All Forum Posts by: Andrew Postell

@Simran Rihal thanks for the post here.  I'm one of Bigger Pockets top contributors and been a real estate investor for over 20 years.  Reach out any time.

@Michael Myers thanks for the mention sir.  Greatly appreciated!

@Danielle Ronquillo thanks for the post.  I'll answer your questions first here and then expand on a few things as well.

1. would a duplex by a cemetery make for a good rehab and rental? - a home ANYWHERE could be a potential good BRRRR Property...if the numbers work on it. (more on that in a moment)

2. would the cemetery just detract its value and drive away potential renters/buyers? - Yes, it would detract from buyers/renters and affect the sales price.  There are numerous studies that support that graveyards/cemeteries affect a home's resale value/desirability.

So, how can I say in one sentence that it could be a good deal and in the next sentence state that the location will affect the value? This is because we make our money when we purchase a home. Meaning, when we purchase it for a good price. A price that allows me to repair it fully and still get value after I have repaired it. There are specific math formulas to know here. And there are general rules that we follow as well (like not buying off the MLS). There's probably so much to this that it would be hard to summarize everything you need to know in a post like this...but here's some basic things I think you should know about:

BRRRR SKILLS NEEDED

Generally speaking you will need several things to successfully complete a BRRRR:

1. ARV - being able to calculate the Value on your own (meaning, without the wholesaler telling you the value) is really important.
2. Repairs - You will likely need to know how to budget the repairs as well. Getting a contractor can be extremely frustrating especially if you need to make an offer without even looking at the property. How do you calculate repairs without a contractor? You may need to lean on other local real estate investors in the beginning. Or maybe even just focus on properties with a very light rehab?
3. Lenders - You will need a lender on your BUY step and on your REFINANCE step. And I would HIGHLY recommend to read this article I wrote for Bigger Pockets on how to find good lenders that you can find HERE. If they are good, they should be absolutely definitive on rate, terms, costs, etc. Trust me, many lenders will tell you they can do this...but it's very rare to find. When I first started BRRRR'ing my properties lenders would tell me "That's illegal"....it's not, they just didn't know anything about it.
4. Finding Properties - and this is the absolute hardest step of anything right now. So network like crazy and find some good resources. It's going to be hard...but if it were easy then anyone could do it.

@Sean A Lewis the only way to know if you can get your money back from a loan is by talking with a loan officer.  Now, it is possible that someone else might be right...but I would still say to confirm with a Loan Officer.  I'm saying this because later someone might give you tax advice - get with a CPA.  Or legal advice - get with an attorney.  It's impossible for us to keep up with EVERY industry out there.  So, even if you hear "something"...having a good network will allow you to verify what's possible.

Here's what you need to know based on what you asked above:

1. Refinancing - There's isn't enough information for me to provide specifics...so, I'll address it both ways. First, you won't be able to refinance with a traditional loan with multiple ADU's on your primary home. Traditional loans through Fannie/Freddie/Jumbo lenders won't allow multiple ADU's on a property. Their guidelines actually prohibit this. Which means you would need a "non-traditional" loan to even consider refinancing. That means a higher rate and less favorable terms. But finding such a loan on a primary home would be extremely challenging. It might even be impossible. Secondly though, if this is an investment property then you would have more options. Same types of rules apply in that this would not be a "traditional" style loan. It may not even be a 30 year, fixed rate loan. This might fall into the 20 year, ARM products. But you could find those on an investment property as opposed to not finding them on a primary home. There's over 8,000 lenders in the US...I can't speak for them all but this is what you should expect. Multiple ADU's on primary home - big challenges. On investment property - options, but less favorable terms. If you just have 1 ADU, then your options will be SIGNIFICANTLY more plentiful.

2. Value - How do we know what your value will be here? We must consult our comps. How many triplexes have ADU's in your neighborhood? And this goes for ANY renovation that we do. What will my value be if I finish a basement? What do your comps show? What about with adding granite countertops? What do the comps say? Adding a pool? Comps! We MUST analyze comparable properties with determining future value. So, if no comps have pools...then adding one may carry ZERO value. That doesn't mean we shouldn't add a pool though. If adding a pool provides a happier family...what's that worth? That's priceless. There might be reasons for us to do these types of renovations still but you need to know that your comps determine the value. And if there aren't any comps, then no value might be something that occurs. Maybe adding the ADU's will give us more rental income and that's good enough. But keep in mind that resale in the future. So, just like it might be hard for you to get financing...same for any future buyer too. Keep the current market in mind but also consider the future too.

