Newbie from Rensselaer, NY / Townhouse renovation

[John Hutchison]

Hello Bigger Pockets!

I've been lurking and binge-listening to the podcast for most of 2017 now, and currently working through my first deal so I thought it was about time to reach out and make an introduction.

My name is John D. Hutchison, most people call me JD for short. I'm from the Capital Region and went to school at RPI in Troy, currently work at an engineering start up in Delaware county.

I've been trying to invest in Troy, NY for the past few years and almost made a few foolish purchases before I really understood the underlying strategies and how to run the numbers on an investment property. I was mostly looking for a multi-family in downtown Troy to occupy and house hack, but the local market is hot right now, it seems highly speculative, and at the end of the day the properties are 100+ years old, many needing extensive masonry work, etc.

My realtor ended up showing me a HUD property in Rensselaer / East Greenbush area - a 2 bed, 1.5 bath townhouse built in 1988. The kitchen had been ripped out in a failed attempt to remodel, and otherwise the baths, carpet, flooring, etc. were just original and tired. We ended up bidding and winning the place for $97.3k. I financed the property with a FNMA Homestyle loan, conventional at 10% down with around $23k of improvements rolled in for a total of about $120k. I imagine with some miscellaneous expenses I'll be all in at around $125k when we move in, with a brand new kitchen, new LVP flooring down and new carpet upstairs, new baths, new front door, and fresh paint throughout. The property appraised at $165k subject to these upgrades prior to closing, so right now I'm weighing out selling next summer or refinancing and renting it out when we move to our next property (BRRRR).

I really love this idea of live-in flips and/or BRRRR from a standpoint of minimizing our housing costs and having multiple exit strategies when the project is done. Knowing what I know now, my goals in real estate are to continue doing 1-2 live in flips and/or BRRRR annually to minimize (or eliminate) our living expenses and build a small portfolio of strong newly renovated rentals that should require minimum management effort and provide some cash flow. I like my career in engineering, but would like to achieve financial independence within the next 10 years just to have the freedom to work when I want, on what I want, where I want.

The biggest thing I've learned so far in this process is that there is significant work involved in coordinating and closing a renovation loan, be it Fannie Mae Homestyle or (I imagine) FHA 203k. Definitely negotiate yourself at least 60 days to close in the contract, as I only got 45 and I had to purchase extensions at a rate of $25/day for about 20 extra days. There are many entities that need to fill out paperwork, come look at the house, and just generally all be on the same page (lender, seller, general contractor, renovation loan consultant, and of course you the buyer). That being said it seems like a great way to get into building equity quick in a distressed property without resorting to hard money, large gifts, private loans, or big reserves of cash that take years of working to amass. Just keep in mind that the lender generally reimburses you as you go for the work - they don't put the money out up front - so make sure you have some working capital left over after the down payment and closing costs.

Here are some pictures of the property as purchased, and now as we're in process:

Kitchen as received: (remodel gone wrong - why close it all off?)

New kitchen coming together - opened back up, fresh drywall, recessed LEDs.

Thanks all for getting to know me and my project - I'm interested in hearing from anyone else investing in Rensselaer or Troy, or who has townhouse experience either as a fix and flip or rental!

Best regards,

JD