All Forum Posts by: Patrick Senas

Hi, my girlfriend is going through a similar situation at the moment. She owns a duplex and lives in one unit. Her neighbor, long time tenant, has been subletting rooms for what seems like a long time now. I know your topic is about AirBnB but there's some similarities.

I'll tell you what I told her. There's a few things you should be concerned about. The main thing is liability. In case anything happens to the traveler during their stay in your home. Who is liable, you or the "host"? There needs to be something in writing at the very least that outlines that.

Any reputable property manager would want to screen all the tenants that would be living in the home. That's why they don't allow the tenant to sublease their property, and any additions must apply to be included in the lease. Same reasoning should be applied for AirBnB, in my opinion. That's a lot of additional wear and tear on your property with no monetary compensation. 

The joint venture does sound appealing though. If you don't mind them doing it at least make them give you a cut. Like I said, make everything official. 

Just my 2 cents.

@Jake Thompson Hi Jacob, you mentioned that you rented out each room in your place. With FHA and VA loans it requires that you use the home as a primary residence for at least a year. Let's play the devils advocate. Let's say that I close on a home and make all the necessary changes to reflect that it is my primary. Are there any legal ramifications if I actually never move in and rent out each room individually?

@Ben Biggs: 

Do you have any lender recommendations that don't have that restriction? 

I also just posted a discussion topic about analyzing multi family deals in San Diego if you can check it out and provide some insight. Thanks!!

Hello @Ben Biggs, I'd like to get your comment on the above topic since you are currently house hacking in San Diego. When you were shopping for deals, did your numbers look similar?

Hello BP,

Before I go into the deal specifics I feel like I have to justify WHY I am choosing to invest in San Diego. Essentially it all boils down to my current situation. I am a first time buyer, Navy veteran currently working full-time at a tech company and a student full-time. I think it would be wise if I use my VA loan to purchase a multi-family unit, "live" in it for a year and make it a full rental while I move back in with my girlfriend (for very little money). Currently I have a pre-approval for $600k with $50k down but am shopping around with other lenders. Some lenders won't use rental income to qualify if I don't have at least 1-yr experience as a landlord; but that's another topic of discussion.

Now on to the good stuff. After running the numbers on various deals, investing in San Diego still makes no sense to me! But there are those that still do, so my question to them is... WHY? What am I missing? Is everything based on speculation, betting on appreciation, annual increase in market rent and principal pay down? So instead of immediate cash flow I should be focused on building equity?

BASIC

Here is a basic analysis of a random property in the Chollas View area of San Diego. 

Questions

• CAP rates in San Diego are very small. Usually higher CAP rates are in the not so great areas. What should be my target CAP rate?
• I've seen GRMs in the 9-12 range. What should be my target?

INVESTMENT MODEL

Comments

In my calculations, I included both units. Though in Year 1 I would technically be the other tenant. 

From what I am seeing, 6% PM fee and 5% Reserves included, I would be in the RED for 8+ years. When I calculate it without the PM, my Leveraged CF would go green after Year 5. The only upside to this is my Total IRR which is insane since I will be putting $0 down, but for maths sake I put $4 down.

TO ALL INVESTORS

For those of you currently investing in Multi-family properties in San Diego, is this something to consider? Is the trade off for being negative for a few years worth it to have such a high IRR? What should I be looking for?

Thanks!

Patrick 

Ben Biggs In regards to your statement, in my quest to find the best mortgage terms I've learned much about VA loans. According to various lenders, the VA sets basic guidelines but the lenders are the ones assessing the risk. So each one will have different qualifying standards. The one I mentioned just happens to have one of the stricter ones and they require that I need at least one year landlord experience to use the rental income to qualify. Though others (lenders) have said that signing a PM is a loophole to that contingency. At least for their particular requirements. -Pat

I'm currently in your shoes right now and have been talking with RE agents and lenders the past couple of weeks.

The lenders want 2 years of work experience, as shown in your filed taxes, to prove your income stability. If you just started working at this start-up you may not have that. Unfortunately for me, even with that stability my income is too low. Especially as a single applicant in the SD area. I also don't have any major assets, just retirement funds etc ~30k. So not much going for me. 

I was trying to apply for a VA loan but the lender told me I needed landlord experience before they can underwrite me a loan. So he recommended that I get a condo, live in it for a year and then rent it out. So at least I can start building equity and get that experience until my income catches up with my education. I'm still going to school full time and working full time.

My mom did say she would co-borrow but there's some other guidelines for VA loans about non-occupancy for the co-borrow. I think it should be ok with an FHA loan though so I'm talking to another lender about that.

I want to get into a duplex - 4plex but the listing that my RE agent showed me was mostly in the 500k+ range. Unless you look in the less appealing places. I might pursue the condo route though to at least get in the game.

You should talk to a lender, at least to get an idea of what you need to do to get things moving. Reading about REI can only get you so far.

Good luck!!

@Shawn Couch Hello Shawn. From my limited understanding between the two, FHA has PMI which is tacked on to the monthly mortgage until I reach a certain percentage of equity and VA has a one time funding fee. Which one do you think would be more costly? Maybe I will go for a VA loan. Extra protection would definitely make me feel more secure about my first investment. And yes, I'll take all referrals for a good VA broker, thanks!

@Bruce May Yes, I'm definitely considering a VA loan now. At least for my very first purchase.

Hello all,

My name is Patrick Senas and this is my first time on this forum. I'm actually a pretty avid reader of the great articles posted on this website but have never thought of joining since I figured I wouldn't get into real estate. But here I am!! Below you'll find information regarding myself and my goals in RE.

Short Intro:

I'm a US Navy veteran that left the service in 2013 and currently enrolled FT at UCSD for Aersospace Engineering. I also work FT at Qualcomm as a Test Technician. I was always too afraid of investing in general but enjoyed reading books and blogs about investing. I decided I wasn't doing myself any favors by just dreaming about being financially free, so I dove feet first into the pit and now I'm deeply invested in stocks, IRAs, you name it. The next step in my journey is RE!

Goals:

My investment niche and strategy is this; I want to invest in multi-family rentals and buy-and-hold. I figured the best strategy for me is to get either an FHA or VA loan to take advantage of a low or zero money down payment and low interest rates if I move into one of the units. Stay in the home for at least 12 months then roll right into another FHA/VA home. Rinse and repeat, until the lenders refuse to give me anymore loans! haha

I do have some questions regarding financing options but I'll post it in the appropriate thread. So if you see that post, feel free to respond! 

Thanks!

Pat