All Forum Posts by: Paul Lee

I own a 4-unit multifamily property in Colorado Springs, CO. These units are townhome-style units, and two of the units have unfinished basements with the bones to convert them into conforming bedrooms. The unfinished basements each already have (i) an egress window and stairs leading to the main floor (two points of exit), (ii) a full walk-in closet, and (iii) a full bathroom.

My questions are:

1. 1.) Does adding a bedroom in the basement and getting a much higher rent amount affect the appraisal value? The rent would go from $900/month (2 br / 2 ba) to $1,800 (3 br / 2 ba). I would think since the property is a residential property, the appraisal would be based off the comparable sales approach versus income approach.
2. 2.) Do appraisers care if permits are pulled to finish basement bedrooms? Does DIYing a basement finish affect the value in any way? My father-in-law is a general contractor and we do a lot of DIY stuff. We would obviously leave electrical work to a licensed contractor. The DIY things we would do are:
   1. Putting insulation
   2. Putting up lumber to hold the drywall
   3. Drywall
   4. Painting
   5. Flooring

Thank you so much in advance.

Thank you Justin!  Just to be clear, the existing written leases do not state that there needs to be a 45 days notice for a rent increase.  The property manager I spoke with does not manage any of my properties.  I'm curious where he/you are getting the 45 days' notice required for a rent increase?  Thank you in advance!

Hi guys,

I am closing on a 4-unit multi-family on July 11th with 3 existing tenants with written lease agreements.  All of their leases expire at the end of July.  How many days' notice am I required to give them to let them know that rent is increasing?

I spoke with a property manager that said I am required to give 45 days' notice, while HB21-1121 - Residential Tenancy Procedures says 60 days' notice without a written lease agreement. 

https://leg.colorado.gov/bills...

I am planning to extend a month-to-month lease so the tenants have the option of searching for other units if they don't agree with the price increase.  Thank you in advance.

Hey guys,

I currently owner occupy a 4-unit multi-family and I'm looking to purchase and occupy another 4-unit multi-family. I'm using Fannie Mae selling guidelines to calculate my DTI, but I'm still not sure if I am calculating it correctly. I have one year of rental income history as a landlord. I would be GREATLY appreciative if any knowledgeable investors/lenders could help me with the bold questions below regarding the calculation.

-------------------------------

Total Debt:

• New 4-unit property mortgage
• Do I include the mortgage for my current owner-occupied property if I plan to rent out my unit and the total rental income for all four units would exceed my current property mortgage? I have read that if the rental income for property exceeds the mortgage, you would just net the positive difference towards income. Not sure if that's the case for owner-occupied properties.

Income:

• Two years of my W2 + Bonus income
• 75% of the new 4-unit property mortgage
• Would I add the rental income for my owner-occupied property if I intend to rent my unit out and the combined rental income would exceed the mortgage (see above)?

-------------------------------

For reference, I looked at:

Rental Income Calculation Worksheets

Fannie Mae publishes four worksheets that lenders may use to calculate rental income. Use of these worksheets is optional. The worksheets are:

• Rental Income Worksheet – Principal Residence, 2– to 4–unit Property (Form 1037),
• Rental Income Worksheet – Individual Rental Income from Investment Property(s) (up to 4 properties) (Form 1038),
• Rental Income Worksheet – Individual Rental Income from Investment Property(s) (up to 10 properties) (Form 1038A), and
• Rental Income Worksheet – Business Rental Income from Investment Property(s) (Form 1039).

https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of-Income/1032995141/B3-3-1-08-Rental-Income-06-03-2020.htm

Theoretically, if there was a fourplex that was priced over the FHA max loan limit, would someone be able to use an FHA loan to owner-occupy and purchase 3-units as a "triplex" and then finance the last unit with an investment property 1-unit loan? If not, what would be some creative ways to finance a fourplex that is over the FHA max loan limit for the area? Thanks in advance!

Great post!  Thanks for sharing

I'm in the process of closing on a multi-family unit that I'll be owner-occupying and self-managing. A lot of the feedback I've received from more seasoned RE investors is that I should try to self-manage for the first investment property.

I'm fine with showing/leasing the property and keeping it clean, but for the other issues (water leaks, HVAC issues, etc) I want to hire a more experienced person to examine the issues and determine if he/she can fix it him/herself or if a specialized third party needs to be called (plumber, electrician, etc.).

Which of the following options are the best in my scenario?

• Self-manage and hire an on-call handyman, as well as get a list of go-to specialized third parties (probably the least expensive and I get a better understanding of managing properties)
• Just hire a property manager and be done with it (probably the most expensive)
• Other?

Thanks in advance.

I'm currently contemplating a counteroffer on an off-market fourplex that will be $50k (or 8%) over market prices for the area. The reason I'm even considering this counteroffer is (1) there is limited inventory in the area, (2) I have an opportunity to use an FHA loan, and (3) the property generates 12% cash-on-cash returns (not including a property management fee). I should also add that I am currently renting and plan on owner-occupying this fourplex.

If I were to hold this property long-term, do you think it would be wise to pursue this opportunity? Since this is an off-market deal, I can use an FHA loan and reduce my initial cash contribution; however, the appraisal gap may be significant. Curious to hear your thoughts BiggerPockets!

I'm in a possibly complicated scenario, so any feedback or help would be very much appreciated.

I'm looking to purchase a 4plex with an FHA loan, but after walking around the property there might be some issues meeting the FHA's minimum property standards. I'm willing to pay for any repairs to get the property to FHA's minimum property standards; however, if there is a large appraisal gap and the seller doesn't want to lower the purchase price to the appraised value, the deal wouldn't work and I don't want to pay for repairs prior to doing the repairs.

I hope this makes sense.  Please let me know if you need further information.  Thanks in advance!

For those of you that have investment properties in Colorado Springs, how are property taxes assessed?  Are they based on the purchase price of the property?  I'm just trying to determine if the property taxes on a particular property I'm analyzing would increase following my purchase.  Thank you in advance.