Author Topic: In need of advice - buying 2nd investment property  (Read 1892 times)

Tumbler

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In need of advice - buying 2nd investment property
« on: May 23, 2016, 01:50:14 PM »
Some quick background: I bought my first rental property, a 4-unit, last October. I used an FHA loan, so I've been living in one of the units as part of the one year occupancy clause.

October is quickly approaching and I'm trying to decide what my next move will be...I'm torn between staying in my unit for the next few years and saving for another 4-unit property, or buying a single family home (which I would house hack by renting spare rooms, guest house, etc...) as soon as my 1 year occupancy is up.

What would you do? Buy sooner rather than later and open up ~$600 of monthly cash flow or hold out for a few years in order to get the most doors under a single mortgage?
« Last Edit: May 23, 2016, 02:04:32 PM by Tumbler »

adamcollin

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Re: In need of advice - buying 2nd investment property
« Reply #1 on: May 24, 2016, 06:28:25 AM »
You can buy a single family home and rent the spare rooms. This will help you earn a consistent income in the form of rents.

zephyr911

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Re: In need of advice - buying 2nd investment property
« Reply #2 on: May 25, 2016, 07:46:10 AM »
Having done the SFH sharing thing, and graduated to buying MFs, I would probably never go back. If you want to build a big portfolio, this is the time to start professionalizing things - establish separation between you and your tenants on a personal basis, develop more formal processes for handling everything, etc.
Returns are almost always better on multifamilies so even if it means you have to start a little later, I'd go that route.

You might look into getting your current property reappraised and refinanced on a conventional loan if you have enough equity, which would allow you to go FHA again on a second MF. Plenty of other options too - from a strategic standpoint, a good mortgage broker might be able to help you identify and compare your options.

Tumbler

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Re: In need of advice - buying 2nd investment property
« Reply #3 on: May 25, 2016, 09:22:03 AM »
zephyr911 - Thanks for the reply. You seem to echo what I know is the more financially minded decision. I bought the property slightly under market and have made significant improvements to the worst of the units (my unit!) - Refinancing and buying the 2nd property on an FHA loan would probably be the quickest way forward. It also has the added benefit of dropping the PMI off my monthly payment which would free up another $150 a month or so in cash flow.

rothwem

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Re: In need of advice - buying 2nd investment property
« Reply #4 on: May 27, 2016, 06:43:34 AM »
You might look into getting your current property reappraised and refinanced on a conventional loan if you have enough equity, which would allow you to go FHA again on a second MF. Plenty of other options too - from a strategic standpoint, a good mortgage broker might be able to help you identify and compare your options.

I'm in a similar spot as the OP.  I live in one half of a duplex, purchased with an FHA loan, and I'd like to purchase another. 

Have you ever heard of anyone doing the refi and the new home purchase loan all in one transaction?  It might save some money maybe, since they really only have to underwrite you once. 

J Boogie

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Re: In need of advice - buying 2nd investment property
« Reply #5 on: May 27, 2016, 07:25:49 AM »
Reminds me of a bigger pockets article I read.

https://www.biggerpockets.com/renewsblog/2015/04/20/how-to-100000-dollars-year-real-estate/

I live in a duplex now, purchase price 230k.  It's in a neighborhood where SFHs can easily go for $400,000+, so my strategy here will probably be to convert to SFH and live there a couple years then sell.

However, I could postpone that strategy.  I've already added about $40k or more in value with mechanical updates and remodeling, so I could start thinking about refinancing in the next couple years.

Another reason I don't like it that much as a rental property is that the taxes are $6k/year.  (St. Paul, MN) For a home I paid 230k for, that's steep and reduces the profit margin quite a bit (top rents for 1k/mo, our unit could rent for 1350).  It's great as an owner occupied duplex but there are far more lucrative rentals to be had.

zephyr911

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Re: In need of advice - buying 2nd investment property
« Reply #6 on: May 27, 2016, 10:26:55 AM »
You might look into getting your current property reappraised and refinanced on a conventional loan if you have enough equity, which would allow you to go FHA again on a second MF. Plenty of other options too - from a strategic standpoint, a good mortgage broker might be able to help you identify and compare your options.

I'm in a similar spot as the OP.  I live in one half of a duplex, purchased with an FHA loan, and I'd like to purchase another. 

Have you ever heard of anyone doing the refi and the new home purchase loan all in one transaction?  It might save some money maybe, since they really only have to underwrite you once.
No, I've never heard of that. It is theoretically possible, but considering they are likely to package up those two loans and sell them in totally different ways, having to build two separate files and do two title searches and two appraisals (ETC / AD NAUSEUM) probably means there's a low chance of cost savings. Even if you have the same loan officer who somehow manages to eke out a time savings, the institution is more likely to just collect the profit, thank you, come again. ;)