How much have you saved down?

[barnaby33]

4plexowner is probably the guy to ask on that. By his own admission he did well buying small rental units last decade and selling into the boom.

As to where to park cash, ask Rich. Thats his new day job.

Josh

[The OC Scam]

PR in OC

I have become very interested in them because of my last landlord who owned 20+ homes around Southern California.

The landlord had a group of plumbers, electricians, craftsman, etc that he would call for repairs. He explained to me how they had built this collection over the years and always purchased in low markets.

I currently have been looking primarily at college town property. College town property I know can be very risking with damage control renters. Checking the craigslist and the OC register for rentals I go and check them out to see up close to find out what fixtures they are using also windows, doors, quality of carpet, tiles to help get idea when you compare the MLS.
I think the duplex idea is a great one. I know a family friend that purchase an 8 unit complex in La Mirada, CA for 300k in the 90s and sold for over 1 mil a couple years ago. Then he made a big mistake and purchase an estate in La Quinta at least I think he made a mistake!

We have 115K for our next purchase.

[The OC Scam]

PR in OC

I have become very interested in them because of my last landlord who owned 20+ homes around Southern California.

The landlord had a group of plumbers, electricians, craftsman, etc that he would call for repairs. He explained to me how they had built this collection over the years and always purchased in low markets.

I currently have been looking primarily at college town property. College town property I know can be very risking with damage control renters. Checking the craigslist and the OC register for rentals I go and check them out to see up close to find out what fixtures they are using also windows, doors, quality of carpet, tiles to help get idea when you compare the MLS.
I think the duplex idea is a great one. I know a family friend that purchase an 8 unit complex in La Mirada, CA for 300k in the 90s and sold for over 1 mil a couple years ago. Then he made a big mistake and purchase an estate in La Quinta at least I think he made a mistake!

We have 115K for our next purchase.

[The OC Scam]

PR in OC

I have become very interested in them because of my last landlord who owned 20+ homes around Southern California.

The landlord had a group of plumbers, electricians, craftsman, etc that he would call for repairs. He explained to me how they had built this collection over the years and always purchased in low markets.

I currently have been looking primarily at college town property. College town property I know can be very risking with damage control renters. Checking the craigslist and the OC register for rentals I go and check them out to see up close to find out what fixtures they are using also windows, doors, quality of carpet, tiles to help get idea when you compare the MLS.
I think the duplex idea is a great one. I know a family friend that purchase an 8 unit complex in La Mirada, CA for 300k in the 90s and sold for over 1 mil a couple years ago. Then he made a big mistake and purchase an estate in La Quinta at least I think he made a mistake!

We have 115K for our next purchase.

[jimmyle]

Would I be able to get a loan with less than 20% down payment in this market? Right now I have about $75K in stocks and cash and can borrow another $30K from my brother.

Assuming that I will buy a $520K house, and put down 15% ($78K). Will I have enough cash for closing cost? My sister-in-law is a realtor and she waives her fee.

Also, Can I borrow the remaining $442K? If I can, how much PMI will be?

I would be a first time home buyer, is there any assitance from the government that I can use?

Thanks,

[jimmyle]

Would I be able to get a loan with less than 20% down payment in this market? Right now I have about $75K in stocks and cash and can borrow another $30K from my brother.

Assuming that I will buy a $520K house, and put down 15% ($78K). Will I have enough cash for closing cost? My sister-in-law is a realtor and she waives her fee.

Also, Can I borrow the remaining $442K? If I can, how much PMI will be?

I would be a first time home buyer, is there any assitance from the government that I can use?

Thanks,

[jimmyle]

Would I be able to get a loan with less than 20% down payment in this market? Right now I have about $75K in stocks and cash and can borrow another $30K from my brother.

Assuming that I will buy a $520K house, and put down 15% ($78K). Will I have enough cash for closing cost? My sister-in-law is a realtor and she waives her fee.

Also, Can I borrow the remaining $442K? If I can, how much PMI will be?

I would be a first time home buyer, is there any assitance from the government that I can use?

Thanks,

[Raybyrnes]

Jimmyle,

Depending upon income limits and home prices there are State and Federal Programs for first time homeowners.

http://www.calhfa.ca.gov

At 442 if you can wait, I would think that you get a second job save every dime over the next year and try to get the loan down to 417 which is a conforming loan and carries a lower cost. Either that, or hang tight and hope Government raises that limit.

Allso be aware that there are programs for teachers, nurses, law enforcement, social workers etc that provide below market rates.

[Raybyrnes]

Jimmyle,

Depending upon income limits and home prices there are State and Federal Programs for first time homeowners.

http://www.calhfa.ca.gov

At 442 if you can wait, I would think that you get a second job save every dime over the next year and try to get the loan down to 417 which is a conforming loan and carries a lower cost. Either that, or hang tight and hope Government raises that limit.

