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Regular Visitor
chucksto
Posts: 5
Registered: ‎01-02-2013
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Advice for Rental Property

Hello !!! Any and all advice for a first time investor in rental property is appreciated - thank you!!

Current situation : bought my PR (joint ownership) 2 years ago FHA 279,000, 4.5%. Last week appraised and did a conventional refinance at 345K, 3.75% / 30 years. I am open to keeping and renting out (4BR, 2BA, 90016, tastefully redone but not high end) or selling
Future: looking for 3 or 4 unit multifamily in West Adams/USC/Leimert Park/Baldwin Hills area. Can only afford 3.5% down, and would prefer to live and fix up one unit at a time, so FHA is okay.
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Jil
Posts: 3,179
Registered: ‎10-24-2011
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Re: Advice for Rental Property


chucksto wrote:
Hello !!! Any and all advice for a first time investor in rental property is appreciated - thank you!!

Current situation : bought my PR (joint ownership) 2 years ago FHA 279,000, 4.5%. Last week appraised and did a conventional refinance at 345K, 3.75% / 30 years. I am open to keeping and renting out (4BR, 2BA, 90016, tastefully redone but not high end) or selling
Future: looking for 3 or 4 unit multifamily in West Adams/USC/Leimert Park/Baldwin Hills area. Can only afford 3.5% down, and would prefer to live and fix up one unit at a time, so FHA is okay.

Once refinanced, you need specific amount of time to stay at the property before putting it as rental. If not, you next loan will not be approved.......Consult experienced (I repeat experienced) mortgage specialist for this or post it at mortgage forum...

 

Regular Visitor
chucksto
Posts: 5
Registered: ‎01-02-2013
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Re: Advice for Rental Property

sorry, the property re-appraised for 345K, so we did the refi to get rid of PMI....

Trusted Contributor
DowntownVentura
Posts: 128
Registered: ‎06-22-2009
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Re: Advice for Rental Property

[ Edited ]

Jil wrote:

chucksto wrote:
Hello !!! Any and all advice for a first time investor in rental property is appreciated - thank you!!

Current situation : bought my PR (joint ownership) 2 years ago FHA 279,000, 4.5%. Last week appraised and did a conventional refinance at 345K, 3.75% / 30 years. I am open to keeping and renting out (4BR, 2BA, 90016, tastefully redone but not high end) or selling
Future: looking for 3 or 4 unit multifamily in West Adams/USC/Leimert Park/Baldwin Hills area. Can only afford 3.5% down, and would prefer to live and fix up one unit at a time, so FHA is okay.

Once refinanced, you need specific amount of time to stay at the property before putting it as rental. If not, you next loan will not be approved.......Consult experienced (I repeat experienced) mortgage specialist for this or post it at mortgage forum...

 


I think you probably mean if he obtained an owner-occupied loan and then turned it into a rental. Based on the terms he listed, I think he probably got an non-owner-occupied loan. 

 

 

 

Gold Super Contributor
Jil
Posts: 3,179
Registered: ‎10-24-2011
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Re: Advice for Rental Property


DowntownVentura wrote:

Jil wrote:

chucksto wrote:
Hello !!! Any and all advice for a first time investor in rental property is appreciated - thank you!!

Current situation : bought my PR (joint ownership) 2 years ago FHA 279,000, 4.5%. Last week appraised and did a conventional refinance at 345K, 3.75% / 30 years. I am open to keeping and renting out (4BR, 2BA, 90016, tastefully redone but not high end) or selling
Future: looking for 3 or 4 unit multifamily in West Adams/USC/Leimert Park/Baldwin Hills area. Can only afford 3.5% down, and would prefer to live and fix up one unit at a time, so FHA is okay.

Once refinanced, you need specific amount of time to stay at the property before putting it as rental. If not, you next loan will not be approved.......Consult experienced (I repeat experienced) mortgage specialist for this or post it at mortgage forum...

 


I think you probably mean if he obtained an owner-occupied loan and then turned it into a rental. Based on the terms he listed, I think he probably got an non-owner-occupied loan. 

 

 

 


He did owner occupied refinance, see here. Fannie Mae will track this and deny the loan!

 

http://forums.redfin.com/t5/Mortgages/investment-property/m-p/391400#M5879

 

Contributor
PropertyGeek
Posts: 16
Registered: ‎03-19-2013
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Re: Advice for Rental Property

[ Edited ]

Interest costs will be very consuming with less than 5% down.  Calculate in detail what the costs and expected return will be in both situations and compare both scenarios.  Come up with ROI for both for different time horizons.  Get a little help if you need to like I did.  I did not realize I had to do all this when buying my first place.  My realtor or broker would not do this type of work for me. 

 

Best of luck!

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justlookin
Posts: 42
Registered: ‎08-20-2012
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Re: Advice for Rental Property

Wow, Chad, did you edit out every one of PropertyGeeks's commercial messages? You're heroic!

Trusted Contributor
Mortmain
Posts: 198
Registered: ‎10-29-2012

Re: Advice for Rental Property

I don't know anything about how much experiece you have with investing in RE, but if you are posting here, I'm assuming this is your first venture. If it isn't, I apologise in advance.

 

You must run the numbers. Absolutely number one before you even think about getting a loan. Very few rentals cash flow positive even with low rates where home values are high in relation to rents. It's not about possible rent over price. It's all about the costs, competition and vacancy rates. Foreclosures have been snapped up by big investors that are now suffering 50% vacancy rates. They drove up the prices, which lowers the capitilization rates, flooding the market with rentals creating a soft market. Not saying this is happeng everywhere, but you need to be aware of it. Costs are huge. Homes are money pits. For every $100,000 invested you need $1,000 a month gross rent. That should be your benchmark. Expect 50% of income to be paid in expenses, and expect major problems every 2-3 years. Most ignore all this because ...well, real estate is a great investment isn't it, what with prices going up. Sure they are going up, but ask yourself why, and what could be the downside, and what contingency plans do you have in place for those eventualities. Sorry if that sounds pessimistic, but real estate can be OK as an investment, rarely is it great, and very often it is a nightmare. Your best investment is in yourself, your job/career. The era of investing is going through a menopause and if I was starting out again, I'd be saving money and waiting/hoping patiently for better opportunities down the road. Just my tuppence worth.

Regular Contributor
jordanmust
Posts: 97
Registered: ‎08-18-2012
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Re: Advice for Rental Property

You will not get an owner-occ FHA loan (or conventional) on units when you already live in a single-family residence.

Contributor
Excellence
Posts: 45
Registered: ‎04-17-2012
0

Re: Advice for Rental Property

I do recommend that you educate yourself on California law as it relates to Rentals. You can look online at Landlord and Tenant Law California. You will find out quite a bit there.