All Forum Posts by: Bill Goodland

@Giulia Mylla you need 15% down for conventional, only 3.5% if you go FHA

Thanks man, that's the plan! Just a question of do I try to push the value and refinance this one out of the FHA loan to get another one next year, or just go for a conventional on an SFR. All lenders are telling me that if I go 2+ units on the next owner occupied that I'll be required to put down at least 15% while I still have the FHA loan.

@Syed H. Thanks man! Agreed in regards to center city

@James Perdomo most impactful starting out we’re Rich Dad Poor Dad, Millionaire Real Estate Investor, Richest Man in Babylon and The Go-Giver to get the mindset and mechanics of investing set. Other real estate ones I really enjoyed were Zillow Talk, Landlording on Autopilot, Set For Life, ABCs of Real Estate Investing and Confessions of a Real Estate Entrepeneur. On the personal development side of things and probably my favorite book right now is Atomic Habits. In addition, I loved Shoe Dog, Extreme Ownership, Never Split the Difference and Crushin It. I could go on and on haha, but I’d start with any of those if you’re looking for a good read/audiobook listen. Got almost all of them for free through my public library.

@James Perdomo it’s in Breinigsville PA in a nice suburb of allentown with a lot of demand for affordable rentals because it’s mostly owner occupied homes and relatively new construction apartments. And yes, you can find some lower priced properties in Allentown for sure, but almost none of them come with adequate parking and I wanted to find a place that I would definitely enjoy living. Plus, with using a 3.5% down loan, the bigger the property the more I benefit from leverage of being able to raise rents and add value. Rents are considerably lower in Allentown, but price to rent ratios are still solid. I’m looking there for the next deal but the first one just made more sense for my as a househack here.

So I found BiggerPockets in around November 2016 and listened to every single podcast in a matter of months. I just dove right in but at the time, I had just found out that I would be going back to grad school as a full-time student from August 2017 to October 2019. At the time I started listening to BiggerPockets and absorbing all of their content I made a goal of having a property to househack under contract by the end of 2019, the year I graduated. As I got further along towards that time frame I kept on going to meetups, absorbing content and books(61 books/audiobooks in 2019 not including school work) and made the goal of also closing on that property within 3 months of graduation. With that being said, although I'm a bit delayed on this post, I'm proud to say that after having a half dozen or so offers declined and a lot of patience from my awesome agent @Justin Brown, I finally got an offer accepted on a triplex just outside of Allentown, PA in December of 2019 and closed on January 14th 2020...exactly 3 months to the day of when I graduated. Goes to show that speaking things into existence really is powerful is you have your goals set and the processes in place to make them happen. 

So now for details on the deal. Its an old stone farmhouse built in 1854 in a great school district that was converted into 3 apartments years ago. Great bones, but as you can see in pictures a bit outdated. Rents were low and it was fully occupied with leases until May 2020 when it hit the market so very few people were interested at an initial asking price of 425k. They kept on dropping the price and it eventually got down to 319k. There weren't any pictures of the inside on the MLS, but with it being a multi-family and in my area, my agent and I decided to go take a look. It seemed like due to the high purchase price and low rents of $800, $800 and $650, not many people were interested. We realized when we viewed the property was that one tenant had actually moved out, leaving the perfect opportunity for me to owner occupy the 1BR apartment and continue to rent the rest. What many newbies don't realize is that closing costs on a purchase can make or break your initial cash on cash return so if one can eliminate that, all the better. A tip I learned by working with a great lender @John Capehart was that conventional loans only allow the buyer to get 3% in seller assist for closing costs whereas FHA loans allow for 6% of the purchase price to be covered by the seller for the buyers closing costs(usually about 5% of the purchase price in my area). After a bunch of back and forth, the seller was firm on wanting to net 300k and we settled on a purchase price of 314k, with 14k in sellers assist which covered all closing costs. Units were in good shape, just a bit dated. I started getting the rehab done on my unit with paint, flooring, new recessed lighting and new carpet on the spiral stairs done so far. Still need to paint doors, cabinets, stairs, replace a vanity and toilet etc. I also will be turning my 1 bedroom apartment into a 2 bedroom apartment by putting up a wall on an 8x10 section off the living room with a sliding barn door. In the unit next door, one of the tenants was already practically living with her boyfriend and was willing to break the lease early, paid for all of March and actually moved out in early March giving me the chance to do some minor upgrades, have showings right away and get it rented to limit vacancy. I had planned on putting in about 5k in rehab and hoping to get $1100 in rent but I decided to beta test my market by putting up a posting for the unit at $1095 with additional pet rent hoping that the pet deposit and rent might pay for the new flooring once I get rid of the outdated carpet(which is still in great shape). I ended up getting a ton of demand and found what looks like will be a great tenant at $1095 + $25 a month pet rent for her one cat with only some paint touch-ups, some new recessed lights, and a new sink. The tenants in the 2BR/2Ba unit asked if I was planning to raise rents and when I said yes, they said they would look for a new place and ended up finding a place to break their lease early too. GREAT! Their unit will be hitting the market soon and should get $1300 a month. Details and pictures below.