Allso be aware that there are programs for teachers, nurses, law enforcement, social workers etc that provide below market rates.

[Raybyrnes]

Jimmyle,

Depending upon income limits and home prices there are State and Federal Programs for first time homeowners.

http://www.calhfa.ca.gov

At 442 if you can wait, I would think that you get a second job save every dime over the next year and try to get the loan down to 417 which is a conforming loan and carries a lower cost. Either that, or hang tight and hope Government raises that limit.

Allso be aware that there are programs for teachers, nurses, law enforcement, social workers etc that provide below market rates.

[4plexowner]

patientrenter – the first property I ever bought was a 4plex – got to a point where I could afford real estate (1998) but buying a single family house didn’t make sense for me at the time (single guy, done with room-mates) – the more I looked into small apartment buildings the more it made sense

first thing to understand: 2 to 4 units is considered residential and qualifies for residential financing – once you get a 5th unit you are talking commercial property and have to get commercial financing (much more expensive)

here are some of the bennies:
– owner-occupied interest rates – 1/2 point to 3/4 point savings maybe
– 75% of the rental income from the non-owner-occupied units is added to the purchaser’s income when qualifying for the loan
– tax deductions on both Schedule A (most bang for the real estate buck) and on Schedule E (this is where depreciation games, etc are played)

here are some drawbacks:
– your tenants will eventually realize that you own the property (this is not a good thing – trust me)
– you will be living in an apartment building (pick a nice one and think about your privacy needs)
– being a landlord sucks – people will lie directly to your face and expect you to believe whatever garbage they are spewing (on the other hand, being a landlord provides an excellent education on human nature)
– exit strategy from property can become more complicated (or beneficial) because you owner-occ some of it but not all of it

let’s play with some numbers just for fun: we want to buy a 4plex to get the most bang for the buck – remember that the income from the non-owner-occ’d units is going to help us qualify for the purchase loan

let’s say we want to buy 4 units just North of Adams in Normal Hts – we find something with a mix of units: (1) studio, (1) 1/1 (bdrm/bath), (2) 2/2s – rents are: $850, $1075, $1775 and $1775 for annual rent of $65,700 – let’s say we are willing to pay current rent multipliers and use 20 – $65,700 * 20 = $1.314M we’re going to pay for this puppy – we could probably get 95% financing but let’s put 10% down and get a loan for $1.183M

on our loan application we will have projected rental income added into our income – in this case we have $850, 1075 and 1775/mo or $3700/mo – that’s how we qualify for $1.183M

at tax time we will determine the SQFT of the property that we owner-occ and deduct that percentage of the mortgage interest paid from Schedule A – the rest of the mortgage interest paid, operating expenses and depreciation (only the % of these expenses for the non-owner-occ’d portion of property) go onto Schedule E and are offset by rental income

I’m bored with the example – if you want to you can see what kind of payment is req’d on $1.183M – I’m sure you will find that this property would have horribly negative cashflow even if you ignore ‘minor’ expenses like: taxes, insurance, maintenance, vacancies

~

Something to watch out for – if you are making enough W-2 income to push you into AMT territory the benefits from Schedule E become limited – in my experience people should be VERY conservative about buying real estate based on expected tax savings

[4plexowner]

patientrenter – the first property I ever bought was a 4plex – got to a point where I could afford real estate (1998) but buying a single family house didn’t make sense for me at the time (single guy, done with room-mates) – the more I looked into small apartment buildings the more it made sense

first thing to understand: 2 to 4 units is considered residential and qualifies for residential financing – once you get a 5th unit you are talking commercial property and have to get commercial financing (much more expensive)

here are some of the bennies:
– owner-occupied interest rates – 1/2 point to 3/4 point savings maybe
– 75% of the rental income from the non-owner-occupied units is added to the purchaser’s income when qualifying for the loan
– tax deductions on both Schedule A (most bang for the real estate buck) and on Schedule E (this is where depreciation games, etc are played)

here are some drawbacks:
– your tenants will eventually realize that you own the property (this is not a good thing – trust me)
– you will be living in an apartment building (pick a nice one and think about your privacy needs)
– being a landlord sucks – people will lie directly to your face and expect you to believe whatever garbage they are spewing (on the other hand, being a landlord provides an excellent education on human nature)
– exit strategy from property can become more complicated (or beneficial) because you owner-occ some of it but not all of it

let’s play with some numbers just for fun: we want to buy a 4plex to get the most bang for the buck – remember that the income from the non-owner-occ’d units is going to help us qualify for the purchase loan

