If you live just to pay the rent you are not living my friend you are just surviving the next day or a month. You have to find your passion and when you do work on It, in the matter of months world will give you results in the terms of money, good relationship, expirience... Read this

 

Hmmmm...

 

OP, thanks so much for sharing your knowledge with us. I really appreciate it.

 

Perhaps a stupid question, but do FHA mortgages allow you to rent out part of the property? In most European countries this is NOT allowed with a standard residential mortgage. A so-called "buy-to-let" mortgage is significantly more expensive.

 

This is a great post and something I've pondered for a while. But if I'm not mistaken your numbers are off here...

If I'm living at the property, I'm not paying rent there are still $1500 in expenses, but I'm only bringing in $2000 on the property. So my NOI is only $500 with a $1500 mortgage payment. So I'm getting a discounted mortgage, but like everything in life, nothing is actually free.​

 

I was going to, but realized this type of investing wasn't something I was interested in. Also figured if it needed to be corrected or clarified you didn't have to live there, it would have been put in the op.

 

How long until you can effectively move out of an FHA house? I believe the minimum is 2 years?

Also, I believe you can get a second FHA without having to front 20% down, or you can do a conventional loan at 5% down? I'm sure you covered it somewhere and I need to keep reading through, but from what I'm reading, it's VERY realistic to make hundreds of thousands of dollars in appreciation and free cash flow by doing this if you're patient - probably 1, maybe 2 purchases per year max, but then over 10 years you could have 10+ properties in your name netting you free cash flow.

I'm planning on doing my first FHA purchase in the next 6 months, and I'd like to follow with a second purchase in 2019 (income properties, exact things being discussed here).. I'm fairly certain FHA is the way to go for the first one, and then you either 'move' and pick up a second FHA, or you can get a conventional loan at 5% down.

Is this accurate?

 

Looking to do something like this and close in 5-6 months time (possible?)

Knowing I might get hate with this question - is this method still 100% viable in 2018?

Thanks!!!

 

Yes. You can still purchase Freddie and Fannie foreclosures using an FHA mortgage. So this method definitely still works in 2018.

Even though the real estate market isn't ideal for buyers at the moment, billions of dollars worth of properties will still be purchased in America this year.

You just have to work a little bit harder if you want to find a good deal right now.

I too would love to hear from people who have "house hacked" in 2018! Anyone care to share their recent experience?

 

When you guys are calculating the mortgage, are you just calculating P+I, or are you factoring in taxes, hazard insurance, PMI, etc?

I'm working on purchasing a 12 BR 2-unit (might convert it to 3 eventually) and the numbers seem to work relatively well, however I'm not sure if I should call the mortgage the P+I and factor in taxes and insurance as part of the 50% expense buffer, or if I should include them into the mortgage #?

 

Usually the taxes, fire insurance, PMI etc are included in the mortgage payements. They generally escrow them -- if you have a loan that sold on the secondary market. Larger commercial type loans, portfolio loans, generally don't have an escrow account included.

Your 50% factor is usually the overhead & operating expenses that don't include your mortgage payments. On multi-family appraisal forms, the mortgage payments and personal income taxes don't even have a line to enter them. Commonly, they aren't considered. The property taxes and fire insurance are line items.

This all depends on what point of view you are viewing your expenses from...

 

That 50% rule is aggressive with that in mind.

I've got vacancy (5%), capex (7%), repairs(10%), water(5%), and property management fees (10%) allocated for in here. If I include tax and insurance in the 'mortgage payment', it's almost impossible to make the numbers work with the 50% rule.. 30-40% rule works well.. I've run the numbers left, right, up, down, and sideways. I can't possibly see my monthly expenses being 50% of the income after i raise rents ($1700) on top of an $1850/mo P+I, tax, and insurance payment. I'd need to raise the rent almost a grand for the numbers to be attractive with that in mind.

 

From an appraisal form point of view, the taxes and hazard insurance are included in the operating expenses which would bump up your overall percentage some. Only the actual mortgage payments (including interest) and income taxes are not. There's also a sinking fund factor for short-lived items such as appliances, roofs, etc. -- is that your CapEx estimate? Your repair percentage looks a bit low to me. Where are you figuring in the costs to get-it-ready-to-rent-again? Does your water percentage include sewer and trash fees?
Do you have a savings account with some back up $? In my life, everything hits the fan at the same time. I like to have some mortgage payment money and some major repairs money on hand for those moments. That's where I put my vacancy factor, repair percentage and sinking fund factor monies to be ready for those the-sky-is-falling moments.
However you look at it, just make sure that you are in the black rather than the red! As long as you have everything covered, it doesn't matter where you list it on your balance sheet. Good luck!
www.wjkbusinessbuzz.com

 

Thanks. I'm just speaking from the point of this thread to make sure the numbers work. I'm not concerned with appraisal, moreso 'is this in the black or red?' - it's already rented, although I'll be raising rents roughly 10% and getting under lease. I've got a list of all repairs needed from my home inspection and I'm allotting for the larger funds and repairs in CapEx and Repairs - the repairs are honestly high for what i'm allotting because i'm planning on spending a few thousand out of pocket up front to take care of a lot of repairs that were noted in the home inspection.

 

Good plan. I always try to take care of any repairs up front. It impresses the tenants and makes my life easier. Put any left over funds into your property savings account. Anything that you can save can eventually be used for your next purchase. Also, I like to set up a plan for getting the mortgage paid down ASAP. During the first years of the loan, so much of the payment goes to interest. I like to double the principal payments to get that nut paid off sooner than later.
I know, I know, I'm a lot more conservative than aggessive. BUT, that's one reason that I'm still investing in real estate.
Good luck!