All Forum Posts by: Will Koederitz

So I am a little unclear on what is involved with converting a primary residence into a rental. I read often that people will buy properties using FHA or conventional as primary residences using low money down, then after the one year occupancy, purchase another and repeat. This applies to house-hacking as well. I am confused on how one continues to move forward because when I read the Fannie guidelines they say a primary residence can only be counted (the new rental income) if there is at least 30% equity. How can one move on to the next property if they are only putting low money down to start and then using it's income to qualify a year later? Maybe I'm misunderstanding something. I appreciate any clarification on this topic.

@Hal Thompson

Those are very good points. Like you said, even if it is a condo, the deal may be good enough to surpass the downside of it being part of an HOA.

Also, see if any of the HOA members have rental units within the complex. The person for the HOA of my rental has a unit that he rents out (theres 24 units total). Having HOA member with the same intentions as you can be helpful, I assume.

As @Mindy Jensen said, I would get a multi-family and house hack.  

My first rental purchase was a condo earlier this year. It was basically the best property I could qualify for under my circumstances in my area. It is part of a very small complex with a low fee. I studied the HOA before purchasing and they had just increased dues by roughly 10% and it was the first increase since 2005, which seemed pretty good. Also, check if there are any special assessments coming up. Cody and Sue are absolutely correct that they are unpredictable and can change whenever they want, so it is definitely something to take into consideration. I spent 63k (I could not get a house in the area I was looking) but I was going after young professionals in a desirable area that want the convenience of a condo. So far its working out, getting more rent than I initially expected. I'm sure I will learn something from this property about HOAs at some point.

Matt Castle Thanks for the reply and the information. Most of these I have considered, but the important one is using a tenant already in the property to qualify for the purchase. This is sort of where I'm at trying to figure out what lenders will/will not allow in order to qualify. Thanks again!

Stephen Lovett I would definitely like to meet up for some coffee and talk with you. Just let me know when you're available and I'm there!

I don't have it set up fully yet, but I put the first months rent and security deposit in a savings account.  I plan to have the tenant direct deposit into the account from their bank.  I'm am less nervous about giving out the account number because it is not my personal account, it is only for this one property.  That way if anything were to happen, the account will not have much money in it at any time.  If this is not possible through the tenants bank, I will most likely use Chase QuickPay.

@Jeff Rabinowitz

Thanks for the reply. 

Yes, I went to the March meet up.  I couldn't make the one in April and unfortunately I won't be able to make this one either.  Thanks for providing this information though, I will definitely have to meet these lenders next meeting I am able to attend.

@Joshua D.

Thank you for the reply.  That is a good point to set your goals and figure out what's necessary to accomplish them. 

I should have been more clear in my post, but I am looking to expand as fast as possible.  So I am open to hear any options that others would do in this situation, perhaps ones I have never considered. 

Thanks.

Hello,

I am seeking advice for my next move.  For a quick background, I moved to Royal Oak, MI in July 2014 and purchased a property to live in.  This was before I knew anything about real estate investing. 

I started learning about investing in real estate February 2015 and purchased another property (closed about a month ago) as a rental.  I have a signed lease that started May 1 and the tenant will be moving in the middle of this month. 

When I purchased my primary residence, it was near the higher end of what I qualified for (~$190k) and when I purchased the rental property, I could only qualify for about $75k.  The rental property purchase price was $63k. 

Now that it appears I am maxed out, what can I do?  The mortgage company I dealt with for the rental said I could use 75% of the rental income toward my income ratios as long as I had a signed lease.  I am not sure how legitimate that is hearing it from the loan officer.

Several options I've considered are:

1. Renting my primary residence out.  Should still cash flow but I could cash flow more with a few cheaper properties. Problem is where do I live if I need a signed lease for my place before I can qualify for the next property?

2. Sell my primary residence, move into a cheaper place, allowing myself more room to purchase another property?

I've also considered multi-family to house-hack.

I guess I am getting a little confused and may just need to speak with multiple lenders now to see what each says I qualify for.  Any information and suggestions would be appreciated on this topic and thanks for reading.

-Will

As Marcela Correa said, I would paint the cabinets white. If the countertop is in good condition I would leave it, and add a light colored subway tile backsplash. Maybe white with dark grouting.