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All Forum Posts by: John M.

John M. has started 7 posts and replied 30 times.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Drew MacDermott Thank you for your well written response. This really helped me put the pieces together. I'm finding that in my market, it is incredibly difficult to find MLS multi family properties (in a decent or better neighborhood) that meet a buying criteria that is ideal based on some of these things you mentioned. I've been searching for 3 months now and this is the first I have come across thst is even remotely close. Unfortunately I haven't taken the time to send out mailers or do any of the other things that might lead to off market properties, so this is what I have to work with at the time (which unfortunately is right before I am about to move out of my current living situation). You caught me on a couple expenses I hadn't considered such as lawn maintenance and trash. For trash, I was under the impression that it was a part of my property taxes, is this not the case?

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Patrick Britton Sounds good. I will definitely let my realtor know.

For everyone else reading this, I spoke with my broker and she contacted her lenders and confirmed Patrick's statement that 85% LTV is the minimum for owner occupied duplex via conventional. From here, I am returning to FHA as my only viable option with as little money down as possible. Apparently lenders used to have "portfolio" programs where they would offer 5% down to owner occupants for MF's, but they have done away with that.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Adam L. Thanks Adam. This property is renovated nicely. There's still some things to be done (tree removal, fencing), but I don't know if these would justify going for a rehab loan. Good point on avoiding the 1.75% funding fee. If the conventional works out that will be a great perk. 

@Patrick Britton She is aware that I am purchasing a duplex. She's been doing business in the area for a very long time as well. I do not know the specifics of what the lender credit was, as we did this all over the phone, I just know that the numbers we ran didn't account for a seller credit, which I plan to incorporate into my offer to reduce cash at close. Would you recommend that before proceeding with an offer on the property through my realtor, I get a cost break out with the specifics of the loan from my broker? 

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Christian Marin Understood. My situation is a little unique because I am currently renting, and have a limited time line to get in a living situation for next year. For that reason, I am willing to forgo the property management expenses and assume that I will be managing the property myself (for experience and additional cash flow). I know this is not the best long term decision, however with my situation it seems appropriate. Duplexes in Orlando haven't been easy to come by in neighborhoods that I would be willing to live in, especially at a price that meets or is close to meeting 1% rule.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Patrick Britton Hey Patrick, I spoke with my mortgage broker again last night, much more prepared this time than last (thanks to you). I let her know my concerns about what we discussed on the minimum down for conventional, and she said that 5% conventional is doable if my credit is good enough, which she believes it will be.

How do you think I should handle the discrepancy? Should I move forward with both conventional and FHA in mind so that if conventional doesn't work out (at 5% down), there is a plan B? Is this 15% minimum down a national thing, or is it state by state? Do you have a resource I could send her that shows minimum down is 15% for all conventional loans?

Thanks for clarifying the loan origination fee, I was definitely expecting a bit more of a lender credit with the higher interest rate, but I realize these are just estimates that my broker and I discuss on the phone, and I am keeping in mind lower rate = higher cash at close.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Raj Gandhi I'm not sure about the regulations here, or what pricing is to get a roof redone.  I suppose that would be questions for the inspector when that comes around, right? 

The plan is to owner occupy half (for a year, hopefully will have the next one lined up before the year ends). It's pretty tiny (700sqft each side) and I will have a roommate on my side, so it's going to be interesting.

I haven't been able to come up with a way to eliminate PMI. I don't think anyone in my family would have sufficient cash available, and I certainly don't want to come to the table with that much of my own funds. I need to learn more about how to eliminate PMI on a conventional loan. I've heard that with FHA it is now for the life of the loan, I'm not sure if its the same for conventional. I suppose I would have to wait till I had 20% equity and then refinance. I could definitely use some strategizing help here.

Thanks for the input on my offer, this is all new to me. What would you suggest as an offer if my strike price is $175,000 (1% rule)?

I would also like to work in some concessions to reduce or eliminate my closing costs.

Planning to speak with my realtor today to set up an offer so I greatly appreciate any input you have.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Erin Legler Wouldnt a higher down payment justify a lower interest rate, instead of a higher one? This comparison I am making is the higher rate of 5% down for conventional, vs the 3.5% down for FHA.

I did request an insurance quote, and to my surprise, it came back at $55, when my broker and mentor suggested an estimate of about $150. I'll make a phone call today to verify this. Thank you!

Yes the plan is to have a bunch of contingencies written into the contract, but contingent upon inspection will certainly be in there. I suppose what you're saying is that I might not need any other contingencies, so long as it is "pending an inspection"...do I have that right?

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Christian Marin Could you explain further what you mean by negative return? I understand based on the 1% rule, I should try to negotiate the purchase price down to 100x rent ($175,000) in this case, however even at the current price it appears that it would cash flow positive, not negative.

The property is near Downtown, giving it the higher price which is comparable to other properties in the area.

Post: My First Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

Hey guys, I'm working on my first multi-family investment, and I'm hoping you all might have some advice. I am currently renting an apartment with a lease that expires at the end of January, so I'm in a bit of a time crunch, especially with the holidays, trying to find a deal. 

I came across a near-fully remodeled duplex here in Orlando, 2/1 on each side, total of 1390 sqft. It was recently renovated: (plumbing, electrical, appliances, kitchen/bath). I couldn't see the roof as it was flat, but it was not indicated as having been replaced.The property is lacking privacy fencing and is covered by trees that are in need of some major trimming or removal ($10k+ to remove the big guys).

I'm planning to owner occupy this property for at least a year, but for investment purposes, I'm looking at it from the perspective of me not living in it (I think this is fair).

I expect I can rent each unit out for $875. Rentometer confirms. Electric is metered separately, and water is not. I figured I'd charge a flat rate of $25/per unit for water to offset this.

Asking price is $190,000. I plan to do FHA 3.5% or Conventional 5% down. My bank quoted me an interest rate of 3.8%, however my mortgage broker quoted me a rate of 4.75% on the conventional. I was told this higher rate includes some lender credits to reduce my cash at close and to compensate the mortgage broker. I expect with the conventional loan my payment will be $937 (I think this includes PMI of $200). I was still told I would need around $14k cash to close.

So here are the numbers I am working with:

Income: Rent $1.750

Expenses: Pmt $937 - Taxes $135 - Insurance $100 (don't know where to get this number) Vacancy $140 - Repairs $87.50, CapEx 87.50

TOTAL Expenses : $1,487

This leaves me with $263 (not factoring in property management). 

Am I missing something? Do my numbers fall short somewhere? I plan to write my offer with contingency on the roof inspection showing it has 5+ years of usable life left. Once I determine the highest price I can pay for this property (hopefully with some help from here) I plan for my first offer to be 8% less than that price to leave negotiation room. I will likely offer close to $170-175k. Anything else I should be doing?

Post: Financing my first Multi-Family

John M.Posted
  • Real Estate Investor
  • Orlando, FL
  • Posts 30
  • Votes 2

@Patrick Britton Thank you for the matrix. That helped. Unfortunately, now I've realized that there's a conflict between what I see here and what my mortgage broker told me (5% down on conventional for 2-4 units). I will raise that question, and if that is the case it sounds like my only option is FHA.

I do have a GFE from bank of America and the fees seemed crazy. This was given to me after chatting with a loan officer for about 45 minutes. Gathering info and coming up with the best option. Thank you for the  warning on their low interest rates as bait. That will be in my mind as I move forward.