All Forum Posts by: Daniel Tisdale

Hi all,

I have an old 1962 house in Austin, TX that has been used as rental for the past 2.5 years. This was originally my primary residence and I am trying to get advice on how I might be able to rebuild a new property and flip it. How does someone typically finance these types of projects? I bought the property at about 2/3 of the current value and would hate to have to sell it to a developer to reap the benefits, but I don’t have the cash on hand to rebuild it myself.

What does someone typically do in my situation?

Thanks,

Daniel

Hi,

I’m looking for some advice on potential strategies with an existing long-term rental property that I have in Austin, TX. I purchased this property 5 years ago as my primary residence and have since turned it into a long-term rental, which is making minimal cash flow as it is a 1960s style bungalow.

I am thinking through potential strategies and was looking for advice or feasibility if I were to build a new property and turn it into a short-term rental. Nice STR properties in the radius with a pool rent for around $20-25K per month, which would make this a nice cash flowing asset.

My thoughts on how I would do this would be:

- Scrape existing property and build a large 3,000 square foot property with a pool and make it a highly desirable Airbnb destination property

- New build properties in the area with these specs sell for around $2 million, so I would use financing for the build and cash out to take on a larger loan using a DSCR product.

- I owe around $380K on the property currently and it is valued around $600K with most of the value in the land.

- I'm estimating that a new build would cost around $600K to build and I would use a hard money loan to finance the construction of the property and do a cash-out refi with a new loan balance of around $1.5 million and a DSCR of around 2.1 on a roughly $1.75-$2 million property.

- This would allow me to have a great cash flowing asset in a good neighborhood that I can hold onto for the long-term.

What am I missing? Are there steps that I am not considering?

Any help or advice is greatly appreciated!

Thanks,

Daniel

Hi,

I’m looking for some advice on potential strategies with an existing long-term rental property that I have in Austin, TX. I purchased this property 5 years ago as my primary residence and have since turned it into a long-term rental, which is making minimal cash flow as it is a 1960s style bungalow.

I am thinking through potential strategies and was looking for advice or feasibility if I were to build a new property and turn it into a short-term rental. Nice STR properties in the radius with a pool rent for around $20-25K per month, which would make this a nice cash flowing asset.

My thoughts on how I would do this would be:

- Scrape existing property and build a large 3,000 square foot property with a pool and make it a highly desirable Airbnb destination property

- New build properties in the area with these specs sell for around $2 million, so I would use financing for the build and cash out to take on a larger loan using a DSCR product.

- I owe around $380K on the property currently and it is valued around $600K with most of the value in the land.

- I'm estimating that a new build would cost around $600K to build and I would use a hard money loan to finance the construction of the property and do a cash-out refi with a new loan balance of around $1.5 million and a DSCR of around 2.1 on a roughly $1.75-$2 million property.

- This would allow me to have a great cash flowing asset in a good neighborhood that I can hold onto for the long-term.

What am I missing? Are there steps that I am not considering?

Any help or advice is greatly appreciated!

Thanks,

Daniel

Quote from @Sarah Kensinger:

One question I thought of right away.... What does the future look like in Austin for STR? Could they be restricted or outright banned, and you have an expense property that can only be rented as a LTR. Also, would the type of home your thinking of building fit the neighborhood? I saw there are other million-dollar homes in the area, but what about the same street? You wouldn't want to build an expensive home on a middle-class street.

Lastly a 1.5-2 million property has to make more the $25k to make a profit, those type of properties usually need to push the 6-figure range on STR income. That might be something to think about and to run some hard numbers.

 Austin recently had their short term rental restrictions overturned due to a Texas Supreme Court case, so for now, it is entirely legal to obtain a non-owner occupied license. I have thought about the possibility of it somehow being overturned again and at that point I would sell it or move into it as my primary residence in the case that were to happen.

Yes, there are many other multi-million dollar homes in the neighborhood. Pretty much every new build that is over 2,500 square feet is selling well over $1.5 million, some even higher than that.

Are you suggesting that it would need to gross closer to $500k yearly to be profitable? I would have around $1 million of equity in the property, which I believe would help with the cash flow.

Thanks for your insights!

Hi,

I’m looking for some advice on potential strategies with an existing long-term rental property that I have in Austin, TX. I purchased this property 5 years ago as my primary residence and have since turned it into a long-term rental, which is making minimal cash flow as it is a 1960s style bungalow.

I am thinking through potential strategies and was looking for advice or feasibility if I were to build a new property and turn it into a short-term rental. Nice STR properties in the radius with a pool rent for around $20-25K per month, which would make this a nice cash flowing asset.

My thoughts on how I would do this would be:

- Scrape existing property and build a large 3,000 square foot property with a pool and make it a highly desirable Airbnb destination property

- New build properties in the area with these specs sell for around $2 million, so I would use financing for the build and cash out to take on a larger loan using a DSCR product.

- I owe around $380K on the property currently and it is valued around $600K with most of the value in the land.

- I'm estimating that a new build would cost around $600K to build and I would use a hard money loan to finance the construction of the property and do a cash-out refi with a new loan balance of around $1.5 million and a DSCR of around 2.1 on a roughly $1.75-$2 million property.

- This would allow me to have a great cash flowing asset in a good neighborhood that I can hold onto for the long-term.

What am I missing? Are there steps that I am not considering?

Any help or advice is greatly appreciated!

