30 Day Stay/MTR Flashcards
What does it mean if the time to pay off a loan is longer than the loan term?
You are paying interest.
What is a non-warrantable property, often seen with many condos?
It’s harder to get government-backed loans (like Fannie Mae/Freddie Mac) because they are considered riskier by banks.
List some reasons why a property might be considered non-warrantable.
New construction/incomplete, Developer has not turned over control of HOA to owners, High percentage of units occupied by renters, Community allows short term rentals, Single person/entity owns >10% of total units, Building owner/developer involved in litigation
What are the requirements for second-home loans?
Same rate as owner occupied 10%, Must qualify based on income (not possible income of property), Must visit home for at least 14 days in the first year after buying, If married or business partner, each gets one loan per person, Must be 50-100 miles from primary or secondary residence, Can only have 1 secondary home per market
What is the DTI ratio for conventional loans and how is it calculated?
DTI ratio should be 50% or below. It’s calculated as: $2000 debt (like car loan, mortgages) divided by $4000 income (like salary) gives a DTI of 50%.
How is rental income considered in the DTI ratio for conventional loans?
Rental income is considered in the DTI ratio at 75%.
What are the requirements for a conventional loan?
Can have up to 10 conventional loans at a time, Minimum credit score of 620, If used as an investment property, 20-25% down is needed, Owner-occupied can have as little as 3% down, If low down payment, likely to have PMI (private mortgage insurance)
When does PMI disappear for a conventional loan?
PMI will disappear once there is 20-22% equity in the home.
What are commercial loans typically used for and what are their characteristics?
Used for business entities like corporations, developers, LLCs, funds, trusts, Length of 5-20 years, Loan value of 65-80%
What is unique about portfolio loans?
The loan stays at the original bank and is not passed to the government (like Freddie Mac/Fannie Mae). They have a more flexible structure with down payment, PMI, etc.
Describe the 203(k) FHA Renovation loan.
Bundles the cost of home loan and renovation into one, Finances the home based on its future value, Can be used for partial or total projects, Repairs must happen within a specific timeline after closing the loan, Based on ARV (After Repair Value), Only requires a 3.5% FHA down payment, Can be used to refinance or purchase
What is a HELOC?
Home Equity Line of Credit. It’s taken out from a different bank than the original mortgage, can be used for 75-80% equity in the home, and can be used for home improvements or down payments on the next property.
What is the main purpose of a Cash Out Refinance?
To access equity in your home. It adds to the length of the mortgage but doesn’t increase monthly payments.
What are the characteristics of seller financing?
Often involves distressed sellers who need to move quickly are behind on payments or don’t have money for repairs Allows for negotiation on buying terms like down payment monthly payment term length and purchase price Offers many different ways to structure interest/principal repayments
What are the requirements for an FHA loan?
As little as 3.5% down, Good for multi-tenant residences but can be used for single-family homes, Requires a strict inspection
Who is eligible for a VA loan?
Veterans.
Describe the characteristics of a physician loan.
Can have no PMI, Minimal to no down payment (options of 0%, 2.5%, 5% down with no PMI)
What are the features of a young professional loan?
Owner-occupied, 100% loan to value, Fixed rate over 15-20 years, Allows funds to be gifted from family, Requires a credit score of >700
List some other mortgage items to consider.
Delayed refinancing, Hard money/private money loans, Partnerships
Describe the two main periods of an Adjustable Rate Mortgage (ARM) and their characteristics.
Initial fixed period has a lower starting interest rate and typically lasts for 5, 7, or 10 years. During the adjustable period, mortgage interest rates change based on market changes, which can go higher or lower.
Why might someone choose an ARM over other mortgage types?
ARMs are good for short-term purchases, save money early on due to lower initial rates, and are less likely to need refinancing. However, they are less predictable in the future.
Contrast the interest rate behavior of a Fixed-Rate Mortgage to an ARM.
In a Fixed-Rate Mortgage, the interest rate remains constant throughout the loan term, offering stability and predictability. It’s not affected by market interest rate fluctuations, unlike ARMs.
