All Forum Posts by: Nazz Wang

@Haixia Shi 

Are both properties local? How about moving into the 2nd house and finance it as a primary? If your current house was higher in mortgage payment than this 2nd one, you can free up some cash flow there. Also I can't remember if the bank counts the potential rental income from your current house or not. I think they counted 60% or something for me in 2012.

Then you get lower interest rates and lower down payment.

Plus, if the bank think you are stretching your monthly income too thin, you should probably consider if you actually are. Do account for a lot of unforeseen expenses, almost over compensate for them. You don't want to be in the red by the end of the day.

AWESOME! Especially in places like San Francisco, a very unique set of strategies can be employed to make a lot of money in a couple of years, gambling on out of proportion appreciation due to population increase. I can't afford to live in the city but I can't afford not to live here.

@Bruce Scannell 

Welcome! I am from San Diego and surely miss the heat and beach! Have fun hunting!

@Rikard Lorén 

Question 1: Can i buy a house and make the bank/irs look at my property as a rental property instead of "small house" ? How is it for you in the US or other states?

The bank: Anything under 4 units are considered a residential property, and can be financed using residential mortgages. The IRS doesn't care what you use the property for. The bank give you a better interest rate if you use the property or one unit of the property as a primary residence. If you are only buying it to rent out, you can take a residential mortgage for an investment property and will have higher interest rates for your loan, along with other requirements like 6 months reserve for mortgage payment, insurance, property taxes.

Q 2: How do the IRS look at houses when you buy them for investing & renting out purposes?

You report as personal income, either positive (hopefully, that is the point) or negative (hopefully not), generally your expenses (mortgage, taxes, repairs and maintenance, paperwork, etc.) are deducted from the rent you collect.

IF you buy and flip and sell, you will need to pay capital gains taxes.

Q 3: How will the bank look at the property when i come to them for a loan/what kind of loans do/can i get?

The property will have to be financable. Everything has to generally work. They will then appraise it using a third party to get fair market value, making sure you are not overpaying for the property, and that your numbers are good with good rent estimates. You will usually get preapprovals from banks before you make offers. The bank will look at your situation and decide how much they are willing to lend to you. I am not sure how this works with a foreign investor.

See Q1 for the kinds of loans.

Have fun and good luck hunting.

We had two foreign graduate students a few years ago. Their professor from the local university did gave a great word for them and they were one of the best tenants we had. I just ran with my gut feelings that time and it was great. I always do trust my gut feelings more than credit reports. But people I trust always had good credit reports.

The only time I made a tenant selection based on credit alone, though I didn't care for their company at our meetings, they always paid on the dot, but were a pain in the rear for their entire tenancy, and I ended up letting them go after a year. It was when their parents started writing emails to me that I realized I needed to also consider what I thought of my tenants.

@Kyle Doney 

They are in Milwaukee Wisconsin. I have family in the area and travel back quite frequently. The journey to set up shop has been fun! I will have to say I am addicted to REi out of state.

@Account Closed 

I use a 10% vacancy factor and a 8% repair and maintenance reserve. The current numbers used in the spreadsheet at 5% vacancy and 2% R&M. I want to make absolutely sure I can afford to keep my cash flowing properties once I have them.

@Account Closed 

Adam, one note is that I am in no way a conservative investor, so it also depends on your comfort level with your finances and risks. One good tool I use a lot is a BP spreadsheet for cash flow analysis. Check it out.

http://www.biggerpockets.com/files/user/MrMadMoney...

I know a big population of bp's community are penny pinchers. I am one myself. But we all have one or two things we enjoy but can't quite justify to ourselves to spend that money. What is yours?

I personally HATE groupon. Why do they make it so easy for me to see great deals and to buy them with one-click? 2 seconds on my phone today and all of a sudden I am the owner of a new remote-controlled helicopter that turns my living room into a "do fly" zone. Argh I DON'T NEED THIS TOY! It's not like Amazon where I have to actively go search for stuff to buy. It comes to me with flashing pictures! 

@Account Closed 

With a 110k balance if you get a 30yr fixed at 4.25% you will be pretty close to breaking even. I wouldn't count the new balance after refi as part of the cash flow because you are not going to use that money for the primary. Think about it this way, you are refinancing the current balance of 110k at 4.25%, and taking another loan of 42k at 4.25% with your primary as a collateral to invest in real estate. What it means is now you have a lower payment and longer pay off for your 110k balance, and you'd better invest the 42k in something that gives you better returns than 4.25%. You will be pocketing the difference between what you can make and what the bank charges you to use that money. 110k at 4.25% 30 year fixed = 541 a month. You are well above the 50% rule. You probably have an impounding / escrow account where the bank also charges your property taxes and insurance, this your high payment. Or you might have a high interest rate (most likely not the case given your loan is no older than 1.5 yrs). The 50% rule only applies to principle payment. How much are your insurance and property taxes a year? Sounds like to me our house is a good rental.

You will also have to figure out how you can spend the equity money with a ROI at least twice the mortgage interest. I would personally shoot for more than 10%. That is the hard part in my opinion.

Another idea is to analyze your numbers on BP and see what other investors think.