Thanks,

Daniel

@Nicolas Thatcher, how did the project turn out? I'm looking to build an ADU on a lot in South Austin that I own right now. What was the process like and who did you work with?

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Hi,

I have received an offer from BHG Financial for a loan of $155K with around a 15% interest rate to be paid back over 10 years. This would not be reported to my personal credit and I am looking at using the funds to improve my existing investments and purchase additional properties.

Has anyone worked with them before?

Thanks,

Daniel

 will they require a personal guarantee for the loan? 

 Yes they do require a personal guarantee, but no collateral for it.

 @Daniel Tisdale  In that case it will go against your personal credit. So, IF you have collateral to borrow against why pay the significant interest premium?  

 They mentioned that it is not reported on my personal credit. What rates are you seeing for a working capital loan? I’m open to looking at other options, but wanted to get people’s thoughts on this one and it sounds like the rate is fairly high.

 A collateralized loan is always going to be a better rate for obvious reasons. If you have to get an unsecured loan, I would shop around a bit, maybe try Greensky, but the 15% maybe the best you are going to do I really do not know. But, my point, is if you have real estate with equity you will get a lower rate and longer term then an unsecured loan.  

That is definitely helpful. I do have about 600k in equity locked up across 3 properties right now (1 primary, 2 investment properties) and I am just looking for the best and most price effective way to tap into that equity. Up to this point, I have just been able to grow using savings, W2 and a cash-out refi before rates went crazy, so this is a new situation to me. Open to any and all ideas and suggestions if you have some!

 well, a cash out refi is still much lower then 15%.  

 That is true, however I have the equity across 3 different properties, so I am not sure if there's a way to pul equity from multiple properties at once or if that would require me to a cash out refi on each individual loan.

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Hi,

I have received an offer from BHG Financial for a loan of $155K with around a 15% interest rate to be paid back over 10 years. This would not be reported to my personal credit and I am looking at using the funds to improve my existing investments and purchase additional properties.

Has anyone worked with them before?

Thanks,

Daniel

 will they require a personal guarantee for the loan? 

 Yes they do require a personal guarantee, but no collateral for it.

 @Daniel Tisdale  In that case it will go against your personal credit. So, IF you have collateral to borrow against why pay the significant interest premium?  

 They mentioned that it is not reported on my personal credit. What rates are you seeing for a working capital loan? I’m open to looking at other options, but wanted to get people’s thoughts on this one and it sounds like the rate is fairly high.

 A collateralized loan is always going to be a better rate for obvious reasons. If you have to get an unsecured loan, I would shop around a bit, maybe try Greensky, but the 15% maybe the best you are going to do I really do not know. But, my point, is if you have real estate with equity you will get a lower rate and longer term then an unsecured loan.  

That is definitely helpful. I do have about 600k in equity locked up across 3 properties right now (1 primary, 2 investment properties) and I am just looking for the best and most price effective way to tap into that equity. Up to this point, I have just been able to grow using savings, W2 and a cash-out refi before rates went crazy, so this is a new situation to me. Open to any and all ideas and suggestions if you have some!

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Hi,

I have received an offer from BHG Financial for a loan of $155K with around a 15% interest rate to be paid back over 10 years. This would not be reported to my personal credit and I am looking at using the funds to improve my existing investments and purchase additional properties.

Has anyone worked with them before?

Thanks,

Daniel

 will they require a personal guarantee for the loan? 

 Yes they do require a personal guarantee, but no collateral for it.

 @Daniel Tisdale  In that case it will go against your personal credit. So, IF you have collateral to borrow against why pay the significant interest premium?  

 They mentioned that it is not reported on my personal credit. What rates are you seeing for a working capital loan? I’m open to looking at other options, but wanted to get people’s thoughts on this one and it sounds like the rate is fairly high.

 @Daniel Tisdale   Says it right on their website:

3There is no impact on your credit for applying. For personal loans, a complete credit history, which will appear as an inquiry on your credit report, will be performed upon acceptance and funding of the loan and may impact your credit.

https://bhgmoney.com/loans/personal#bhgaccordion-bc4ff7afd6-...

I probably should’ve clarified in my original post, but this would be a business loan and not a personal loan.

” Will an Existing Business Investment Loan affect my personal credit? No. Applying for our business loans will not impact your personal credit. We only perform a soft pull of your credit when you apply, so your score will remain intact. After you’re funded, your BHG Money business loan will not be reported to the credit bureaus. However, if your account becomes delinquent, we can report the delinquent trade line to the bureaus.”

https://bhgmoney.com/loans/business/investment

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Quote from @Jay Hurst:

Quote from @Daniel Tisdale:

Hi,

I have received an offer from BHG Financial for a loan of $155K with around a 15% interest rate to be paid back over 10 years. This would not be reported to my personal credit and I am looking at using the funds to improve my existing investments and purchase additional properties.

Has anyone worked with them before?

Thanks,

Daniel

 will they require a personal guarantee for the loan? 

 Yes they do require a personal guarantee, but no collateral for it.

 @Daniel Tisdale  In that case it will go against your personal credit. So, IF you have collateral to borrow against why pay the significant interest premium?  

 They mentioned that it is not reported on my personal credit. What rates are you seeing for a working capital loan? I’m open to looking at other options, but wanted to get people’s thoughts on this one and it sounds like the rate is fairly high.