All Forum Posts by: Nelson M.

Update:

I offered 15k below listing price and the seller countered with 5k more than my offer. We just need to sign off on it and the property will be under contract. I'm preparing myself for what follows! Will be posting a new thread under Investor Deal Diaries shortly to keep track of updates and expenses, in case anyone is interested. 

@Justin Fernandez @Benjamin Blackburn

Thanks for following up, Justin. I am still in the process of trying to get the pre-approval. Bank of America pre-approved me for 150k so I'm trying to get them to raise that amount. One of the local lenders said they would only finance a duplex and not a 3 or 4-unit due to my lack of experience with investment properties. Hopefully I can get financing from somewhere, but if it falls through I plan on starting out small with single-family rentals. Although it also seems difficult to get those smaller loans. Either way, where there's a will there's a way, right? 

Hello BP,

I'm getting close to finally pulling the trigger on my first property but I'm currently facing a dilemma that I thought I'd share here to see if I can get some much needed advice...

I have my eyes set on a triplex that cashflows around $150 per door but I'd only see the cashflow after I move out, which would probably be anywhere from 1 to 2 years since I'd be going through FHA. On the other hand, I've also looked a few single family homes ranging from 30k to 50k that would cashflow around $200 per door (using conservative numbers) and I would not use FHA because I wouldn't be occupying the property myself.

I currently have enough cash to pay the 3.5% down payment plus closing costs on the triplex, which is also around the same amount of cash required for a 25% down payment plus closing costs on a conventional loan for 50k or less. Therefore, my dilemma expands into the following areas:

1. Cashflow - seems like most of the single family properties I saw would cashflow more per door (especially if the tenant takes cares of all the utilities), however, I do understand the convenience of having multiple units under the same roof, so a value can be added to this convenience which could sort of even out the numbers between the two. Then again, the SF property would be easier to sell in the long run and would appreciate more while cashflowing the same.

2. Location - the triplex is in a rural area, about 15 minutes outside of a small city, with scattered towns around it. The single family properties I've seen seem to be in more central locations that can be rented out with more ease.

3. Risk level - from the threads I've read, I understand that a big factor of choosing MF over SF is the risk of vacancies and how with MF you won't really have to worry about having 100% vacancy as opposed to SF, but then again, the difference between monthly PITI payments is quite large.. the monthly PITI on the triplex would be almost $1,300 while the monthly PITI on a SF would be less than $500, so in a worst case scenario where both are fully vacant for some reason, I'd be much more capable of covering the SF payment, while the MF payment would put me way too deep in the hole.

4. Tenant Quality - I definitely want good tenants that want to take good care of the property, which can be a bit more tough to find for MF properties.

5. Loan concern - Even if I start with SF, I'd like to get into MF eventually as well. So would I be able to purchase an owner-occupied multi-unit through FHA in the future if I already have single-family properties under my name? I'm not 100% clear on how that would work out. And also, would there be any lender willing to do a loan for less than 50k for SF homes?

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Those are just some of the priority items on my list.. Doubts that are keeping me from pulling the trigger. Any advice on any of those points would be greatly appreciated! Thanks!

Thank you! I appreciate the response. That is the type I was referring to, the road warrior type. I'd love to be able to spend all week at my new primary residence but the long drives back and forth during the work week just wouldn't make sense except for weekends. I definitely wouldn't furnish another residence and I do plan on putting everything on my name, transferring my driver's license, and settling in as a normal new resident would.

Thank you, Mr. Patel. Yes, they would only be short absences. Maybe 4 days or less per week.

Hello BP,

I've been having a small concern and thought I'd turn to BP for some insight..

I'm currently residing in NJ, working full-time in NYC, and looking to relocate to PA some time in the next few months by purchasing a multi-family property through FHA (while still keeping my job.) However, my work schedule often requires odd/late hours during the week so there would be times where I'd have to stay at a relative's house in NJ for a few nights at a time. Of course I would still spend weekends and as much time as I can at the PA property since I do not plan on renting out my unit and I'd still consider it my primary residence, after all.

So my question is, would my current work arrangement somehow conflict with FHA terms? As I said, I don't plan to rent out my unit at all so I don't feel like I'd be committing any type of bank fraud (and I certainly don't want to!) plus I assume there have been plenty of cases in the past of homeowners with similar work arrangements that required them to be away from home for days or weeks at a time.

I just want to do things right. Any advice is appreciated!

Hello BP,

I have been looking at a few triplexes and I've noticed that most have been built before the 1900s. There is one that I'm quite interested in but it was built in 1820 and this has raised some concerns. I've budgeted for repairs and maintenance in my analysis but I don't want to underestimate the costs of owning such an aged property. I do plan on having a thorough inspection done but I wanted to ask the BP community beforehand for insight about any possible hidden costs I may be overlooking or any issues (such as asbestos, lead paint, etc) that I should be aware of when dealing with these type of buildings? 

Thank you for your help!

Very helpful diary! Thank you for sharing. 

@Justin Fernandez - Thank you for that very useful information! I will definitely look for banks that have homeowner programs. To be honest, I am not sure of how a seller credit/concession works though, so it would be great if you can elaborate on that process.

@Arianne L. - Yes, property taxes and insurance are included in the $1,300 PITI figure. I do need to look into prices for pest control and termite inspections, thank you for mentioning that. $150 per door is a good guideline, for this particular property I should be able to raise rents and cut down expenses to satisfy that figure. Have you had any experience asking sellers to pay closing costs on a full (or above) price offer? My analysis hinges on the seller accepting these terms, since it may prove difficult to obtain a loan without rolling the closing costs into the mortgage.

Welcome to BP. It's nice to see investors from my area. I suggest you look up NJ REI meetups to begin networking. The Jersey City market can be tough but there are great deals everywhere. Best of luck with your future investments!