Triplex for sale in Tacoma, live in one, 2 units pay your mortgage! - SOLD

It is listed for $180,000 located at 716 Yakima Ave. Has 2 houses: a 2-bedroom house with a laundry room, and a duplex with a 2-bedroom apartment and a studio. The duplex also has 2-one-car garages.

Prices and interest rates are rising and inventory is shrinking

The prices of the cheaper homes and fixers in King and Pierce counties have gone up by about $20,000 to $40,000 since January this year, and the prices of the condominiums have gone up by $10,000 to $20,000. To make the matters worse, the inventory of available affordable homes shrunk to almost nothing.
Right now in King County there are a total of 18 houses for sale under $90,000, out of which there are only two that can be financed; one of them is a HUD house in Federal Way for $85,000 + $4,000 in repairs escrow, and another one is an $88,500 in Auburn, which can go Homepath or Conventional - I strongly suggest grabbing it immediately. The remaining 16 houses are fixers in a very bad condition. Six of the 16 are basically dilapidated cabins in Skykomish or Baring. The cheapest cabin in Skykomish is $35,000 cash.
The current listings in Pierce County are as follows: Out of 77 homes that came up in an under $80,000 search only 29 can be financed, the rest are fixers or mobiles in a bad condition. From the 29 financeable houses three are in Ashford near the Mt. Rainier Park entrance, one is $59,000 and two are $68,000 - very affordable but also a bit far from civilization (about 30 or 40 miles to a nearest Walmart and Goodwill stores in Yelm), although, I hear, there is plenty of fish in the nearby river, so you wouldn't starve. There is a nice short sale 3-bedroom house in Tacoma for only $65,000 and there doesn't seem to be anything wrong with it. Then there are 3 fairly nice HUD homes: in Gig Harbor, Tacoma, and Spanaway for $70,000-$72,000

When you don't qualify for a single family house you can qualify for a multi-family

I bet you didn't know something cool  -  banks allow 75% of potential rental income to be subtracted when figuring out your monthly payment when buying a multi-family zoned property (duplex, triplex or a fourplex (anything bigger than a 4-plex is commercial, no longer residential))!
For those math inclined, here is an example:
Duplex: $124,000 you're buying it FHA 3.5% down: $124,000 - $4,340 = $119,660 - your loan amount ( there might be 2% and 0 down available conventional).  Mortgage payment at 3.6% interest (that's today's interest rate from Bank of America) comes to $544 a month, the tax is, say, $150, the mortgage insurance is around $120 (if you get a conventional loan you won't have mortgage insurance) and property insurance, say, about $80, so the total everything payment comes out to be about $890 a month. And then the good part: one of the units is rented, or you could rent it out for $600 a month. Bank will deduct 75% of that ($450) from your total payment: 890 - 450 = 440. That means the monthly payment you'd have to qualify for is only $440 !!! By any standards, even the most strict, your income can be as low as $1100 a month! And when you qualify for the loan, then you can go get government downpayment assistance and pay nothing down at all (that's if you don't happen to have any money).

Examples of some available properties:

Two beautiful 2-bedroom houses in Puyallup on a .41 acre lot for only $184,000, within walking distance to hospitals and downtown. Total monthly payment comes out to about $1200, and if you rent one of the houses you'd be paying only $400 to $600 a month.

Duplexes in Lakewood with two 2-bedroom units:
                               
$124,000 with 2 garages    $149,000 plus huge barn    $135,000 townhouse style

$149,000 a gorgeous turn of the century duplex very near downtown Tacoma, one 3-bedroom unit and one 2-bedroom unit, plus a 2-car garage and two more extra bonus rooms!

A huge spooky place on a dead end road totally private on 5 acres $175,000

You are lost, you end up on a dead end road, nothing in sight but trees. You look around and notice a dirt road. You check your cell - no service. You drive onto the dirt road, leading through the trees up the hillside, thinking that at least you can maybe make a phone call. You come out by a very old creepy house. There is not a sound, but the wind blowing in the tree branches. You nervously get out of the car, thinking, "How is this place possible!". You hear a strange sound like bubbles bursting - you notice a pond completely covered with green muck surrounding the remains of a raised lid - probably an old septic tank. The muck moves suspiciously and some bubbles burst again. You expect some mutant giant toad with teeth to jump at you and hurry to the porch. You knock, nothing happens. You try the door - it opens with a squeak. It is dark inside. Suddenly you feel cold steel on your temple and you stand perfectly still. Your heart tries to leap up and away, but, without cooperation from the body, ends up lodged in your throat. You slowly shift your eyeballs and see an ancient old man, probably a hundred years old, maybe two, holding a rifle. He grins and spits unto the invisible floor, and you think, "great, now he is going to get out his rusty old chainsaw..." You stutter, "I'm just here to look at the house for sale. I'm sorry. Can I just use your phone?" The old man says, "Follow me," but holds on to the rifle. He leads you into a dining room and points to a chair by an old heavy wooden table. He leaves and comes back with a glass of water and puts it in front of you. As you pick up the glass, he says with significance, "Spring water, no chemicals in it." You shudder and put the glass back down.
Wouldn't you like to own this spooky old house on 5 acres zoned Anything Goes? Of course it needs a bit of elbow grease, and you probably want to boil that water before drinking it, but where else can you get a huge self-sustaining echo farm minutes away from the city! You could have a machine shop, fill up the 5 acres with old cars, or get some goats and chickens... The possibilities are endless... Your lucky day - the property can be purchased with owner financing with a reasonable downpayment (min 20%).

