All Forum Posts by: Shaun Callais

Thanks a bunch for this info! Your suggestion definitely sounds like a great, possibly our best, option. My only concern would be that we would want to move into the new home right away, instead of taking the time to transition. I understand that might not be possible though. 

My wife and I purchased a duplex in Denver last year. It was financed using a primary residence mortgage. We had to put $105k down to qualify, based on DTI. We lived in one side of the duplex for about 7 months, then a new job required us to move about 60 miles away, to another part of the state. We currently rent.

We are currently renting both sides of the duplex. One for $3k/month, the other for $2k/month. Our mortgage (PITI) is $2,300/month, total income is $5,000/month. We spent another $70k on updating the side we were living in. By finishing the basement, we doubled the square footage on our side.

We purchased the property for $550,000 and invested another $75k. Our mortgage balance is $443k. Assuming we were to sell the duplex for $850k, which is what comparable duplexes have recently sold for, we would have $407k - $51k realtor fees = $356,000. Since we have owned it for over a year, it’s possible we would have to pay 15% in long-term capital gains taxes, based on our income bracket. $350k - $175k original investment = $125,000 - 15% = $106,250 + $175k = $281,250 that we would walk away with. Is this correct?

Another option we are looking into is doing a 1031 exchange, but it would need to meet the needs of my family. We want to purchase a home in a Denver suburb about 8 miles away next summer to live closer to family and be in a better school district for our son, who is in special education and is experiencing increased behavioral challenges. We would look for a single family residence with a mother-in-law suite. We doubled the square footage of the duplex unit our family lived in from 874 to 1,750, and the side that has always been a rental is still 875 square feet.

I am also looking to move to another career, as I am currently in a commission-only sales job and have not made the amount of money I had anticipated, due to supply chain and payroll delays (needing to wait 4-6 months to get paid on my sales). I’m concerned that I won’t qualify for a $650k mortgage next summer without this job showing on 2 years of tax returns. Fortunately, our rental will show up on 2 years of tax returns, as $5k/month of rental income since August 2021, but only $2,400 of rental income in 2020, as the previous owner hadn’t raised rent since 2012. I have an MBA and should be able to find a job that pays $80-100k/year, with my experience.

Please advise on the best option(s) for our family, as well as if I am missing any key info needed to make this decision. If we kept the duplex, would the $5k in rent be enough to offset the $2,300/month mortgage, for DTI purposes? Assuming we only deduct PITI and depreciation from taxes, no repairs. Is the 1031 exchange from a duplex to a SFR with a mother in law suite realistic? If we kept the rental we would need to go through Penfed Credit Union, or another financial institution, to take out a HELOC on the duplex to use as a downpayment on a new house. Is there any way we can possibly avoid paying long-term capital gains taxes if we sell, besides through a 1031? Thank you!

Thank you, David! I appreciate the kind wishes and sound advice. I’m interested in learning more about commercial products and how they can help me progress toward my investment and financial goals. Once I get unpacked after the move, I immediately plan to hit the streets and drive/walk every corner or Charlotte and it’s suburbs. In the meantime, I’ll be searching the BiggerPockets and Reddit forums to network with realtors, brokers, investors, and attorneys who are familiar with the Charlotte market. Thanks again!

Thank you for contributing to my post. You're right, I'll plan to reach out to my mortgage officer on Monday and find out their policy for DTI when purchasing an investment property.

I recently sold my primary residence and have a fairly large cash reserve. I am about to buy a home in Charlotte and my DTI will increase from 5.4% to nearly 45%. The total monthly payment is about $1,750/month if I put 10% down. I will have around 10% equity in the property at closing. I have an MBA, but have been working a job that pays about half of what most people with my education and experience currently earn. I'm hoping to substantially increase my income after I find a good job in Charlotte (I have years of experience in banking).

The main reason for selling my home and moving to Charlotte was so I can have cash to begin investing in rental properties. I would also like to raise my children in a city that has is more diverse and provides more opportunity than I could find in Utah. I determined that Charlotte would be a good city to start investing. After putting 10% down on a new PR, I will still have six figures to invest. However, I'm afraid that even if I put down 25-30% on a rental property lenders won't give me money due to my high DTI. Is there any way to make this work with high DTI? For example, would I still have a chance at purchasing a tenant-occupied property as long as they've signed a contract? Would I need to look for hard money lenders? Is anyone familiar with how this would work in the Charlotte market? How long after purchasing a rental until I can begin putting 75% of the rent toward income for lending purposes? Sorry for so many questions. I just don't want to shoot myself in the foot.

Thanks for the advice! I agree that selling would likely be best. Utah has one of the highest/worst rent ratios of any state. We’re eager to move out and find better opportunity. 

We live in Northern Utah. I’m thinking there might be a better way to invest our equity, which would mean a sale. We’ve lived in the homes for 5 1/2 years.

My wife and I are in the process of doing a cash-out refi on our primary residence in Utah. We owe about $129k and the house is valued around $290k. At 70% LTV I can borrow $73,500 at 3.125%, 30-year fixed interest rate. We are currently locked until May 21. We can potentially borrow up to 85% LTV, around $117,500 although it may increase the rate by 0.5%.

Our plan is to borrow $73,500, put 20% down on another single family residence that would cost around $250-275k (in Charlotte, NC), put the additional funds into savings, and rent our current residence for $1,500/month. Our current escrowed mortgage would increase from $895 to $1,056 per month. The monthly amount that would go toward paying the escrowed mortgage on our current residence is $740. We would charge $1,400-1,500 for monthly rent on our current residence. I know that’s a bad rent ratio, but we would be interested in using a good portion of the equity for other investment opportunities. No repairs or updates are needed at the moment, as we initially intended to sell the home, and put about $60k and hundreds of hours of sweat equity in the home over the past 5 years.

After reading this sub, and reading the Cash Flow Quadrant, I’ve started to think that perhaps I should pull out as much cash from this home as possible ($117,500), purchase an investment property (duplex?) using cash, find tenants to occupy the property, wait a few months and pull out a mortgage on the property. After obtaining financing, I would purchase another primary residence, then rent out this home. This method would allow me to purchase an extra property using the equity I already have in my home.

I’ve also heard about going the lease-purchase route, or doing something similar where I could only put 10% down and purchase several additional investment properties. What advice would you give me, based on the information I provided? I’m happy to explain my situation in more detail.