All Forum Posts by: Adam Petterson

@Connor Hornsby

Reading and networking will help you greatly. The bigger pockets podcasts will help you understand the terminology and lingo of the business. I would recommend Brandon Turner's book "Investing in Real Estate With No and Low Money Down" 

Your biggest tasks right now need to be to learn as much as you can through research, reading, networking, bigger pockets, etc  

and 

getting your personal finances in line in order to be able to start saving for a down payment. I would recommend putting together a personal financial statement and creating a budget in order to get a better idea of your financial picture. Once you know where you are at set goals (weekly, monthly, year, etc) and work towards obtaining them.

Best of luck

@Steve Vaughan Thanks for the help! Im currently house hacking my primary with 3 roommates. I plan on renting out the property once I am able to find a good multi family opportunity. 

I am looking to get started in multi family property investing and had some questions for the bigger pockets community. I am currently in the process of a cash out refinance on my primary residence that will free up enough cash for my downpayment, closing costs, and an extra $10-15k for a reserve account. I am looking to house hack a 2-4 unit building using and FHA loan with 3.5% down and am looking for some guidance.

-Cash Flow: How much cash flow per month are you looking for on the other unit/units when buying an owner occupied multi family property. Ideally Id like to have the mortgage, insurance, taxes, etc covered by my renters, but with a duplex that seems like a lofty goal. 

-Management: I don't plan on using a management company when I live in the building, but do you build in that fee when looking at properties. I plan to live in the property for 2-3 years, and using a property management company once I move out of the building

-Closing costs: Is the negotiation process similar to the SFH purchase process. Has anyone had success having the seller pay their closing costs on a multifamily property?

-Parking: Do you charge extra if the property has parking spaces specifically allocated of the property or just give an equal amount to all units and build it into the rent?

Thanks in advance!

@Jef A.

Jef, the reason that the bank is asking you to put down 20-25% is because you are buying a property for investment purposes. The only time you are able to get away with a lower downpayment is when you are trying to purchase a primary residence. I would talk with your lender to see what your options are if you were to use the equity in your free and clear home

@Christopher Ojeda I am not 100% sure on the qualification side, so I would recommend talking with a lender in your area. My assumption would be that they would want to see an offer letter and your first 2 pay stubs (after 30 days or so). 

When it comes to properties, if you are looking to house hack, a 2-4 unit building might be a good option. On an FHA loan, if you owner occupy, you are able to put down only 3.5% and can count rental income on the other units you won't be living in for qualifying purposes. The downside is you will have to pay a mortgage insurance premium every month which is an extra $100-200 for the life of the loan. However, once you have the equity you can always refinance into a conventional loan.

Best of luck

@Grovo Carmona You are in a great situation with money to invest. If I were you I would be looking to use leverage to your advantage and put down as little as possible on your investment purchase. The key is to find properties that have good cash-flow after your expenditures, management fees, etc. Always have a reserve fund in place in case of emergency. You don't have to jump into multiple properties at once. I would search the market for good deals, and when you find something you like and the number work, go for it!

Best of luck

@Mo Nelson Im not sure what is the best strategy for you, but will give you my 2 cents on what I would personally do. I would take the property I am inheriting and cash out refinance in order to get enough money to pay off my aunt and fix up the property. Make sure you don't over leverage the property and that it will still cash flow. Once you have finalized that deal I would began to look at purchasing a multiunit property to owner occupy. With an FHA loan, you are only required 3.5% down (which you may be able to get by cashing out on your inherited house) and you are able to use future rents on the other units of the property you will be purchasing to help qualify for the loan. This is a potential way to keep the property you are inheriting and still qualify for a new FHA loan. Just a reminder, you can only have one FHA loan at a time. If I were you I would reach out to a lender in your area and talk through your situation with them to make sure you can qualify for both a refinance and a purchase.

Remember there may be tax consequences if you are to sell the property. When you refinance and take out debt you can get the cash you need, and will not have to pay any capital gains tax (you will actually have tax benefits involved as you can write off mortgage interest, fees, etc.)

Best of luck

@Brian Garrett I would get a title company involved as soon as I had a contract signed by both parties. The exception would be if you have an inspection contingency, if so I would wait until after your inspection. Once you start working with the title company you will start to incur fees, so make sure that you are pre qualified and that you will be moving forward with the deal. You have the ability to choose a title company, and many lenders will give you a few options of title companies that they frequently work with. Your real estate agent/broker may have suggestions as well. I would look at reviews online and network with other investors in your area, or here on bigger pockets. Hope this helped! Feel free to reach out with any other questions

@Jonathan Kramer I would check with your lender to find out your timeline then. It will vary by institution. 

@Brian Garrett Cash purchase will expedite the closing process. You are able to eliminate the approval process and appraisal process. Many buyers will still want an inspection and title work. You wouldn't need a lenders policy as there is obviously no lender involved, but most agents would recommend buying an owners policy to protect you from any issues with title

@Ty Monroe

Ty if you are going to go FHA there will be multiple fees involved. My strategy has been to try and negotiate and have the seller pay part of my closing costs as well. I would rather have a couple thousand dollar higher mortgage (amortized over 30 years) vs having to bring more money to closing. Here are some of the costs to consider:

Down payment: You will need at least 3.5% down for an FHA loan

Title work: The lender will require title work and a lenders policy to insure them against any title issues. This fee will depend on the property price, title company, location, etc

Lender Fees: Your lender will charge an origination fee, credit report fee, etc. Usually the origination is between .5-1.5% of your mortgage

Pre pays: You may have to pay insurance and taxes for x amount of months up front as well

misc fees: Deed tax, mortgage registration, etc. This will vary upon mortgage size

If you plan on house hacking, FHA financing is a great option as you have low down payment requirements, and they are able to count 75% of the rental income off of the other unit/units for qualifying purposes.

If I were you I would look into the FHA Sapphire program. There is an opportunity to receive a grant for up to 5% to assist with down payment. You never have to repay the grant! There are some restrictions based on income, but if you plan on owner occupying you may qualify. Im not sure which lenders offer this grant, but if you google the program you can learn more information.

Best of luck