I got my real estate license last week!

So write to me using the contact form if you want me to help you buy a house in Seattle-Tacoma area!

Forming a Real Estate Investment Trust - REIT

REIT can be a better way to go than a partnership if you have a whole bunch of friends who want a piece of action, and if the idea of the trust is not to just get a home and live in it, but get a rental house or an apartment building - something income producing. You form the trust and use everyone's money to buy something. You distribute the profits to all the investors. The benefits of the REIT are that: the trust doesn't have to pay taxes on the profits, only the investors do, just like in a partnership; and you can sell trust certificates to anyone cheap to raise more money.
www.sec.gov/answers/reits.html

Form a Partnership to buy a house

It can be a great idea to purchase a house with a partner. Especially if the house is like a split level or duplex, where each partner can live without bothering the other. If the house costs $100,000 your half will cost only $50,000. You divide the utilities, insurance and taxes in half as well, making your personal monthly share including everything only about $300/month!
There are two types of partnerships:
In a general partnership each person shares equally in the responsibilities, the decision making, and the maintenance, and is equally liable for any debts or incurred costs.
In a limited partnership one or more partners are in charge, and are personally liable for everything that goes wrong. The limited partners do nothing, pretty much, they just invest some money, and they are only liable for the amount of money they invested. An example of a limited partnership would be if you and your best friend buy a duplex, and your friend's grandpa invests $10,000 to help you out, but will not be participating in any lawn mowing.
Each partner is responsible for paying taxes on income received from the partnership.
The partnerships are governed by the Uniform Partnership Act (UPA).

Calculating NOI - Net Operating Income

What is NOI (Net Operating Income) and what do you need it for?

Suppose you found an investor who might lend you his private money to buy a house, but you're a poor starving student and only make $400/mo working part-time at Starbucks. The first thing he'll ask you when you tell him that you found a house you like is, "What is its NOI?" So here is how you calculate it for him to look intelligent:
Say this house has 4 bedrooms and you're going to live in one and rent the other 3 rooms to your friends for $400 each.
3 X 400 = 1,200 - that's your estimated gross monthly income. Muliply it by Vacancy Rate.

How to calculate Vacancy Rate

You plan to rent 3 rooms in your house, which means in a year, with zero vacancies you'd be renting 36 rooms. If you estimate that a couple of people might leave and it might take you a month to find another roommate for each room, you divide 2 by 36 = .0555 (or times 100 = 5.5% ) - this is your vacancy rate.
1,200 X .055 = 66 - estimated average vacancy in $ per month
To get back to the NOI:
Subtract the estimated vacancy, monthly tax, the estimated insurance (call insurance company and get a quote), the estimated utilities (call utility company to get an estimate or use information from a friend who owns a house in the area), and the maintenance/management cost (which probably won't be much, since you'll do it yourself, but you still need to take into consideration cleaning supplies, occasional repairs or replacements of things that break) and multiply it by 12 months:
( 1,200 - 66 - 100 - 60 - 200 - 40 ) X 12 = 734 X 12 = 8,808
Is this good? I'd say that it is a good NOI. If the house is in a move-in condition, the investor will be very interested in doing a deal with you. So, for example, if the house costs $100,000 and the investor lends your the money at 7% interest rate, your monthly payment to him would be $665. So not only you live there for free, but make a profit of $69/month.

After a year or two you can refinance for lower interest rate with a regular bank. All that income from the roommates is counted by a bank and is called a boarder income. That way you can remain a happy starving student working only a couple of days a week (but you should work for at least 2 years in the same line of work to have a bank be okay with your income).

