All Forum Posts by: Brian Shand

I purchased my first house last year, June 2021, for $270k in a hot market with TONS of new construction everywhere you look. This house is a brand new construction as well. Since then, it's appreciated quite significantly and is currently comping out to between $450-470k. I write this post because I'm seeking guidance on what I should do next.

I am currently house hacking: Mortgage is $1,400 and I’m collecting $1,500 in rent from my one roommate. Rents comp out to $2,500 if I were to fully rent out the house.

Here’s where I could use advice:

Do I sell the house and walk away with ~$130k (after realtor fees, closing costs, capital gains tax, etc.) to reinvest? If so, I’d use approx $20-30k on another primary residence down payment, and purchase 2 cheaper properties utilizing the remaining $100k as 20% down payments (provided they cash flow of course but given the market I’m in, is very feasible).

OR 

Do I just buy another primary residence (and house hack that one too) and rent out my current house and cashflow $1,100 from it each month and let it further appreciate?

OR 

Do a HELOC or cash out refi to purchase another property?

I don't have much saved, so going with option 2 would eat up all of my savings. I'm also slightly experiencing FUD in the market dipping and me missing out on opportunity?

I’m in a position in my life where I have no kids yet, am young enough to bounce from property to property, and am a risk taker. My plan initially was to purchase a primary residence house each year, to take advantage of the low down payment requirements and maximize leverage. But if I’m sitting on considerable equity, I think doing nothing with it is wasted potential. What would you do?

This would be my first deal ever. I stumbled across a foreclosure back in March when just learning how to analyze deals and was browsing the market. I just recently revisited some of my older notes and deal analysis' and saw that this foreclosure was never scooped up and that it is now an REO. So I drove past it the other day and sure enough it is vacant and has those big stickers plastered up on the front door and windows. I called the number on the posters and was told I need a realtor to obtain the lock box code to check out the interior.

The following day my good friend, a realtor, visited the property and I was blown away at how much of a dump this place was. I could literally smell the money! 

Details of the house:
FANTASTIC location in Palm Beach County, Florida. Great neighborhood.
2 story
2,000 sq ft
Mid 1980's construction; wood frame
4 bed/3.5 bath
Double car garage converted into a bedroom, but not counted as one of the 4 mentioned above.
ARV of $375k

Needs all new:
Windows
Siding
Roof
Floors
Kitchen
Bathrooms
Doors
MORE

Here is a Google Drive link to the folder containing pictures and videos of the walk through. I also created a spreadsheet to help with coming up with rehab estimates, but my numbers must be way high. I based them off the high-end cost ranges from "The Book on Estimating Rehab Costs" by J. Scott. 

https://drive.google.com/open?id=16WOlVdj1U1iid4-vXJpH8Bc9h6dlBQAs

My next steps are reaching out to local contractors and shopping around for prices to get a more accurate cost of things. 

Any help on what this project may cost and what an acceptable MAO would be if my desired profit is $30k would be awesome.

My notes from some of the books I've read tell me to bring a Purchase and Sale Agreement (obviously), a backup PnS Agreement, some creative financing PnS Agreements (owner finance/sub2), Authorization to Release Info from Mortgage Company, Authorization to Release Info from Bank, Property Disclosure Forms, Affidavit of PnS, and a Credibility Packet to leave behind for an unsure seller. 

Are there any other documents or forms that come to mind?

I was also surprised to see the holding costs during the rehab aren't factored in to the Total Cash Needed at Purchase. Should definitely budget for all expected costs. 

I understand the refi not making sense. I simply chose a different interest rate for the purpose of having a different variable in my uncertain calculations to go off of. All good points though 👍. 

@Martin Elkins Thanks so much for that Martin. I've literally computed dozens of different variations of how to reach that figure and was simply stumped. But after reading how you worded it, it makes total sense. 

@Wayne Brooks Learned something new today! Thanks for the insight. 

In case anybody new like me is reading, here's a helpful link expanding on what Wayne's talking about.

https://www.hsh.com/first-time-homebuyer/prepaid-items-vs-closing-costs.html

Wayne, do you use any calculators? How do you analyze your deals? I'm working on building an excel spreadsheet version of the BRRRR calculator which will enable me to run multiple scenarios of different down payments/purchase prices/interest rates/ARV's/etc to see what kind of numbers I'll get.

@Wayne Brooks Arriving at the "Cash on Cash ROI" after the refinance, which states an 8.64% return. Can't figure out how that ROI is being calculated.

PMI for this example is $115. Refi is 6 months.

I also cannot derive how $57,109 is the total cash needed at the bottom of the Refinance section. I have the uncertainties in red boxes in the attached pictures. 

I see you're an investor in the West Palm Beach area. I'm located in Jupiter, and am looking to invest within an hour radius. Could you shed some light on your experiences with typical closing costs? Is it typically a percentage of the sale's price? Also, are taxes and insurance prepaid upon the initial purchase of the property? After listening to dozens of podcasts and books on the subject, haven't heard this come up.

Thanks!

If you click the picture, you can Ctrl+Scroll and see the numbers better