All Forum Posts by: Nicolas Escoffier

Hi @Krystin Aversa,

I went through the same questioning. Bought a SFH (rental) in Indianapolis. Then bought a property (residence) in CA.

I still considered myself a newbie, but those experiences brought me some clarity, as well as some challenges that I don't see discussed very often.

The first thing that everyone mentions is "house hack", but there seems to be a lot of confusion on the meaning of that. If you buy a multi unit property, let say 2 units for the example. You can live in one and rent the other. You can use the rent from the second as income in your DTI for any future loan. If you buy a single unit, with several bedrooms and bathrooms and you rent them, you can't include any of those rents in your income for the DTI, because it's your primary residence and it's not possible. I still don't understand it but that's how it is.

Same if you keep renting the place you live in, with roommates / co tenants / sub tenants etc... anytime you will go to a lender they will include the total rent on the lease in the Debt of your DTI, no matter how many people are on the lease or how many people are actually sharing this monthly rent. Example if you are 3 roommates on a lease for a 3 bedroom, total rent of $4,500, you each pay $1,500, debt added in the calculation of your DTI is $4,500, not $1500. Because if they default, you have to pay for it. Or some logic similar to that.

Same if you buy your primary residence with someone. It doesn't matter, the debt in your DTI will include the full PITI, not half of it.

Common Bay Area / SF tech compensations often include base salary + stocks grants vesting quarterly / yearly. But only base salary is used as income. Stocks are just ignored plain and simple. Even if it's reported on your W2. And even for base salary you will likely need 2 to 3 years minimum of history, in the same company or at least similar job profile / company.

Income from a rental property will be acknowledged by most lenders only once it shows up on at least 2 consecutive tax returns. And even then they will only use 60 to 80% of it as income. But the mortgage you have on it is counted fully in the debt from day one of course.

Rehab cost on your primary residence is probably tax deductible (gonna learn that soon). On a rental property, it's not (at least it wasn't for me).

Having a ton of equity in your home in CA or in a rental could let you borrow against it with an HELOC. Except not when the economy is not good, like now with Covid... plenty of lenders stopped their HELOC programs...
https://www.chase.com/personal...
https://www.wellsfargo.com/equ...
etc.

Buying an apartment (not a SFH) in SF would very likely be under a TIC (Tenants In Common) agreement, not a condo. While it might not seem like a very different situation than a condo, the reality is only a couple of banks would lend money for those properties. Meaning way higher interest rates and conditions. And 10-15% at least. And only for your primary residence.

When you buy your place (aka primary residence), if not TIC, there are plenty of very low down payment options but for investment properties it's easily 25% down or more (was asked 35% down minimum by some lenders). Interest rates are also usually significantly higher.

If you're a US resident but not a US citizen there is a whole other layer of complications on top of all that but it seems like you were born here so that should not be a problem for you.

Learned all that the hard way :)
So if that can help
Nick

Hi @George Blower,

I've only been in the US for a year and a half. My retirement funds for now are close to nothing. So I can't use that

@Jim Cummings that's the step I'm in right now. Providing a summary of my situation and my project. Waiting for the answers to see who does it for my situation then evaluates the best option. and you're right that makes sense to then only go for one pre-approval with the one that seems the best fit. Thx!

There is still something I'm not really clear about. Do the mortgage lenders and/or mortgage brokers have to be in the residency state, property state, or any is possible? And in that case, which is the best option? Thx

Hi @Jim Cummings, so based on my researches and based on what you said, now my plan would be to have several banks and brokers to give me their answers (to allow mortgages even as a non citizen/permanent) then all the ones that seem good enough I'll ask them a pre approval all in the same few days to get only one negative impact on my credit score. Thanks a lot for the details and clarifications!

@Lynnette E. That's a very good point. I thought about it too. I'm currently in touch with several of the US banks I have accounts / cards with. And a mortgage broker. So far no hard no and the discussions are going on. I'll wait until I have some answers from them to see what are my options in my current situation. Thx for the advice!

Hi @Rudy Munoz,

Sure why not. Let's discuss that. Thx!

@Allan Bishop Jr. Awesome. Very helpful. Thanks!

Thx @Allan Bishop Jr. Really appreciated.

- For the taxes, you mean only income taxes or also property taxes? If I stay in CA and buy in TX for example as you suggest. Assume I rent it. And some day maybe sell it. Wich taxes in all those steps are supposed to be payed and to who (federal, CA, TX)?

- For the pre-approvals, everything I found so far is saying that it requires a hard pull. Seems like you know a way around that? Or lenders that would do it only based on a soft pull?

Thx!

Nick

Hi everyone,

I'm brand new on this forum. I've been in the US for a bit more than a year now (on a work visa).

I'm interested in buying my first rental, out of state as my current state is CA (and I don't have 500k in cash lol). I'm interested in SFH/Small Apartments/Condo mainly. Duplex why not if it's in a cheaper area. I would say the range for this investment would ideally be between 100 and 200k. I can afford a 20% downpayment for that range. The strategy would be to buy and hold, and ideally have a bit of cash flow from the beginning or worst case scenario, break even. Including taxes, HOA, insurances and especially a property manager cost as I have to make that investment fully passive (no active income allowed in my situation).

I have experience in rental in my home country but as there are many differences (both financial and cultural) I just see myself with that project here as a newbie. I watched and read a ton of things, including a lot from Bigger Pockets, to get familiar with all the ins and outs of the real estate market in the US. I'm currently doing some researches to find which cities could fulfill my strategy, expectations and budget (recommendations are more than welcome :)).

I still have a few areas where I'm not exactly sure:

- first one is taxes for out of state. As mentioned I live in CA. If I buy in another state XX, will I pay all the potential taxes for that investment in that XX state based on its state rules, or in CA based on CA rules, or potentially both / a mix of both?

- second one is about pre-approvals. I understand that it is the best way to have a guarantee while prospecting and to make reliable offers. Though for my understanding it will require credit pulls, which impact negatively the Credit Score (which is already challenging to maintain as a foreigner) so I'm not sure when is the best time to do so.

Is it better to do it as soon as possible to have it (but then if it takes weeks or even months before actually buying, will it require to do another pull at that time for the actual mortgage)?

Or to wait until I have a better idea of the city, property size/type/price and do that at that time to be more accurate with the budget?

And in the case it would be better sooner than later, is it better to ask for approval for an amount close to the budget (for instance pre-approval for 200k if the range is 150/200k) or to the highest possible to have as much margin as possible (for instance 400k pre-approval even if the target are around 200k)?

All pieces of advice and recommendations are welcome, especially people who already succeeded in a similar path and being non citizen / non permanent resident (yet).

Looking forward to read you, start my journey, then share my experiences.

Thanks!

Nick