All Forum Posts by: Robin Dassy

Good Morning All,

My wife and I have finally purchased our first duplex and moved into one of the units. 

I am currently in the process of obtaining a green card, as my wife petitioned for me. In the meantime, I am still on my F-1 visa under OPT. I am 99% sure that I am allowed to receive rental income as well as capital gains, regardless of my employment status limitations. What I do not know is if I am allowed to "operate a rental business." I am planning on doing a segregated depreciation study as well as filing for business expenses such as the office, internet, and repairs. My wife and I will most likely be filing jointly.

I guess my questions are the following:
- I have been having a hard time finding a CPA who would have experience in dealing with this and would work with such a small portfolio. Does anyone know of either a web-based firm or one in the West Texas area?
- Am I allowed to take these deductions considering my status, and would I need any type of entity to do so?

Thanks in advance!

Hey Erison!

I have been living in the area since 2013 and joined the local REIA in April. You can find more information about the group on Meetup if you'd like to join the next meeting.

I was in Wichita last month visiting my wife's family, and a couple of my coworkers are from that area as well :).

Let's get in touch! I hope I get to meet you soon, and we'll get you introduced to everyone out here.

Are there any good sources out there showing somewhat accurate population growth expectations for the upcoming years in the cities on this list? I’d be curious to make the correlation between units built and potential renters influx.

@Andrew Postell thanks for sharing the article! I am surprised to see Austin projections are only around half of DFW. Pretty interesting stuff.

Hey Gavin,

I think there are a few things you need to consider when such a big expense comes into the picture.
Are you sure your numbers are accurate for the foundation work? 
If that's an accurate quote and a structural engineer confirmed it was necessary, I would recommend you plugging it into the calculator as repair costs and see how big of an impact it has on your projections. Same for the TLC you mentioned. 

If the sellers won't budge on price, I think the foundation work would cost you about a third of your ARV without adding net value to the property. That's pretty significant, and it would likely take a while for your cash flow to wipe away that loss.

Another thing to consider is whether there are any other similar properties on the market. If you're willing to spend that amount of money on foundation for this particular property on top of purchase price, why not by another 4plex (if the deal makes sense) or even several 2plex or 3plex for the same price after repairs? That being said, I am not familiar with the market where you found this deal and it may not be an option.

Other than the price of foundation work, I assumed all your other numbers were accurate. This would be totally different if your ARV and purchase price have a much wider spread.

@Anthony Gayden Oh my goodness I was thinking it was on the other podcast. I do remember your episode! Man, it was amazing, you're truly a champion of strong will. I was baffled at how your successful career was spurred by something as simple (yet difficult to commit to) as self and lifestyle improvements. I was so pumped after the show haha. I hope you're still doing great! 

Thanks to all of you for your encouraging replies! 

@Chris Mason I have been making sure to work towards an excellent credit score over the time it took to save up enough for a down payment. I am really glad to have been so intentional about it, my lender has been able to come to me almost with the very best terms he could offer. 

I do realize sources become obsolete, but your two years guideline makes a lot of sense in hindsight. I really wish more people knew about this alternative because it could potentially make the numbers on a deal look a whole lot better.

Thanks for the quick response man!

@Anthony Gayden I saw you were a podcast guest but could not remember that episode. I felt so bad until I realized it was missing... anyway.
I do realize 5% is still a great deal, but I was just trying to optimize my strategy to have as many properties as possible in my portfolio with the least amount of cash possible sitting idle instead of working for me. I thought this would most likely my best bet for rapid growth.

My strategy is fairly similar to what you did, and I really believe a 3 or 4 plex would make things even better, but good deals on those are really tough to find in my area. Is there a reason you decided to go for a 15 year mortgage rather than 30 on your second property?

@Stephanie Medellin I know that the two are not that far apart. It's a little bit of a trade off. I just thought for a second that this option was BOTH a lower down payment and a better deal overall. It was too good to be true haha. The FHA lives on as a good alternative. I'm fortunate enough that my wife and I have been working on our finances and credit ever since we got engaged to the point where we can get almost the very best financing deals out there. I hope Home Possible becomes a bit more popular, it could truly help a bunch of people starting out if they're willing to put a bit more cash upfront.

Got an update and down payments are 5% on Home Possible for duplexes... Oh well.

Okay, maybe this was a bit of a dramatic title, but hear me out.

Until yesterday, my plan had been simple:

Step one: get my first ever property (a house hacked duplex) with an FHA loan.

Step two: move into property and stay in there for at least a year. This would allow me to take advantage of not only the low down payment and affordable interest rate of FHA, but also of the rental income to increase my savings rate.

Step three: buy a second property, maybe after a cash out refinance, and snowball from there.

Everything was ready to go. FHA was my best option, first-time buyers newbies with little cash on hand can't be picky... right? I've read it on forums, heard it on the podcasts, FHA is probably the best way to buy a duplex and get started.

I was ready to go, got pre approved by a lender, then one of the small downsides of FHA started to bother me: mortgage insurance. Unless I make a 20% down payment, I have to pay mortgage insurance for the entire life of the loan. Problem is, i don't have the cash to do 20% and i really don't like the idea of paying it for 30 years if I decide not to refinance. I know the amount goes down as you pay off the balance, but it just bothered me. My only other option to not pay mortgage insurance forever seemed to be a conventional loan with a much higher down payment and only pay until I reached 20% equity.

I was determined to find something better. So I did what we millennials do best and googled my way to an answer.

I found out Home Possible loans are available for duplexes for first time home buyers. JACKPOT I thought. I brought this to the attention of my lender who said he would look into it and work out the numbers. I explained to him that I wanted to take advantage of low down payment loans with decent rates, and he said that Home Possible would be even better than FHA in my case. He just had never seen someone use it for a duplex.

Then he dropped a bomb on me. And it blew my mind. It went something like this: If you're looking to optimize over three years without refinancing, and you're going to occupy the houses you buy, then this opens up a great path. You can start with Freddie's Home Possible loan. After a year you'd be able to get the Fannie equivalent of this, the Home Ready loan. Then after another year, you could do FHA if you really need to.

My jaw dropped. These loans have lower down payments, and even though they have higher interest rates, insurance is cheaper AND goes away at 20%. WHAT?

This is when I ask for your help, BP veterans, lenders or anyone who know about this.

This sounds too good to be true, right? Maybe I just stumbled upon something that is old news to everyone, but this changes everything for me. Would FHA's insurance really offset the higher interest of Home Possible and Home Ready? Would this be the best combo for a newbie wanting to start with a duplex house hack? I understand I am focusing solely on mortgage insurance here, but am I missing anything?

The oil industry calmed down quite a bit after 2014 when oil was going for $100/barrel then went way down. I’d say it started picking up really fast in late 2016. Now, rents have gone up at least 30%, traffic is awful again. There’s a steady flow of people moving in every month. It is getting crazy out here. Haha. Did you teach at OC or Permian? San Angelo is a nice place, prices are more reasonable than up here and they have a very nice college campus. Pretty sweet area to invest. I’ll probably branch out there if prices don’t make sense anymore in Midland/Odessa.