All Forum Posts by: Zack Karp

@Shaya Piispanen if you lived there for at least 2 years, you should consider selling. You don't get taxed on gains if you lived in the property for at least 2 out of the last 5 years when you sell (check with your CPA, I am not an accountant).

Otherwise, your options are to refinance (which is a bad option), or take out a 2nd mortgage, and that won't allow you to tap into all of the equity, you'll be capped at 90% or whatever lender's guidelines are that you use for that.

Moving it to a LLC is a bad option unless you plan to get financing under the LLC, because that would likely be more restrictive than financing in your personal name.

So although you would prefer to keep it as a rental, if you want to keep your money moving and tap into all of the equity, you have a small window to sell now tax-free as long as you lived there for 2 years before you moved out.

Best of luck!

@Account Closed you know that you can do 5% down now on a Conventional loan for a primary residence 2-4 unit? Fannie Mae started allowing that in Nov 2023. No need to refinance your existing property out of FHA. Or any of those other challenges/questions you mentioned. As long as it's going to be your primary residence...

And you can use rental income from your existing property, including rental income from the unit that you are vacating with a signed lease, and rental income from the new property for the unit(s) you are not occupying. DTI shouldn't be an issue.

Seems like an easy slam dunk to me. If you need an experienced loan officer to navigate all this smoothly for you, feel free to reach out.

Best of luck!

@Duane A. Snow copy that, let me know if I can help get you to $300K or whatever you need.

@Duane A. Snow the short answer, yes.

The VA guidelines say you need to have prior landlord experience in order to use rental income towards qualifying. But what they don't say, is that there is a workaround for that. If you hire a property manager, that counts as your landlord experience.

Also in order to use rental income, you are required to have 6 months of the mortgage payment in reserves. Maybe that's what you are referring to about the $10K? But the reserves don't need to be liquid, you can use retirement funds, stocks, etc. And you can also use seller credits to have $0 cash to close, so that all of your funds can be used as reserves, and you don't need anything out of pocket for the entire transaction, you can even get your earnest money back.

If you need any help navigating all this and making this a reality for you, feel free to reach out. I've been doing this for 27 years, I specialize working with newer investors and house hackers, and I teach VA lending.

TYFYS and best of luck!

@Michael Solomon congrats on what seems to be a successful house hacking journey.

Here's how this works. The lender is going to require your most recent tax return. If a property was placed into service as an investment property prior to that tax year, then the lender is going to calculate your qualifying rental income (or loss) from your Schedule E. (If there is no rental income listed on your Schedule E in that scenario, you cannot use any rental income, period, even with a lease.) If the property was placed into service as an investment property during that tax year, and there is partial year of rental income, make sure that you put the correct number of fair rental days on your Schedule E, and the lender will prorate it for a full year. If the property was placed into service as an investment property after that tax year, that's when we can use your lease, and we use 75% of the rent and wash that against the PITI (total mortgage payment).

So in your case, by the time you are ready to buy your 3rd property, your 1st property will be using your most recent tax return for your qualifying rental income. Your 2nd property will be using a lease, since you would be doing what's called a Conversion of your Primary Residence, which is when you buy a new primary and convert your existing primary to an investment property at the same time.

Hope that helps. If you are working with a lender that does not underwrite to these exact Conventional guidelines, run. And based on your questions, it sounds like the loan officer you are working with isn't doing their job coaching you, mapping out your game plan, and explaining all of this.

TYFYS and best of luck!

@Nikol Catino this might be doable. Depends on what you can get in rent on the condo, assuming you are converting this from your primary to investment at closing. Depends if you have prior rent history. Depends if you have other debt (car payment, student loans, credit cards). Lots of variables here that need answers to piece this puzzle together. I'd be happy to dive deeper, feel free to reach out.

@Austin Williams yes you can do a 100% cash out refi on your existing home with a VA loan, but keep in mind that you would need to finance it as a primary residence, which resets the 1 year clock that you need to occupy the property. But then in a year, you could buy another primary residence with your VA secondary/bonus entitlement with $0 down (yes having 2 VA loans at once), and keep and rent out your existing home. Meanwhile, you'll have that cash out that you could buy an investment property as well.

If you need any help calculating or mapping out what you could be eligible for, feel free to reach out. I've been doing mortgages for 27 years and I teach VA lending...I know all the tricks and nuances.

TYFYS and best of luck!

@Luke Hamlin you can buy a second home with 10% down with a Conventional loan. You don't need 20% down.

Sounds like a great plan. If you need a lender for that, feel free to shoot me a DM.

TYFYS and best of luck!

@Kenneth Joseph Perfido It really comes down to math and future goals. And one simple question...

Are you going to buy more investment properties, or invest in any way, in the future?

If the answer is yes, then it's a no brainer to make minimum payments on your 2.8% interest rate mortgage, and use the funds that you would have paid extra to pay it down faster, to either invest in more real estate, the market, or anywhere else where you can get a ROI > 2.8%.

If the answer is no, then feel free to aggressively pay it down as fast as possible, to become debt-free faster, and just have a large amount of money in savings or to splurge with.

The bottom line is that your 2.8% mortgage is GOOD debt. IF, you are being smart with your money. If you have no desire to actively pursue other investments where you make more than a 2.8% return, then by all means pay it off faster.

TYFYS and best of luck!

@Garrett Kula welcome to BP. Not sure what suburbs you are referring to, but I have a lot of clients that are very successful investing in areas like McHenry, Woodstock, Elgin, Antioch, Mundelein, Belvedere, etc. Yes the inventory is much lower than the City, but there are 2-4 unit properties to be had, and with good numbers. If you are patient, you will find properties that work.

But in the end, there is no right or wrong way to invest in real estate. SFD vs condo vs 2-4 unit, hold vs flip, turnkey vs rehab, passive vs active...it really comes down to each individual property/opportunity, what your goals with the property are, and if the numbers make sense or not.

Best of luck!