Types of real estate ownership

Severalty is when property is owned by one person.
Joint Tenancy - Owned by two or more people, one title has their names on it, their shares are equal, and if one of them dies, the remaining owners own it all, not the heirs of the dead owner. (This is a way for a grandparent to put the grandchild's name on the property, so that if the grandparent dies, there are no inheritance issues, delays or taxes, if the property is paid off.)
Tenancy in Common - Owned by two or more people, shares can be unequal, and every owner has a separate title and can leave his share to his heirs.
Tenancy by the Entirety - Owned by a married couple, there is only one title with both of their names, and each owns 100% of the property, and if one spouse dies the other owns it in severalty.
Community Property - in community states the husband and wife are equal partners, and if one spouse dies, the other spouse automatically owns a half of the estate, and the other half goes to the heirs of the deceased.
Separate Property - property owned by a spouse before marriage or received as a gift or inheritance during the marriage. It can be sold without the other spouse's signature, but when it is being listed, it still needs both spouses' signatures.
Condominium ownership blends severalty and tenancy in common. The unit is owned in severalty, and the common areas are shared.
Cooperative - A corporation holds the title, and the purchasers get shares of stock in the corporation and the proprietary lease. The tenants do not own actual real estate, like the condo owners.
Time Share - Interval ownership. The buyer does not own the real estate. The developer retains the ownership.

Real property ownership and types of interest in

An estate in land defines the extent of one's interest in a real property. Estates in land are freehold or nonfreehold.
Nonfreehold estates are leased - leasehold estates.

Freehold estates:

Fee Simple Estates:

Fee Simple Absolute - the highest form of ownership. For indefinite duration, freely transferable, inheritable.
Fee Simple Defeasable - 2 types:
Special Limitation with Possibility of Reverter - Has to be used for a specific purpose. Title reverts automatically back to the grantor if the estate is not used for prescribed purpose.
Condition Subsequent with Right of Reentry - Title is transfered on condition that there is something the grantee (or a buyer) must do. But it doesn't revert automatically, the grantor (or the seller) must take legal steps to get the property back.

Conventional Life Estate - 2 types:

Ordinary with Remainder or Reversion - Set up by a grantor in such a way that the person who lives there is called a life tenant, and after he dies, the property reverts to the grantor. It can also be set up to transfer to a third party.
Life Estate Pur Autre Vie with Remainder or Reversion - Set up by a grantor in such a way, that A, or A's heirs, can live there for the duration of B's life. When B dies, the property reverts to the grantor, or C, another party.

Legal Life Estates:

These estates are set up by law, such as:
Dower - a widow's interest in her husband's real property
Curtesy - a husband's interest in his deceased wife's property
Homestead - a part of the value of the estate protected from creditors

Know this about your real estate agent:

Your agent had to take a 90-hour course and pay $250-$400 for it. Yes, she had finals and had to have a passing grade. Then she had to study a thick and boring book of federal laws and real estate terminology, which took about a week. Then she had to study local state rules and laws that took another week. Then she had to take a very hard 3-hr Real Estate Exam and pay $138 to take that exam. Then if she passed it, she has to get fingerprinted and pay $35 for that. Then pay the license fee $146. This license has to be renewed every two years. For the first renewal the agent has to take another 90 - hour class and not only pay for it, but pass the finals. To renew the license the agent pays $146 to renew the license.

Your agent doesn't get half of the total selling commission (3% to 3.5%). She splits it with her broker, which makes her personal share only about 1.5% to 2%. She pays all her own expenses, such as gas, paper, copying, printer ink, etc.

The financial benefits of owning a home

When you rent, you are throwing away the money every month. When you own a house, a part of your monthly payment goes to increase your equity in the house, and the other part is the interest. But you are not throwing away the money you pay for the interest either - you get to deduct it from your taxable income. You also get to deduct the real estate property taxes. You pay less taxes when you own a house, than if you rent one.

About Capital Gains

Whenever something you own is exchanged for a profit, that profit is called a capital gain.

When you sell your principal residence, you don't have to pay capitol gains tax up to a gain of $250,000 if you are single, and $500,000 if you're married. In order for it to be considered a principal residence, you must live in it for two years. You can only use this exemption one time in two years on a sale of one house.

If you are selling a rental, you have to add total Depreciation as well to the capital gain.
Depreciation = Cost of house (Puch. Price + Closing Costs) X cost of the building percentage (using the tax assessment divide the value of the house assessment portion by total assessment) divide it by 27.5 multiply by the number of years you had the property

Listing Agreements and duties of a listing agent

TYPES OF LEGAL LISTING AGREEMENTS:
Exclusive-right-to-sell listing - The listing broker is paid commission no matter who sells the property, even if the seller finds the buyer all by himself.
Exclusive-agency listing - The seller retains the right to sell the property and doesn't have to pay commission if he finds the buyer on his own without using the brokers advertisements and/or materials
Open listing - The seller can sell the property and not pay commission. Any broker can sell it and get commission.

