All Forum Posts by: Austin Tondreau

Excellent work! I did this for my first rental as well. Bought a condo in Naperville and did a live-in-flip doing everything you mentioned above! Two years of living while doing the work, refi'ed though didn't pull my cash out because I wanted the lower monthly payment so I would gain more profit each month. 

It is super rewarding to do the work yourself, and you save a ton! I just finished doing the same with my second property a house. Onto the next one!!! 

Hey @Tim Delaney thank you for the response and encouragement! 

I have considered cash-out refinancing on the condo, to pull equity out. But I am concerned about loosing the cash flow which is pretty comfortable right now. I might consider this option in the future when more equity has been put in through mortgage payments. I put in around $18,000 into the condo through renovations, which I will have paid back to be in 3.3 years (I am currently in year 2 of that).

Regarding the house, I actually misspoke in my original post… I will make roughly $800 - $1000 profit each month. My current mortgage on the house Is $1500, I’m hoping after the renovations are done It will be worth closer to the $350,000 mark. Comps in the area are selling for that, most have a detached two car garage whereas mine has an attached one car garage… that’s the only thing that will hurt me. Based on housing rentals in the area, I should be able to rent it for $2200 - $2400+ (note: My house is significantly upgraded/ nicer than most places renting for that amount in a comparable size home). I was considering doing a cash-out refi on this house to get the $50,000 or so that I have invested into it. But that will make my payment jump closer to $1700 - $1800 thus decreasing my rental income to only $400ish a month.

When I run the numbers I like that I could have $50,000 at my disposal to purchase another property. But, making $1000 a month on a single property seems more appealing that two properties (assuming the next property would net similar to the house) that only bring in around $400 each.

I am not super familiar with hard money loans, I always thought those where balloon style loans. Do you have an recommendations on articles/ strategies on how to use those advantageously? I am certainly not apposed to paying others, in fact it would be great to take that off my plate because my job keeps me busy enough lol. Just hard to eat that cost. I’m in that debate right now, the house needs new siding/ facia/ gutters/ soffit covers. I feel confident I could do the work myself, and it would cost me probably closer to $7,000 compared to paying someone $15,000 to do everything. With that said it would take me weeks/ month or two realistically and they can do it in a few days lol.

Regarding the self-storage facility when I started running the numbers things were not as super expensive as I thought, granted this would be located in rural northern Michigan. With the land being free that helps a ton, having a logger come in to log the area and recoup some costs help (a little not too much). The largest expense is the dirt work and concrete. The buildings have increased a lot in cost recently due to supply chain constraints on raw materials such as steel. I was estimating around $250-$350k for everything starting with just a building or two and then expanding when/ if it takes off. I have a total of five acres to work with and I would start with 2-2.5 acres. With that said, I just got a lead on a few companies that do market feasibility studies and I am considering going that route before dumping everything into that.

Hello BiggerPockets, 

Looking for, well exactly what the title says, creative real estate financing. My goal is to grow, but to use less of my personal funds than I have done in the past, traditionally. I don't wish to expand too rapidly but get closer to buying 1 new property every year.  I do all the work myself, usually. 

Back Story;

I don't have enough cash, or not currently aware of better alternatives, to putting 25% down on rental specific properties. So I have been purchasing properties as a primary residence, living in them for around 1 - 3 years while renovating them completely, I then do a traditional refinance to lower my monthly payment, move out and rent it. So in essence, the BRRRR strategy (even though I live in them). This allows me to put 5% down, and increase the properties value which in turn lowers my monthly payment by creating more equity. But slows my growth process.

First Property: 

Condo - In fall of 2018, I purchased for $160k, I paid for the down payment with a 401k loan (not smart but I paid it back). I put a brand new kitchen/ 2 brand new bathrooms/ garage door on/ tons of other random odds and ends, all paid for from bonuses from work. Refinanced with the value coming in at $186k. Value is probably higher with the crazy market (there is another unit similar selling for $240k currently). This process decreased my monthly payment by $200ish a month. With my current rent, I bring in around $450 a month. But I was stuck in the property for three years trying to raise funds to complete everything. 

Second property: 
A few month after I refinanced the condo, the bank to grant me a mortgage for a house while turning the condo into a rental. I purchased a house in January of 2021 for $240k. I used a 401k loan for the down payment of 5% (again bad idea but I have paid it off). I have put around $25,000 into the house all from savings/ bonuses from work. I have put a brand new kitchen and brand new bathrooms (converting a 1.5 bath house into a full 2 bath house), installed a fence, redid/ removed all the cast iron pipes and galvanized and converted to PVC and copper. Doing the work myself saves me a ton of money, just can be annoying living in a constant construction zone. I still have another $15-$25,000 left to spend on this house between a few more interior projects, but the bulk of that will be to either add a second driveway (or expand the existing one), and to either repaint or reside the whole house (it has the original masonite siding, its chipping all over. Paint would probably buy me another 3-5+ years. At a minimum the house needs gutters/ facia/ soffit covers.). Ideally I would like to be moved out of this property before the fall and convert it into a rental. Estimated worth after renovations based on comps, $350k. Estimated rental income per month on property $800 - $1000 a month (depending on appraisal and new monthly mortgage from the refinance). 

