All Forum Posts by: Wilber Perez

@Wilber Perez I think generally speaking, the 5% down conventional loan will allow you to cash flow almost as well as 20-25% down on a property. It is more about the potential rents honestly. 

At the other end of the spectrum, you can house hack without making "cash flow" and still do really well if that is the goal. You do need cash flow eventually, but the days of looking for a perfect house hack are over for this market cycle. Now it is time to think longer term, and to really invest in the real

Quote from @Wilber Perez:

How much down payment is needed in this market to cash flow? I am looking to house hack but wondering how much I need? I’m in Chicago btw

The answer to your question depends on 2 things. Location, location, location.  Strategy, Strategy, strategy. 

Location- Chicago is a large, diverse market.  What you'll require for a downpayment will vary based on location. Property values on the north side versus the west side, versus the south side versus the suburbs, vary widely as do the rents.  For planning purposes, you can use 3.5% to 5% of your offer price for a downpayment but you will still need closing costs so count on possibly another 6%. 

Strategy-
1. Will you use an FHA loan or a conventional one?
2. Does the location of the property matter to you or not? I ask this question because there are locations you can house hack & cashflow right away but you have to decide if it's a location that you want to live in.   
2. Can you qualify for an FHA 203K loan?- We have clients that use this strategy. Purchased a property at a big discount that needed renovation. The loan includes $ needed for renovation. The clients put up 3.5% for a downpayment, negotiated to have the seller pay a large majority of their closing costs & then had some reserves to get the renovation started. Once complete they live in one and rent out the remainder
3. Cash flow now versus cash flow later- There are lots of different ways to define cash flow
a. Only look for properties that will give you immediate cash flow once you occupy and rent out the other unit(s). 
b. Another strategy is to seek out properties that may have a small negative cashflow once you occupy the property but with rent increased will eventually have a positive cashflow
c.The 3rd strategy which I believe may be the most popular is to purchase the property and have the other unit(s) and reduce your monthly out of pocket while living in the unit using the rent, but once you move out and rent out your place the property will have a positive cash flow
d. Not a fan of this one but some strategies are to bet on appreciation. It may not be about immediate cash flow. In the right location, you may be breaking even or the cash flow from the rents covers most of your expenses but the property is appreciating at a good rate so when it comes time to sell...... You have a boatload of cash
4. Another strategy is to take advantage of 1st-time buyer programs that may cover downpayment and/or closing assistance costs. 

Bottom line:  You have a little homework to do and decisions to make.

@Wilber Perez This depends on the number of units.

You can buy a single-family home with $0.00 OUT OF POCKET and No PMI If you qualify.

For 2 to 4 units, you need a minimum of between 3.5 to 5.0% down payment. Terms and conditions ALWAYS APPLIES.

If you want to cash-flow then you will need between 25% to 35% downpayment in most markets and neighborhoods with strong economic factors. Also, you have to pay yourself the monthly rent for the unit you are occupying for you to cash-flow.

The #1 goal of House hacking strategy is to REDUCE YOUR LIVING EXPENSES not to make you money.

You should buy in a neighborhood you are comfortable living. If I cannot live there, I would not buy there.

So get recommendations for a local mortgage broker and complete a mortgage loan application with them. 

Make sure they know about Real Estate Investing and save yourself a lot of hassle and time.

Goodluck and keep us posted.

Quote from @Jared Clukey:

This is a pretty vague question, it all depends on purchase price, loan amount, interest rate, taxes, power, water, sewer, cap ex, vacancy, maintenance, rent price. Add all your estimated expenses and subtract from your estimated rental income! You're likely to get an FHA loan if you're housing hacking making down payment much lower but that will also make your mortgage more expensive with a smaller down payment. You've got a lot of research to do my friend! best of luck

 Agree with all of this!  @Wilber Perez I would also recommend getting connected with a lender who works with investors (ask your local market REI network for referrals if you don't have one already). Then you can see what your finance options are, capital requirements and like @Jared Clukey said, you can then take this info and figure out your buy box and do your analysis.  

This is a pretty vague question, it all depends on purchase price, loan amount, interest rate, taxes, power, water, sewer, cap ex, vacancy, maintenance, rent price. Add all your estimated expenses and subtract from your estimated rental income! You're likely to get an FHA loan if you're housing hacking making down payment much lower but that will also make your mortgage more expensive with a smaller down payment. You've got a lot of research to do my friend! best of luck

Quote from @Wilber Perez:

I am new to REI. I know this is something I want to do. I haven't even started and already am having a bit of fear. Its the networking part that gives me anxiety. I am an introverted person but i am also a get it done kind of person. Any tips on how to get over this fear for a newbie. Is best advice just to put myself in situations and with time I will get comfortable. This is my usual approach but since this is a market I don't know figured id ask seasoned people. Thanks in advance and looking forward to being part of the REI family.

 The way I got over fear was by researching as much as I could about real estate through books, podcasts, webinars, etc. and then taking action. I thought about how I could get in with relatively low risk and possible high returns in the future and househacking made sense to me. I househack every year and by doing so, Ive acquired 11 doors. DM me if you have any questions. I'd be happy to help. 

Where are you located?

Quote from @Wilber Perez:

I am new to REI. I know this is something I want to do. I haven't even started and already am having a bit of fear. Its the networking part that gives me anxiety. I am an introverted person but i am also a get it done kind of person. Any tips on how to get over this fear for a newbie. Is best advice just to put myself in situations and with time I will get comfortable. This is my usual approach but since this is a market I don't know figured id ask seasoned people. Thanks in advance and looking forward to being part of the REI family.

Where are you located? You should join a REIA to get started.

@Wilber Perez I'm glad you are at least asking this question.  Too many people just jump into it without even knowing that's part of the equation.  Often times your preferred contractor won't even be able to make it to the property in time to give a bid anyway.  This means, we have to do it ourselves.  I'll DM you a link to a video so you can see how I estimate my rehabs but I would also suggest getting together with some local investors in your area.  Investors will get together locally and meet in person (some will do it virtually) and this will often be a topic that they will teach/train.  Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you.

Thanks!