I am looking at buying my first house.. this will be my 'primary'. The main purpose in having this house is to call it my primary home, take advantage of tax benefits (I have a good salary and pay a TON in taxes), and buy an umbrella insurance policy to cover any investment/flip deals I come into. I plan on buying BELOW FMV and 'living' in this house for 1-2 mos, then subletting it out. This way, I can hope to obtain POSITIVE CF, pay less taxes, and any appreciation for the amount of time held (1 year-2 years) My question -> Where do I get a mortgage? How do rebates work? How do I know if I am getting a good deal? My background (excellent credit, scores about 700), high income (over 6 figures), and ZERO debt (maybe $400 at most on a credit card, but paid off in full every month) Any suggestions/please advise. Thanks! BTW - I spoke to Fla-Tan and he provided excellent advice.. I just wanted to widen the audience!
sounds like you just read a book or took a class on how to make a million dollars in real estate. A couple of random thoughts from a non-professional real estate owner. It's pretty tough to buy below FMV in most areas of the country right now as housing inventories are really low. You'll probably have to look for foreclosures or fixers. I live in Souther cal, and nobody gets anything below FMV out here right now. If you want to do a funky mortgage (negative amortization, 100% ltv etc...) you'll probably have to use a mortgage broker, ask your friends if they have one to recommend locally. You'll probably get better rates and less fees if you use a main line bank like b of a or wells fargo, but they have limited programs available. I'm doing a wells fargo 5 year adjustable right now and the rates are incredible. If you don't plan on being in the house more than a year or two, go with a short term adjustable, you're monthly costs will be much lower than with a traditional fixed rate. Remember to have at least 5k extra available at closing. They never seem to get the numbers right, I always seem to need extra to cover this or that. You can work out the "rebate" with any motivated buyer. The terms will be spelled out at the closing. It's no big deal, lots are done in this area.
Ender, Sorry I can't be of much help, but I did find a message board that has info on what you are looking for. I just scanned through it quickly, but it looks as if it may help. http://www.realestateinvesting.com/cgi-bin/general/index.html Scroll down to beginners success thread. Sounds good to me
You are fairly close, I been reading a TON of books on getting into REI.. I think there is a TON of opportunities.. just gotta know where to look. I live in NorCal actually.. For now, I plan on getting my own house first.. to have tax deductions.. what do u mean by 'incredible'? Mind me asking what 'deal' u got on your 5 year ARM? What was your i rate?
Ender, I see your idea but the bottom line is this: You would have to put down a substantial amount of money to get a mortgage payment in the same ballpark as rent (in the Bay Area). My girlfriend just bought a $430K house in the Willow Glen area of San Jose. She did 100% financing and basically has a first and second mortgage (she did 80% on one loan and 20% for the down on a second loan). Her mortgage payment is around $3400/mo for a 3 bed standard house. She could not rent the house out for $3400. She'd be LUCKY if she got $2k. What is your plan? Are you planning on buying out of the area? A friend of mine tried that plan for a house in Los Banos. He could NOT rent the house and ended up forclosing since he could no longer afford the mortgage.
I plan on buying a house outside of the bay area.. something more affordable. Because I travel quite frequently, it allows me that flexability.. then I hope to sublet the house for a year or two, then sell it.. that is my plan. As for investment property, I plan on finding motivated sellers..
Also many mortgages require you live in the house. My mortgage did. I was allowed to rent to another person but I had to live there. -Peace, Dave
I thought about this plan for a while. I was thinking about something in the Sacramento area but I ran into the same problem of getting the mortgage down to around the same rate of the rental value. I guess this plan would work if you actually lived in the home for a year or two to allow the rental rate to get in the same ball park as the mortgage.
Re: my 1st house! help w/ mortgage In order to avoid paying capital gains tax, it needs to be your primary residence for at least 24 months. However, if it is converted into an investment property, you then can sell the house and avoid paying taxes by doing a 1031 exchange in which you defer paying taxes on your gain for an indefinite time period. I have a client now who purchased a second home, but kept her first home her primary residence until her two year anniversary date. I had her house on the market but stated that we would not close/settle until after that date. So she is sitting on a chunk of equity which we will later use to purchase an investment property. You can not do a 1031 change on your primary residence. I am licensed to practice real estate in Virginia. You may need to check what the CA rules are Mike G
Re: my 1st house! help w/ mortgage I udnerstand that 1031 exchanges can only be done on investment property. What I basically need is a house that will be considered my 'primary' residence. Perhaps I'll 'live' there and have one room.. but sublet the rest of the house out. I will have some mail go there.. but not change EVERYTHING.. I don't really need a place to live since I travel 100% on my job. I am just looking for sometihng for tax purposes.. As for capital gains, well when I sell - I realize I owuld need to wait 2 years to not realize those gains.. any other ways around that though? How about if I buy a 2nd house a year after owning this first one and consider that 2nd house my 'primary' residence.. then what happens? I haven'ts old anyhting yet.... so that wouldn't that mean I can 1031 that first house at that point since the second home is now my 'primary' residence'?
