All Forum Posts by: Brett Weaver

@Shaka Farrier This ceiling was not painted, but the texture was not the typical blown-in popcorn texture.  Painting always makes texture removal more difficult, but this was going to be challenging even without paint.

@Dean I. I agree on all of your points when evaluating work to be done to a rental property.  However, this case actually is my home, and living with the texture was non-negotiable. Just ask my wife!

About a year ago I found BiggerPockets and renewed my REI education efforts. During that time I've kept my eye open for deals and have looked at several properties. I made a goal of closing two deals in 2017. I pretty much lost the first half of the year when my Dad was diagnosed with advanced cancer in late January and passed away in Early April.

Between being a care giver and working a full time job, I still kept looking at MLS properties and even sent out a couple of letters to distressed properties. One MLS listed property that was interesting was an older duplex with brick exterior in a nice neighborhood near schools in the next town over from us. The seller was asking too much for it, and the property had been on the MLS off and on for a couple of years or more. I drive by it weekly when I leave the school after visiting a student that I mentor.

In one of those moments when having a definite purpose and goal seems to align events, I mentioned to my boss (who owns about 50 MF units) that I "have to" buy something this year. He suggested that the Duplex owner may be more motivated that he seemed because he lived out of town. The owner had purchased the duplex as a house-hack (around 2009), but had moved to a nicer part of town and down the street from my boss and from there on to a new position out of town. That was about three years ago. After a quick Facebook message, my boss relayed the info that the duplex was still for sale, but the MLS listing had expired.

I immediately contacted the seller and after some negotiation over two or three days, got the price to where it needed to be. One thing that had happened since the seller bought the property was that the city passed an ordinance against parking on the street in this neighborhood. That decision basically rendered one side of the duplex obsolete. My purchase price factors in widening the driveway. After all is said and done, I should be in the deal for about $65K. One unit (3/2) has been rented to the same tenants for six years and they have no plans to move. They're paying $500/mo which is under market. The other unit (2/1) will rent for $450 after minimal spruce-up (<$500), and that will be right at current market rate. So a total of $950/mo which could be $1000/mo in a year or so. We paid cash using some inherited funds and plan on doing a cash-out refi or HELOC to keep the momentum going.

I have my eye on two different 8-unit properties that are off market.  I'm hoping to continue developing relationships with those owners and make a deal soon.

As is often mentioned on the BP podcast, persistence pays off.  I'm also much more comfortable evaluating and moving on deals as a result of being a BP member, so thanks to the community and for those who give their time to post.

I thought I would follow up and let you guys know how this ceiling turned out.  We got a referral of a drywall guy / contractor from another investor who was flipping a house near us.  That house had a similar ceiling and he had done a good job on it for her.

The guy came and looked at our ceiling and quoted $1.25/sq-ft for making the ceiling paint-ready. The technique that he proposed was to sand down the "stomped peaks" (but not completely flat) and skim coat the entire thing with drywall paste. 

We ended up letting this guy (actually his electrician) install recessed lights and he and drywall crew re-do ceiling.  He did a great job.  I almost hate to paint it!  He charged $60/fixture to install the lights including the fixture.  

I will add that this contractor is in his 60's.  That generation is used to making things work with minimal waste of materials.  I don't think this particular drywall skill is prevelant, but your mileage may vary.

The image is the ceiling at the stairway looking down. Same ceiling as the image in the first post.

I thought I would give an update to this thread and thanks again for all the input.

The tenant (Tony) decided he just wanted out and voluntarily broke the lease and forfeited his deposit.

The "new guys" had only stayed over with Tony for a couple of nights and were willing to move along if that's what we wanted them to do.  After some screening, we decided to let them stay and signed a new M2M lease with both of them on it.  Turns out this was a good move.  Tony had left unpaid utility bills (not a huge amount) and the new guys cleaned all that up.

The rent has already been paid on this unit for February.  They are more than qualified as far as income and so far it seems that they will be an asset to the property.

