buying duplex in South Dakota

[meehan22]

Recently paid off all my debts. Looking to purchase an entry level duplex in the 50k-100k. 

1. Credit.  680+ On TU and Equifax. Not sure about Experian at this time. Will be applying as soon as 700 across the board at the end of summer. 
2. Income.  Guarentee+Commission of 2013 $30k, Also self employed income (fathers rental business) of $2000 last year. Have to pay taxes on yearly. 
3. Source of income.  Full time job and part time employment.
4. Monthly debt payments.  ZERO debt, currently drive an older pick up. Rusty trusty!  
5. Employment Full time, 2 years in May at full time job. Few hours a month part time. 
6. Assets/Reserves.  5k in savings, vehicle asset of less than a grand. No other assets. 
7. Location.  Minnehaha County in South Dakota. Sioux Falls, SD. 
8. Property.  Duplex, possible triplex or fourplex depending on what comes up later this summer. Have located liveable fourplexes for 100k area. My understanding I must live in 1 unit to qualify for FHA. 
9. Value.  50k-100k
10. Occupancy.  Primary residence. 
11. Transaction Type. First rental property purchase. 

I have been repairing my credit to finally get out of my apartment and also purchase my first rental property. Hope to apply at my 2 year mark at my current job in May. I have no plans on purchasing a new vehicle or any other debt besides mortgage debt. My income is lower I realize than most but luckily where I am housing is a bit cheaper as well. Thanks! 

[meehan22]

I should also mention I am not married and do not have any dependents. 

[BrianB_The_Loan_Professor]

Great job with the debt  - I wish I could say the same but life keeps stopping me from paying it all off at once 

Is the full time job just commission or is it salary PLUS commission?

To use the commission income you have to have proof that it is consistent - a two year average is used based on taxes - 

The self employed income can only be used if it is also shows two years of history and again based on an average documented through taxes

Buying by yourself wont be an Issue SD is NOT a community property state so going along means just that - your income - your debts

It sounds like you are ready once you have the two year history (may not need it for the regular income just the commission)

Buying a duplex is a lile more complicated but not too hard - I have two but personally never bought to live in one side

This is a great way to get starte at building some wealth using other peoples money - just remember these other people will be your neighbors and it is a busines

Renters are by far the worst part of being a land lord (spent the last two weekends cleaning a place that was vacated and left a mess)

In that price range I would try to get as much (many units) as I could afford)

[meehan22]

Thanks for the reply! The full time job is hourly + commission. I made just over 25k hourly before commission. The Part time job through my fathers rental company I only have documented on one w2, until last year it was always just money under the table. So it sounds like that income will not count. And I agree with you when it comes to rental property, my family owns over 100 apartments spread across a couple of towns and nearly 30 buildings. I have seen my fair share of headaches and work in my short life of 26 years.  

As you mentioned, I hope to buy as many units as possible for the best buck, but than again a duplex is still on my mind based on the fact it'll slowly get me started in the business and less to worry about on my plate. Whatever building I chose to purchase will be under the 100k mark is my plan which puts me at 4 units or less depending on the property I want. 

My goal is to live in one to not only get out of my rent payment, but cross my fingers for a good tenant(s) that will allow me to save away for a year or two and form a LLC and move the mortgage, debt, and income out of my name and in hopes of purchasing more properties down the road. Not to mention the personal responsibily when it comes to tenants and such. Never want one to come after me for personal assets years down the road. According to the FHA website to qualify I must live in 1 unit for a year. 

Have to start somewhere. Thanks for your insight Brian! If you know if I will qualify for a 100k mortgage or less let me know. I know I have a lower income but with absolutely zero debt I do believe that helps. I like my old reliable runners and paying cash for things.  

[meehan22]

bump.. anyone else offer any insight if I would be qualified? thanks! 

[BrianB_The_Loan_Professor]

Assuming you can count the commission income of 30k

This would give you a total of 55k to show for income

That and no debts

I dont see any issue with a home up to 100k - you probably have room for more

3-4 unit homes are a little tricky with FHA but they are very workable

The rents will be considered and they need to show that the rents could cover the note2 unit is still mostly about the borrower - 3-4 unit places are also looked at based on rents and payment - so the property is also considered (more than just appraised value)

Hope this helps

Brian

[meehan22]

Thanks again Brian. I have also been thinking about moving out of my expensive apartment into a cheap studio or 1 bedroom or frankly adding a 30 minute commute and live in one of my families complexes for cheap. In the process I could save a great deal of money up. And when dealing with rental property i dont see the values going up or down TO MUCH in a years time. I could more than save the increase in value.

 Ive had offers for different jobs with more pay but I am concerned if I switched jobs I could no longer find financing. Ive gone 8 years now (since highschool) constantly employed but a few different fields as promotions, better offers, etc have came along. What is your opionion Brian? How long should one be at a job to qualify for FHA? I was reading online that FHA just requires work history of 2 years not a same job for 2 years. Any truth to that? 

[BrianB_The_Loan_Professor]

As long as the jobs are similar you just need two years in the line of work - If you change jobs FHA requires 30 days of paystubs from the new employer before you can get financing - you do not need to wait another 2 years.

B

[meehan22]

And if they are not similar than I have the two year wait correct?  

[BrianB_The_Loan_Professor]

If the jobs are not similar it could cause you to wait - what are you doing now and what will you be doing

It is more about what you are doing than job title - 

You could be management at a Fast Food Place and step into management at a Walmart and get away with it - obviously two different fields for the employer but same skills for you..........