let’s say we want to buy 4 units just North of Adams in Normal Hts – we find something with a mix of units: (1) studio, (1) 1/1 (bdrm/bath), (2) 2/2s – rents are: $850, $1075, $1775 and $1775 for annual rent of $65,700 – let’s say we are willing to pay current rent multipliers and use 20 – $65,700 * 20 = $1.314M we’re going to pay for this puppy – we could probably get 95% financing but let’s put 10% down and get a loan for $1.183M

on our loan application we will have projected rental income added into our income – in this case we have $850, 1075 and 1775/mo or $3700/mo – that’s how we qualify for $1.183M

at tax time we will determine the SQFT of the property that we owner-occ and deduct that percentage of the mortgage interest paid from Schedule A – the rest of the mortgage interest paid, operating expenses and depreciation (only the % of these expenses for the non-owner-occ’d portion of property) go onto Schedule E and are offset by rental income

I’m bored with the example – if you want to you can see what kind of payment is req’d on $1.183M – I’m sure you will find that this property would have horribly negative cashflow even if you ignore ‘minor’ expenses like: taxes, insurance, maintenance, vacancies

~

Something to watch out for – if you are making enough W-2 income to push you into AMT territory the benefits from Schedule E become limited – in my experience people should be VERY conservative about buying real estate based on expected tax savings

[4plexowner]

patientrenter – the first property I ever bought was a 4plex – got to a point where I could afford real estate (1998) but buying a single family house didn’t make sense for me at the time (single guy, done with room-mates) – the more I looked into small apartment buildings the more it made sense

first thing to understand: 2 to 4 units is considered residential and qualifies for residential financing – once you get a 5th unit you are talking commercial property and have to get commercial financing (much more expensive)

here are some of the bennies:
– owner-occupied interest rates – 1/2 point to 3/4 point savings maybe
– 75% of the rental income from the non-owner-occupied units is added to the purchaser’s income when qualifying for the loan
– tax deductions on both Schedule A (most bang for the real estate buck) and on Schedule E (this is where depreciation games, etc are played)

here are some drawbacks:
– your tenants will eventually realize that you own the property (this is not a good thing – trust me)
– you will be living in an apartment building (pick a nice one and think about your privacy needs)
– being a landlord sucks – people will lie directly to your face and expect you to believe whatever garbage they are spewing (on the other hand, being a landlord provides an excellent education on human nature)
– exit strategy from property can become more complicated (or beneficial) because you owner-occ some of it but not all of it

let’s play with some numbers just for fun: we want to buy a 4plex to get the most bang for the buck – remember that the income from the non-owner-occ’d units is going to help us qualify for the purchase loan

let’s say we want to buy 4 units just North of Adams in Normal Hts – we find something with a mix of units: (1) studio, (1) 1/1 (bdrm/bath), (2) 2/2s – rents are: $850, $1075, $1775 and $1775 for annual rent of $65,700 – let’s say we are willing to pay current rent multipliers and use 20 – $65,700 * 20 = $1.314M we’re going to pay for this puppy – we could probably get 95% financing but let’s put 10% down and get a loan for $1.183M

on our loan application we will have projected rental income added into our income – in this case we have $850, 1075 and 1775/mo or $3700/mo – that’s how we qualify for $1.183M

at tax time we will determine the SQFT of the property that we owner-occ and deduct that percentage of the mortgage interest paid from Schedule A – the rest of the mortgage interest paid, operating expenses and depreciation (only the % of these expenses for the non-owner-occ’d portion of property) go onto Schedule E and are offset by rental income

I’m bored with the example – if you want to you can see what kind of payment is req’d on $1.183M – I’m sure you will find that this property would have horribly negative cashflow even if you ignore ‘minor’ expenses like: taxes, insurance, maintenance, vacancies

~

Something to watch out for – if you are making enough W-2 income to push you into AMT territory the benefits from Schedule E become limited – in my experience people should be VERY conservative about buying real estate based on expected tax savings

[jimmyle]

“Allso be aware that there are programs for teachers, nurses, law enforcement, social workers etc that provide below market rates.”

My wife works for the Navy, I am not sure if this qualifies for the lower rate? Yeah, ideally we should borrow $417K meaning that we should buy a house around $480K max but my wife likes houses that are selling around $530K-$590K at current market. Of course, If prices go down another 10%-15% in a year or two then we won’t have any problem.

[jimmyle]

“Allso be aware that there are programs for teachers, nurses, law enforcement, social workers etc that provide below market rates.”

My wife works for the Navy, I am not sure if this qualifies for the lower rate? Yeah, ideally we should borrow $417K meaning that we should buy a house around $480K max but my wife likes houses that are selling around $530K-$590K at current market. Of course, If prices go down another 10%-15% in a year or two then we won’t have any problem.

[Author]

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