit) there are quite a few benefits in the long term as you don't pay any capital gains.

Below is a link to the designated Opportunity Zones in California.  

https://cafinance.maps.arcgis.com/apps/webappviewe...

If we can find you a multi-unit within the census tract of the Home Possible Program and within an Opportunity Zone you could have some amazing tax benefits going forward.

I agree with @Lee Bell enjoy listening to the guy, he probably has a few good stories and can help you along the way but it's too early to ask too many questions, guidance or favors.  

Become his friend and let him know you're excited to be a part of this new journey your on and then at the end of the conversation ask if you can meet with him again in the future to buy him lunch or a beer.

@Jeff Burdick thank you for the comment, however, the OP does mention in the post that there is a possibility that he/she could sell the property for approximately $210k to $225k.  

Since the property was purchased at $205k and it's been 10 years since purchase, I would not consider this an appreciating asset.  It isn't even keeping up with inflation.

There are definitely appreciating properties in Chicago but unfortunately it doesn't sound like this is one of them.

@Mitchell Litam yes the BRRRR method is the best way to make your money work for you, however, it does come with more work and risk.

You're buying a property that will most likely require work to get a higher ARV and be able to pull all of your money out of the deal.

Similar to many things life the more work required the more reward typically gained.

It's okay to do a few BRRRR's and then a few conventional. You don't have to over leverage yourself if it doesn't make sense.

@Arthur Fuller II as @Andrew Postell mentioned what matters is what percentage of equity you have in your property. When the lenders look at your numbers they'll look at the LTV to determine how much you're able to get out of the property.

If you want to avoid the fees and still keep your rate the best option is to improve your credit score.  With a few payments throughout the month over the next 3-4 months your credit score will improve fairly quickly and you can get above the 600-620 mark.

@Megan Kline this is truly a question that depends on markets, the rental and the opportunity for appreciation.  

In my opinion you are starting out so you may be okay with a little lower amount of $150 - $200 a door but this also depends on the market your in and what your total investment in the property is.

@Martin Neal mentions his CoC return cannot be less than 17% which is a good factor to look at not just dollar amount per door.

My Internal Rate of Return is typically in the 17% range and my CoC is well above 20% and I try to get at least $350-$400 per door.

I have a few that don't cash flow right now but the appreciation on them has been great and we've refinanced a few times and sold a few to get a strong profit.

Also, if you want a second job do the property management yourself otherwise hire a good property management company.  If the rental is in your backyard you can try it out for yourself to learn and if it goes well, that's great!

@Patrick Jenkins yes people pay a lot to rent a home!  It doesn't matter what city, state or country people have to rent for multiple reasons and that is why it's critical that we have investors and experts here on BiggerPockets.

@Marcus Auerbach explains it well in his post.

If someone asks me whether they should rent or buy here in Los Angeles I always encourage them to rent as long as they plan on staying at least two years which most people do stay in one city for at least two years.

Listen, while interests rates are at 4%, 5%, 6% or even higher interest on a rental as a renter is always 100%.  If you don't own your own home and pay rent when you can afford to buy I encourage you to buy.  If you're a renter I'm sure someone on BiggerPockets can help you find a rental.  :)  If you want to become an investor and make money this is the place to be.

@AJ Vanderhorst as Jaysen and Andrew mentioned there are a few lenders that will do it such as PenFed, however, they do have restrictions. To my knowledge I believe you can only have a maximum of three current mortgages or three investment properties to your name to qualify for the HELOC program.

As @Andrew Postell mentioned definitely ask a few local lenders in your current market and they maybe able to give better guidance.

If this 4-plex is your personal residence right now obviously the best thing to do is google "introductory HELOC" in your location and there should be numerous results from credit unions and a few banks that offer a very favorable introductory rate and terms.

@Jay Garrison this story doesn't sound correct, whether it's a miscommunication between you and your agent or you and your lender.

As @Frank Wong mentioned now is not the time to be changing lenders as you're probably far enough in that you may miss necessary deadlines.

My recommendation is similar to @Richard Borashan to get your agent and lender on the phone at the same time and make sure you are all on the same page. 

@Andre Clarke as others have mentioned if it's for a residential property the typical amount is 1%, however, depending on the demand for the property the earnest amount may be higher to reflect that you're a serious buyer.

Obviously, the earnest money may be deemed non-refundable after a set period of time, called an option period.

You can always try to negotiate your option period.