All Forum Posts by: Bonnie Low

Is it possible to build an ADU on your property? Maybe build a small 1/1 ADU for you and your wife to move into and rent out the main house. That way the renters are covering the mortgage and you and your wife are living on the cheap. That would force appreciation and most of Austin is appreciating anyway from what I can tell. Eventually when you move on you'll have 2 doors to rent out if you decide to keep it or an improved property to sell.

Things can go sideways on a rehab SO quickly. We have done several flips, are able to be onsite as frequently as we want to be, we know enough about construction project management to be comfortable managing the phases and we STILL underestimate our rehab & holding costs. So it happens. This has caused us to increase the buffer we put in our budget every time for both length of time holding and rehab costs and ask ourselves if the numbers still make sense before we buy. Labor scarcity and rapidly increasing costs of both labor and materials in northern CA have caused us to be much more conservative with our numbers right now. I'm glad to see that despite this first project, you're moving forward anyway. You'll have wins so long as you keep going!

HELOC or cash out refi on the one you you owe free and clear to fund your down payment and improvements on the new one.

Is it possible to build an ADU on your property? Maybe build a small 1/1 ADU for you and your wife to move into and rent out the main house. That way the renters are covering the mortgage and you and your wife are living on the cheap. That would force appreciation and most of Austin is appreciating anyway from what I can tell. Eventually when you move on you'll have 2 doors to rent out if you decide to keep it or an improved property to sell.

So you bought the property for $90k and you've been quoted another $162,500 to build the house and it comps at $250k? That doesn't give you a lot of options. How is appreciation in your area? Did you finance the $90k you've already spent and will you need to take out a loan to complete the project? Will rents cover the mortgage or at least a significant portion of the mortgage? You might not cash flow, but if appreciation is strong you may be able to recoup some of your cash in a few years.

Hey, Andrew - I don't know you but I'm a firm believer in giving people the benefit of the doubt and operating from a position of helpfulness when someone reaches out asking for help. That's great that you have an angel investor - many of us know people who have the access to that kind of capital whether it's a successful business person, a wealthy family member or a friend with resources so I've got no reason to doubt this opportunity exists, despite what other people here have suggested. Despite the naysayers, there's been some good advice on this thread. Specifically, start small. Just because you have access to $1M doesn't mean you need to figure out how to spend it all at once and, in fact, you shouldn't. Start small, get a few wins under your belt and then you'll be in a much better position to do bigger, riskier deals. Buy a SFR or a duplex or do a BRRRR to get your feet wet in the rehab space. Spend the time to develop a business plan for you and your investor before you do any bigger deals. That $1M will come in handy if the market crashes so you want to be prepared to take advantage of it. Getting a few wins under your belt will help you be better prepared to be successful. Best of luck to you!

You definitely want to talk to the local building department because they probably have set back rules that govern how close to the edge of the property your building (including the patio or balcony) can be. As close to the road as that is it would be visible so a building inspector (or busy body neighbor) could easily turn you in for violating building code and then you'd be forced to remove it at your cost. At the very least, it would come up if you ever go to sell it. 

Wildfires aside, one effect of climate change I think about is drought. Many people say scarcity of water will be the source of future wars and I can certainly understand why. I do think about that when looking at areas to invest in as we've seen some areas around us have wells go dry and this continues at an increasingly alarming rate as we draw down our aquifers and ground water through agriculture, industrial use and population growth in areas that have no natural sources of water. I have no desire to own homes that become unlivable because there isn't enough water so although high precipitation areas can have more maintenance on the physical structure of homes, I think it's a worthwhile tradeoff for readily available water. 

What is more important to you? The cash flow or having that money available to you again to purchase the next property? And have you found a source that will lend you 80% LTV? We're seeing cash out re-fi rates in the 70-75% range max.

You know, there's rarely a single answer, but that's a good thing because it means you have options! IF you can get a conventional loan that will cover the rehab - the 203k is the one I'm familiar with but there may be others - you will probably get the best interest rate of these options. But it may come with restrictions that make it less appealing to you. For example, you probably need to use a contractor approved by the lender, and you're subject to draws at intervals they approve. But that might be worth it to you for a better interest rate and your rehab funded. Private money (theoretically) is the most flexible because you and your private money lender come to whatever terms you both feel are agreeable. Hard money can be a great, but expensive alternative. Personally, we use hard money a lot and just factor the higher interest rate in when we run the numbers. If the deal still makes sense we do it. The other thing to note is that with a conventional loan it's going to take you longer to close. Private money and hard money can usually close as fast as the title company can run your title so it's much faster and sellers love that.