Purchase Price - 314k with 14k in sellers assist towards closing cost

Down Payment - 3.5% down ~ 11k

Loan details - FHA 3.55% interest rate over 30 years

Monthly PITI - $2059

Unit Details

Unit A - 1 Bedroom, 1.5 bath with washer/dryer. $650 at closing, leased at $1120 a month($1200+ after cosmetic rehab following next tenant turnover)

Unit B - 1 Bedroom, 1.5 bath with washer/dryer Previously rented at $800, vacant at closing and currently occupied by yours truly. With about 5k in updating, more some sweat equity and adding the second bedroom(to possibly airbnb when not home), should rent for $1250 when I move out at the end of the year.

Unit C - 2 bed, 2 bath with washer/dryer. Rented at $800 at closing. Tenants moving out soon and going to list at $1300(plus pet rent) essentially as is which already has interest from people that viewed Unit A. Could get more if updated and has the potential to be subdivided one day into 2 separate 1BR apartments because it's huge.

Gross Monthly Rents

At closing - $1450

After stabilization - $2420

After I move out - ~$3700

ARV - ~400k. Very few comps with how old the house is. Its 3240 sq ft and bought at $96.91 per foot and there's a recent also outdated multifamily comp that sold for $113 a foot. Almost everything else in the area is new construction selling for a minimum of $130 a foot and up. Likely wouldn't look to recapture equity until all units are rehabbed. I'm looking to rent the other units as is right now just because of the time commitment of a rehab, the fact that there is still plenty of useful life left in the outdated fixtures and I think my time and cash would be better served finding the next deal considering this one will cash flow/pay my PITI as is.

And here are so pics of the property with a couple before and afters. Still plenty of work to do but looking forward to it!

Hey man, I'm a PA too over in Eastern PA. We should connect sometime. I'm househacking right now and although its definitely a big learning curve has definitely been worth it. Sounds like you're on the right track but once you have a decent idea of what you wanna do and are educated on it I say jump right in. Best of luck

@Fred Fleury I would do this if I were you in that situation. It may not cash flow well purely as a rental, but if you consider the savings on your living expenses as extra cash, then your cash on cash would be through the roof compared to other properties. Not to mention all of the other benefits of real estate, most importantly loan paydown on a 720k property that you would only need to put 3.5% down on. If it appreciates 3.5% in a year, that’s a 100% return from appreciation alone right there.

Congrats and awesome job @Cory Iannacone. What did the property you cashed out another 30k appraise for? Considering there aren’t a ton of higher end rentals in your market, have you had a tough time at all finding comps to justify rehabs to boost your future rents and appraisals?

@Jonathan Greene “bro’s don’t research” ? Lol all it takes is clicking on a profile to see that you’re advertising the fact that you’re a coach regardless of if you explicitly offer it on the forums. For someone that’s clearly trying to make themselves seem like an authority figure, the petty name calling and talking down to others seems pretty childish and it seems like many would agree