First time buyer an heir property

[Tycoma Mcfann]

Hello inspiring investor here, I have been educating myself on real estate for awhile even starting a real estate course, then covid hit an as a nurse I could not focus on markets, sub markets and ROI with the devastation so I stopped. I had recently before the pandemic bought my first home rural on 5 acres in a flood zone for $212 (it has appreciated) Had no idea what I was doing an because of that I overpaid and some features in the house like HVAC and pool has never function properly but it passed the inspection and I even pd extra for the pool to be inspected. so I literally bought the house and then began traveling as nurse so I'm never there. Any suggestion on how I can leverage this home to start investing . Also I have inherited two properties from my dad passing in the last month. 1 has 10,000 owed property taxes and the other has a tenant paying $700 should I BRRR these 2 properties and refinance are move in one to save. I know this is my shot into real-estate investing and I don't want to blow it in any way. Any suggestion ?

[Andrew Postell]

@Tycoma Mcfann wow, lots going on but let's try to address each of these one at a time:

1. Current Home - The numbers I would guide you to use here is 80%.  Take your current value of your home and multiply it by 80%.  If your current mortgage that you have on the home is below that 80% number, then you can take a cash out loan (at least potentially).  If your current loan balance is higher than 80%, then there's not much that is possible here.  You could certainly rent this home if you are still traveling.

2. Properties you inherited - If the properties are in fair condition then that means we can likely get a mortgage on them....specifically a cash out mortgage.  On investment properties I want you to use 75%...so take the value, multiply it by 75%.  If the mortgage balance is below 75% then a cash out loan is potentially an option.  If there is no mortgage - even better.  Cash out loan, pay those back taxes, get them both rented.  To get a loan though, they need to be in good condition or you'll need a "renovation" type of loan.  But I think you can get a plan to make these properties produce income for you.

That's just a quick summary but let us know if you have any questions on it.  Thanks!

[Tycoma Mcfann]

@Andrew Postell Thanks for your reply and guidance. Okay primary home when using different sites estimated value for my home ,the loan value is below 80% but only by some thousands. I think I should get a tenant to pay the mortgage with no cash flow but to help build equity in the home before cash out refinancing And at the current interest rate is now a good time too do that for not much return? Am I missing something?… Heir properties have no mortgage only back taxes ,my plan here was to use the BRRR method and rehab out of pocket after paying back taxes do u advice getting a loan before rehab?

[Andrew Postell]

@Tycoma Mcfann you can get a rehab loan right now to get those inherited properties up and running.  You don't have to come out of pocket if you don't want to.  If you do choose to come out of pocket, make sure you get prequalified beforehand.  You will need a specific amount of "reserves" when you refinance...in order to know that amount, you'll need to get prequalified.

If you are only getting a few thousand I would discourage you from refinancing - no matter what the rate.  Your closing costs alone would not make it worth it.  Everyone's need is different of course but to pay $10,000 in closing costs to get $10,000 in cash would not make financial sense.

Hope all of that makes sense.  Thanks!

[Tycoma Mcfann]

@Andrew Postell thanks a lot for your time and sharing your experience with me.

[Barrett Bridgewater]

@Tycoma Mcfann I can imagine your yearly flood premium is adding to the cost of your 5 acre property.  However it is actually possible to have the flood designation removed.  That would remove any lender mandate forcing you to purchase flood, and then you could decided if you think flood insurance is necessary or not.

If the structure sits above the FEMA defined flood level, then the building qualifies for removal.

Thankfully, lenders dont require flood insurance on land... only on structures.  So this little known tactic could eliminate that yearly expense.  We are happy to review it (always a complementary review) and see if that is possible.

[Tycoma Mcfann]

@Barrett Bridgewater that would be awesome if I could remove the property from having to have flood insurance. Is there a website ?