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Updated about 5 years ago on . Most recent reply

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Andres Ayala
  • Austin, TX
1
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19
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Buying from wholesaler, rehab, rent rooms, refinace

Andres Ayala
  • Austin, TX
Posted

Hello all,

This would be my first flip/first time investing. I live in Austin, TX and wanted to house hack to try to have most of my mortgage covered while living in a house. The market is very competitive, rising and expensive. I realized in order to make house hacking a possibility this would be my best bet to make the numbers work.

Buying a property from a wholesaler, rehabbing the property, and rent out some of the rooms. Or same with a duplex, rent one side and live on the other.

I am looking for some advice from the community, if this is a good idea or am I getting myself into a tough situation?

I also was wondering, after I complete the rehab and hopefully refinance the home, I pay the hard money lender back for the initial loan and get a fixed mortgage for 30 years. Is there any way I could calculate the mortgage after the rehab, does having equity in the property bring down the mortgage? I would also like to plan for vacancies and if I decide after a while to live there myself full time or rent the property entirely and do it all over again.

Any advice would be greatly appreciated! I do have some estimates on the prices I would like to get!

Estimated house purchase price: $240,000-$260,000

Estimated rehab: $30,000-$40,000

Estimated ARV: $340,000-$370,000

Thanks again!

Most Popular Reply

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Andrew Postell
#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
6,316
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7,926
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Andrew Postell
#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
Replied

@Andres Ayala and @Kristin Feerst thank you very much for posting on this subject.  This is a common area for first time buyers to ask about and I am going to recommend against this....but in a good way.

When we buy an investment property from a wholesaler....that property might be anywhere.  Maybe it's over here...or over there...or in some neighborhood that I don't like...or whatever.  And then, as Kristin mentioned, your lending options are limited.  Usually your "aquisition loan" is pretty high interest rate (hard money is ONE type of acquisition money) and then you'll have to refinance, but you can't refinance all the way.  And you just had to pay closing costs twice and your rate is higher and you came out of pocket all this money blah blah blah.  And all of those things might be fine...IF I DIDN'T HAVE TO LIVE THERE.  As an investment property...we look for things that make sense, like numbers, to make a deal seem worth it.

Now, let's change hats - my PRIMARY home.  Since I'm living in this house I need it to fit my needs.  Maybe my needs are that I have a reasonable commute to work.  Maybe my need is that I need a safe environment for my family.  Maybe my need is that I need a specific school zone.  Maybe my need is that I want a specific layout since I'm going to be house hacking. Maybe my need is NONE of those....but it's some other need that Andrew can't think of.  Your PRIMARY home will have PERSONAL needs.  Some of those needs will not have a monetary value to them.

Now, let's go to the loan part of PRIMARY homes - you get the best rate!  And the lowest down payment!  WAY better than any investor loan.  Oh, and you have renovation loans at your disposal too....and they are better than any investor renovation loan!  You already have the best loan that every investor WISHES they could have.  And all you have to do is just buy the house that fits your need....well, that and get qualified for the loan that is.  I guess that is a big step, must make sure you get prequalified.

The point here is that you can choose a property that fits your PERSONAL need and also get the BEST loan you can find.  It's a win win!

I hope this makes sense what I am describing here but just think about purchasing a home in the traditional fashion if it's your primary home.  Hit us back if you have any questions.  Thanks!

  • Andrew Postell
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