Hope all of that makes sense.

@Account Closed I would say to just speak with a lender that has experience with this type of a transaction.  I wrote an entire post on this that you can read HERE but feel free to reach out directly if you want to talk anything through.  Thanks for the post!

@Ryan Ness house hacking means buying your own primary home.  So, buying your own primary home should not be an issue at all - even if it's outside of a city.  Have lenders told you that something is up?  Feel free to reach out directly if you want to talk anything through.  Thanks!

@Aaron Costello thanks for posting.  It's always a little more challenging investing in out of state (I invested out of state for 15+ years) but you can still be successful doing it.  The #1 resource for me has been other investors.  How do I network with other investors if I don't live there - Facebook.  I know, I know...but there are many Real Estate Investor group pages.  Some of those groups have THOUSANDS of members.  Join those.  Post in them.  Ask other investors who they are using.  Nothing is foolproof of course, but having another investor in your market make a suggestion at least gets us on the right foot.  That would be my #1 suggestion - get connected on Facebook. 

@Dennis Fleku if you are looking to network with other investors in your market then try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you. Some of those facebook groups have thousands of members. Eventbrite too. But post locally for this. That’s the best bet.

@Sean Haran I have used Longhorn many times.  Love working with them.  Would certainly understand this position though.  

There is always this question that is debated of "What's the best market to invest in if you are investing out of state?"  

Usually the answer is in the form of another question - "Where do you know someone that will protect your investment?"

As a 15 year, out-of-state investor my recommendation is to ALWAYS choose whatever city you have the most trustworthy contacts in. Keep in mind that you may never see your asset. That's an ENOURMOUS amount of trust/money to put into a stranger's hands. What I mean here is that if you know someone in a "City X"...but that city may not have as good as numbers as "City Y"...then stick with "City X"...the city where you know people. One wrong move, one wrong contractor, one wrong vendor…will erase any "benefit" one city has over another. Your network is the most important piece for any potential returns when you invest out of state.

And please don't hear what I'm NOT saying - I'm not saying don't invest in Columbus.  What I am saying is that you should absolutely, 100% get someone that you trust to manage your property for you.  Even if another lender won't require it...I would highly recommend to have someone that is local to help with this.  Even AFTER your property is completed. 

Hope this makes sense how I am describing this.

@Tim Hartwig thanks for the post.  Always great to hear from a fellow Texan.  You will certainly come across several groups in the Austin area...but none will only specialize in Section 8.  Now, there's a reason for that...but to answer your question directly.  The meetup forum is a good resource for some groups but some of the groups will also post here on Bigger Pockets Marketplace too. Meetup.com is a good resource as well.  Even facebook might have some good local groups for you. Some of those facebook groups have thousands of members. Eventbrite too. 

Hope some of that helps.

@Rania Mutumhe Keep in mind that house hacking REDUCES my cost of home ownership. You will NOT cash flow on any property that you purchase. I'm not sure if anybody has said anything different to you but I need this to be your expectation. Remember, you are occupying one of the units...it would be impossible to cashflow in that scenario. Ok, maybe if you rented out each room and maybe did everything Short Term or something like that. But if it's long term renting, then you won't cashflow. But it will still allow you to afford a SIGNIFICANTLY higher price point than if you did not house hack.

So, if real estate appreciates 5% per year, then a $500,000 property will have $138,000 in additional value after 5 years. A $1million home will have $276,000 in value increase after 5 years (using that same 5% appreciation per year). The higher our value, the higher the equity gain is - even if the % of gain is equal between the properties...the dollar amount is higher on the higher valued home because the property is worth more. That's how house hacking helps us gain wealth. We certainly aren't gaining $276,000 with $200 of cashflow. So, don't sweat the "no cashflow" thing. Just focus on purchasing a good home that you feel comfortable with living in. Your commitment is to live in it for 12 months...and then you can do it again and again!

On the same thought, when I buy my primary home it has to fit my PERSONAL needs. Maybe I personally need a good commute time. Maybe I personally need a certain school zone. Maybe there's some other "personal" needs that I have.  I'm addressing a primary home with a different perspective.  It's not JUST about numbers here.  If the numbers work...but I feel unsafe living in that neighborhood...then guess what gets to take priority?  Keep in mind that this is your personal home.  It's not JUST about the numbers.

Hope all of that makes sense.