All Forum Posts by: Patrick H.

I read that banks may provide title insurance but it will have exceptions, and much less than a warrenty deed. I thought REOs were targeted for investors rather than someone looking for an owner occupied home. That is why I was curious if it's worth looking into.

I was going to stop by a few banks to get pre-qualified (or at least see what I qualify for) and talk to them about any homes they are selling.

Since REO's have potential unknown liability issues, is it more likely a "you get what you pay for" situation.

A home may have a price of $250k, but have an estimated value of $300k (based on size, age, neigborhood, etc), but that means the bank estimates there is $50k worth of liability (whether that is unknown debt or repairs).

I spoke to a local credit union and having home ownership outright didn't seem to have any advantage.

Their analysis is debt to income. So ownership outright just means no debt. The amount borrowed would be the same if I didn't own a home.

This wasn't intuitive at first.

I thought this situation would be somewhat common since there are transactions between siblings related to property that occur. I believe the transaction would be considered a gift if no money is transferred and it would use part of the lifetime gift tax benefit. Under that rule the original property basis would be transferred to the person receiving the gift, which hopefully is the case.

The property is located in California.

I am filling out a quit claim deed for property that my brother and I have in joint tenancy. He will quit claim deed his portion to me.

1)
For the transfer tax calculation, I believe I use 1/2 the property FMV. So if the transfer tax rate is $0.55 per $1,000 and the property is worth $200k, than the transfer tax would be ($200k/$1k) * $0.55 = $110.

2)
If no money is transferred, does the basis for the property stay at the original purchase price of $150k? Or does the basis go down to $75k?

How different are the rates for a non-owner occupied loan (vs. owner-occupied loan)? I was checking online, but couldn't find any rates.

If the rates are that different, this creates an advantage of buying an owner-occupied house first. And than wait a year and buy a second home with a second owner-occupied loan.

But if I ever needed to refinance the first owner-occupied home some time later (maybe to pull money out for another investment), I think I would have to convert the loan to a non-owner occupied loan which might create a situation where the refinance is at a higher rate than the original loan.

My initial thought was to use Bryan's reasoning (to purchase rental property first).

I could purchase a rental for $1,200 a month (House B) and rent it out for the amount of debt I would have. I could rent a place to live for $600 a month. A few months later I could purchase a house to live in (House A) for $1,200 a month. But based on the two year (or one year) requirement for rental income, my existing debt for any new loan would be $1,200 a month not zero. Thus, my loan application for House A would show $1,200 a month debt (not zero debt).

If I decide to purchase House A first, the situation is the same. The House B application would show $1,200 a month debt.

So it seems there is no difference in which path is taken. Initially I thought buying the rental would make getting the second loan easier, but that doesn't seem to be the case.

If there was a one or two year time difference between the purchases, than buying House B first is advantageous. But if the purchases are within a few months of each other, there doesn't seem to be a difference.

My friend bought a duplex so I am familiar with the advantages of living in a multiple unit property. But I do not want to share a wall with a tenant. This is mainly due to privacy and noise levels.

Having a separate house in the back is a solution. I don't think it is that popular in the city that I live in, but I'll have to check.

I wasn't aware of the two year requirement for rental income. So this means it is better to buy the live-in property first, just in case the second loan is difficult to get.

I assume the same is true if I rent out a few rooms and receive income from the room renter. That income would not offset my debt for two years.

In terms of getting two loans, which is better:
1) Buying a house to live in first
2) Buying rental property first?

I would think buying rental property first is better. Once the rental property is purchased, the rent would cover the monthly loan payments.

When the lender evaluates the second loan (possibly a few months later), they would consider the rental income and it would be easier to qualify for the second loan.