What are the most common terms for Fixed-Rate Mortgages and which is the most popular?
Common terms are 15, 20, or 30 years, with the 30-year fixed-rate mortgage being the most popular.
If an investor is looking to pick the right location for a property, name four resources they might consult.
www.city-data.com, AirDNA, Google street view, and Furnished Finder.
What are the six market criteria metrics essential for choosing a property location?
Population growth, job growth, wage and income growth, rental rates, home values, and crime rates.
For Multi-Tenant Rentals (MTR), what locations are considered ideal?
Locations close to universities, convention centers, tourist attractions, hospitals (especially for traveling nurses), large corporations, research centers, and universities for grad students, professors, and students.
What is the significance of the Instagram handle @sidwashere912 for an investor?
It’s a source to check for filming destinations.
When formulating a clear-cut investment strategy, what key information should you obtain from an agent?
Current rents, market rents, estimated rehab costs, property taxes, estimated insurance, and property management fee percentage.
List the key elements to consider when defining a clear investment criteria.
Purchase price, renovation budget, class of neighborhood (A-D), investment strategy being used (e.g., MTR), cash on cash requirements, desired cash flow per unit, and location proximity to major hospitals.
What are some general strategies/principles for Multi-Tenant Rentals (MTR)?
Pick a neighborhood, understand demand and pricing, understand how competition decorates, and look into tech that allows remote & automated management.
Describe the concept of Rent by the room and its ideal property specifications.
It works best with larger homes, specifically those with 4+ bedrooms and more than 2k living space. Ideally, rent from 3 rooms should cover the mortgage, and the fourth can be for the owner or extra cash flow.
What is House hacking and what are its various forms?
House hacking involves maximizing rental income from one’s primary residence. This can be done by renting out a room, the basement, a unit in a multi-family property, or an Accessory Dwelling Unit (ADU).
Explain the concept of Use/Make ADU in the context of MTR.
An ADU, or Accessory Dwelling Unit, can be created from a primary bedroom by using a backdoor & sliding door as a separate entrance. It typically includes an en suite with a bathroom and sink, and a walk-in closet or other space converted into a kitchenette.
What are some unconventional MTR ideas beyond traditional renting?
AirBNB arbitrage, cohosting, buying homes specifically to list on AirBNB, geoarbitrage (living in cheaper countries while renting out one’s home), and renting out one’s home while on vacation.
How does the author feel about Value add vs. turnkey properties for MTR?
The author prefers turnkey properties, emphasizing the importance of getting them furnished and rented ASAP.
What are some MTR-specific concepts to keep in mind regarding property maintenance and tenant preferences?
There’s typically less trash and snow shoveling to deal with. If considering a condo, it’s essential to be aware of HOA rules. Properties with 1 or 2 bedrooms are preferable for traveling nurses.
What are the key factors for MTR deal success according to the author on page 119?
Relationship with investor-friendly agents, crystal clear deal criteria, confidence in analyzing deals, and having a deal analysis spreadsheet.
What is the author’s goal in terms of COC return for an MTR deal?
The goal for the author is a 10% COC return, though this may vary in more expensive markets.
How should one approach deal analysis according to the author?
One should analyze deals conservatively, ensure tenant satisfaction for lease renewals and extensions, and respond quickly to tenant inquiries, especially on platforms like AirBNB and Furnished Finder.
What criteria does the author use for deal analysis?
8% vacancy, 5% CapEx, 5% maintenance & repairs, and 10% property management.
List the essential metrics to know when analyzing an MTR.
Vacancy, cash flow, COC return, landlord-paid utilities, CapEx, maintenance/repairs, additional expenses, gross operating income, gross operating expenses, NOI, and CAP rate.
How often might an MTR be vacant and why?
An MTR might be vacant every 3-6 months due to nursing shift/contract changes, time for renovations and maintenance, cosmetic upgrades, or tenant rent defaults.
How is cash flow calculated?
Cash flow is calculated as Net income = Gross income - (operating expenses + debt payments).