I would like to move away from constantly draining my savings account and using all my bonuses to renovate these properties. I have no issues investing my own money into my properties, but its a pain to use almost every last dollar I make on them. Because by doing so it slows my ability to pay off student loans faster/ hobbies/ enjoy life (vacations). I probably wont purchase another property until the market lowers, cost of everything is way too inflated, I will also most likely start investing in a new market out of state because properties are cheaper and I can expand faster. I have also started a business plan for a self storage facility in a different state, numbers look decently promising as the land would be gifted to me for free.... but with dumping every last dollar I make into these properties it does not leave me with much cash left over to fund new deals. So I would like to find creative ways to fund my deals. Here are a few I have considered, let me know your thoughts?

Cash Out Refinance: I like this idea, as it would allow me to pull out most (if not all) of the money I have invested into the house. I could then use that money to buy another property. What I don't like, is it would dramatically increase my monthly mortgage thus I have less rental profit per month. 

HELOC: I also like this idea, but with only investing 5% into properties when I first purchase them, it makes this option impossible.

Balloon Loan: I have considered these as well, I figured it would be a good way to fund deals while keeping my payments loan. It just seems tricky to make the numbers work in my favor. 

@Jack Jenkins, also live in the metro-chicago area. Currently investing in the western suburbs. Doing the BRRRR strategy as well, should be renting out my renovated condo in the fall and moving into a single family home! Let me know if you have any questions on the renovation side!

Been tossing the idea around of finding people in the area to partner in with a flip!

 Id be a little careful with this, I would only do it if you're hemorrhaging cash. Because while most banks/ mortgage companies will issue you a forbearance for 6 months, at the end of the term you're often required to pay the past six months principle AND interest payments all at the same time... And then make the next month payment. 

@Tim Sipowicz welcome to the forums! 

The numbers game will always be a critical one! I didn't run the numbers all that well on my first BRRRR, but I'm fortunate it wasn't a "fail" but that sorta depends on who you ask... I'll let you decide.

Purchase Price of Condo (Naperville): $160,000
Down payment: $8,500
Renovations: $11,000
New home value: $175,000

If I where to sell, I'd technically loose money or break even as I lived in it for a year and a half. That being said, I should be able to rent it for around $1600-$1700 per month, with a monthly payment of $1200-$1250, meaning on a conservative estimate Ill make $400 a month. Therefor it will take me 4.2 years to get my down payment and renovations back, realistically 5 years for an ROI. In my opinion for a first time deal, not knowing anything, that's not terrible.... but could be better.
Things I learned;
- I over payed for my condo
- I didn't research the HOA enough, and this is huge because they increased 5% the first year of ownership and 17% the second year.
- I went a little overboard with renovations, but I wanted to get good materials that would last

Nevertheless good luck! Welcome again! I hope my experience can give you some insight into people in a similar situation. 
Side note: Look into 203k loans, those mortgages pay the cost of the house plus money for renovations... its a lot of paperwork on the loan side, but not a bad route. Thats going to be my next route is an FHA203k loan. (They will be hard to get for the next few months due to COVID, banks are afraid of loaning money for those at the moment). 

 Alex, 
It's interesting you say that regarding taxes... I was always under the impression there is usually enough tax breaks on rentals to make your rental income almost tax free?

 Hello Julieanne, 
What is discussed at these meetings? Perhaps I'll drop by some day. 

As silly as it sounds (even with an accounting degree), I truthfully forgot about taxes haha. I knew I would be hit with income tax for the income provided from rent (I usually calculate 35% of my rental income will go to taxes). Ideally I figured I would collect the rent and send my parents monthly checks. Which I would assume would fall under the “gift” category. Would be easier for me just to pay a few of their bills each month? Or would this also be taxed?

I have considered multifamily homes, if I where to pull the trigger I would most likely do so in Grand Rapids. Properties are significantly cheaper over there, but the buildings are also over 120+ years old. The price on multifamily homes around Chicago-land are outrageous in my opinion price wise and most are outdated. Without a massive down payment I don’t feel I could make profit off of them.
Good to know on property management though! Have you ever used them to list a rental/ screen tenets?