The agent must ask that both husband and wife sign the listing agreement, even if one of the couple owns the property separately by himself or herself.

Contracts

To be valid, contract must contain these elements:

Both parties must be 18.

Offer and Acceptance, also known as Mutual Assent or Meeting of the Minds. An offer must be made by an offeror (buyer) and accepted without changes or additions by offeree (seller). If something is changed or added, it is called an addendum, which is added to the contract, and both parties must sign it.

Statue of Frauds requires that deeds and real estate contracts must be in writing to be legally enforceable.

Must be entered in for legal purpose.

There must be a legal consideration – something of value, but legal (can’t be a stolen painting or a ball of weed).

Reality of Consent – the contract must be entered into without duress, misrepresentation, or fraud. The parties cannot be drunk or high, or incompetent (incompetent doesn’t mean illiterate. An illiterate person can sign by a cross, and it would be legal). The innocent party is not obligated to perform.

Tacoma Down Payment Assstance

City of Tacoma has a down payment assistance program for 1st time buyers using FHA loan. Here is the link: http://www.cityoftacoma.org/page.aspx?nid=454

How to buy a cheap house on low income

So you go to the bank and say you make $1500 a month. Bank will allow your monthly payment to be 41% of your income: $615 total, including taxes, insurance and home owners dues if applicable. This payment allows you to buy an $80,000 house at best, if taxes aren't too high. Suppose you can't find anything nice in that price range. What do you do then? You look at houses requiring a rehab loan, it will say so in the listing. You find a fixer priced $40,000 to $60,000, and you make an offer specifying financing: FHA 203K Then in the 10 day inspection period you call a contractor and ask him to come out with you and bid on the repairs. The contractor will give you a rough estimate of how much the repairs would cost. You need a minimum of $5000 of repairs, and the maximum allowed is $35,000. Be careful not to exceed the maximum loan amount you are approved for when you add the purchase price and the cost of repairs. The bank will finance the total package, you'll pay the same low 3.5% down of the total amount. As you can see, it is quite easy and affordable.

Fannie Mae financing, is it a good deal like it says in some listings?

Sometimes you see a listing that says, Fannie Mae property, only 3% down. Is that really true? Well, I called a whole bunch of banks, wanting that deal, and found out a few things:
1) Most banks don't do Fannie May
2) A lot of the ones that do want 20% down, they say it's not worth their time
3) A lot of banks that do Fannie May will have a minimum loan amount, such as $50,000 or $75,000, so if you're looking at a cheap Fannie Mae condo listed at $40,000 no one would bother lending on it
4) I was recently referred to a Fannie Mae lender, and the banker I talked to was such a stickler for rules and so dense, she disqualified me for a $55,000 townhouse, where as I am pre-qualified by a few banks to buy something up to $80,000 FHA. She thought a payment of $550 a month was too high for my income, where as Bank of America or Banner bank, for example, would easily let me go up to a $650/mo payment.
So, to summarize in plain English: Fannie Mae 3% down is a mystical pot at the end of the rainbow that you can chase forever and never get.

Buying a HUD home demistified

To buy a HUD home you need to get an agent who is approved to do HUD. The agent submits your bid on the computer. HUD has been greedy and hasn't taken full price offers right away, but waited to see if they'd get a more than full price offer. So you might submit a bid and not hear from HUD if you win the bid until the end of the bidding period. To see how long that would be you can go on the HUD site (click this link): hudhomestore.com and look up the property you are interested in bidding on. You must know, however, that if you bid a higher amount than the listing price, you'd be expected to pay that difference in cash.
A lot of HUD homes need repairs. It tells you right there in the listing on HUD site what the Repair Escrow is. What it means to you in plain English is that a HUD inspector determined that as the amount required to fix the house to the minimum standards to allow one to live in it. You don't need to have that cash up front. It will be added to your FHA 203b loan, which is like a regular FHA loan, actually easier, since there is appraisal required - HUD's report of what needs to be fixed is enough. There may be more things you'd like to improve upon, in which case you'd need to get an FHA 203k loan. If you do that, an additional new appraisal will be required. In either case, your total loan amount is the purchase price plus the repair escrow plus whatever repairs you want to finance less your down payment. You have 48 hrs from the moment you win the bid to agree and to turn in your paperwork and lender approval to HUD. So you should definitely get pre-qualified before you win the bid. Use a HUD approved lender easy to work with. I am currently using Bank of America, for instance.