Thanks. For reference, my wife says this technique is called "stomping". Hopefully it is the same material that is used for popcorn and not actual "Sheetrock mud". If so, then I would suspect  the same removal procedure will work.  We'll see. 

I see a lot of topics about dealing with popcorn ceiling, but I have a slightly different case.  I've embedded an image.  It looks like it was "stamped".  To me it's not as bad to look at as popcorn, but my wife is adamant about removing it in favor of smooth ceiling (this happens to be a personal residence rehab, but I thought the would be helpful for reference).

Is this going to be as simple as scraping like popcorn, or do you think it will be more involved?  Seems to me if that's drywall paste textured that it will be difficult to impossible to scrape.   Are we looking at  new 'rock, or ?

Liam, 

For my sake, I'm going to step back and describe this "problem" a bit differently and see if it changes our thinking. I'm just learning along with you.

What we have here is an off market deal, well under market value that you plan to flip. Sounds like the rehab will increase the ARV by about $50K more than the rehab will cost, so that's good. The twist is that it's a long-term flip. There's plenty of cash/credit to purchase the home and do the rehab, but you have to evaluate whether you can support the holding costs. If you're going to move forward quickly with the rehab and draw all the HELOC funds quickly...then I think it's a moot point between an up-front mortgage or an after the fact HELOC if the interest rates are the same. The reason to do a long term mortgage is to lock in the terms, but you're planning to flip. Either way most of your cash is spent. After the rehab is done you're gonna have this debt to service until you sell.

The house-hacking approach would be to bring in tenants to help pay for that debt service.  If that's not an option for you then you'll have to run the numbers and see if you can afford to live there three years making the payments.  If not, then get the house, do the rehab, sell it and move on. Sounds like too good a deal to pass up doing the flip, it's just a matter of timing.  Will be good experience with little risk.  The market would have to drop almost 50% for you to break even (thinking worse case). If it stays up and you buy smart with your proceeds, you should be well on your way.

Try the BP Flipping Calculator

Also for a good perspective on home equity that may also help, listen to GRE Podcast Episode 6 titled Here's Why You Aren't Financially Free. 

Hope that helps!

You're welcome. I breezed right by the fact that you said ARV was in the $400K range. I like you're #3 thinking OR just getting a HELOC. You'll only pay interest on the amount you draw out. That would keep your payments low if cash flow is a concern. The bank is lending 100% of your purchase price, which is well under final ARV, so you're in a good situation either way.  It sounded "scary" when you said borrow 100%, but when the purchase price is low relative to ARV it's not that bad.

Hi Liam, welcome to BP!

You don't say what your future plans are, but since you're on BP I assume you want to continue to buy investment properties. Also, the way I read your background info is that you want to live in this house.

With that in mind, I think #1 would tie up too much cash.  

#2 is a good compromise, but there is another option IF you are planning on living in this house for at least a year. That option is an FHA loan where you can put down as little as 3.5% and it is assumable. You can even roll the rehab budget into the loan with the 203k program. There are some hoops to jump through with the 203k, but you can research it. The low down payment comes with PMI (currently 1.75% up front and .85% monthly) too though.

I'm shying away from #3 because it sounds like you're borrowing from your dad.  My general rule is not to loan or borrow from family, but your experience may be different.

My $.02

I have taken the Dave Ramsey approach when it comes to reserves. Long before REI was even being considered in our house, we started keeping an emergency fund. I consider that to be for "personal emergencies". If it came down to it, we could and would use that fund for some emergency that came about because of a rental property. For our actual rental property reserves, I've earmarked a chuck of our HELOC. I intend to grow actual cash reserves from monthly cash flow, but when we save enough to make a down payment, I wouldn't hesitate to use most of it to purchase another property as long as the LOC is available. Hope that made sense.

I've come to realize that ol' Dave does not have the best advice for building wealth, but personally I still would not consider "credit only" as being sufficient as my only safety net.