What would you do with these circumstances?

Question

quick back story: Self employed RE Broker in Greater Seattle Wa, my wife is a w2 employee, 133k HELOC, 50k COH, looking to acquire first investment through brrrr, flip and/or short term (airbnb) most likely out of state

Getting right into it....

My wife and I have just closed on our HELOC and we have some COH as well...we have a few different options and were looking to see what others would do in our shoes....

1. We were thinking of using the HELOC to flip (while costal market is hot...reinvest into Midwest/southern markets)?

2. Purchase multiple properties with heloc using it as a down payment (try to force some simple sweat equity to brrrr back DP)

3. We have a 500 sqft (walkable and above ground) crawlspace that the city says we can convert to an ADU/MIL, we have been quoted 70-90k for the build out with a GC (not including city planner or architect). We would use this as a short term rental/airbnb.

4. Purchase 2nd home and do short term rental airbnb/traveling nurses

5. Purchase 1-2 motorhomes and rent them out through outdoorsy type hosted sites (yes I am aware that this will never appreciate  and will depreciate quickly) these do extremely well where we live.

Thank you for reading and responding, my wife and I appreciate your time!

Joe Villeneuve · Answer

1 - Use the LOC and cash to buy and flip.

2 - After doing this a couple of times, you should be able to start using just the profits to buy two at a time...one hold and one flip.

3 - After a couple of flips with house #2 from Step #2, you should be able to repeat step #2.

4 - Continue to repeat Step #2 but hold back your LOC for misc surprises in your growing number of hold properties.  Use the LOC for this instead of taking out part of the CF.

5 - Repeat until...?

Brian Hughes · Answer

My vote is build out the ADU -  you know the neighborhood already,    you have a good idea of likely renter demographics and likely rental (long term and STR) demand already.   Remote investing can be very risky especially at small scale.   You already know the house so you have a good idea of the work and risks involved.    If you are comfortable with a learning process and/or have some contacts who can help then you might be able to do a fair amount of work yourself and save some $ in the process.    Do get multiple estimates though.   If you are outside seattle and its a simple build I can believe 100K   (I have a similar situation only being held up by zoning rules,  but I need to reevaluate given changes in laws since I looked last time) but the devils are in details.   In my case the ADU triggers upgrade requirements to the rest of the structure,  making it cost waaay more than just the additional unit would cost by itself.  But my case is not an SFR,   yours is.

Jess Haas · Answer

Yes! I am based in Seattle. We invest in STR's in the mountain areas. Small A frame cabins are timeless and dont have need huge renovations. Local travel has significantly increased since COVID and I think it is here to stay.

Jess Haas · Answer

Is your crawlspace a full height basement? It will take a lot more than 90k to build an ADU in this area.

Rates for 2nd home loans are going up. I would get in while you can. There are a lot of good areas around Washington for short term rentals.

Joe Villeneuve · Answer

In order to make this work you need to be able to:

1 - Financially analyze markets to find the micro-markets, to know where to invest,

2 - Know how money works (another way of saying know strategies that work within #1),

3 - Have a Plan as to how and where to invest based on a financial string of steps...one step leading directly to the next and so on, so you never say the words, "what do I do next?" ever again.

Joy Elisse Garner · Answer

Don’t buy RVs/ Trailers — depreciating asset

Jeremy Williams · Answer

Absolutely, I would definitely only get involved when a core four group of individuals have been vetted and put in place. The reasons why my wife and I are setting out to create this passive income, allows me to handle the risk. Thank you so much for taking your time out to respond as well, I appreciate it so much!!

Jeremy Williams · Answer

Absolutely, I would definitely only get involved when a core four group of individuals have been vetted and put in place. The reasons why my wife and I are setting out to create this passive income, allows me to handle the risk. Thank you so much for taking your time out to respond as well, I appreciate it so much!!

Jeremy Williams · Answer

Thank you Jess! Luckily having grew up here most of my friends and even family are contractors or electricians. The relationships I've built here in western Washington, allow for really good prices on work, plus I refer them out to my RE sellers and buyers for work to be done before listing or when after buying.

Yes indeed, the three it's going up I think the only short-term rental that we would do in Washington would be converting our own house into a short-term rental space. Besides that I think we're looking to do a short-term rentals out of state and places like Arizona, Florida, North carolina, maybe even nashville?

what areas are you seeing affordable listings in our area to buy short term rentals?

thank you so much for taking your time out to respond, are you in the greater Seattle area?

What would you do with these circumstances?

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