All Forum Posts by: Dave Silva

We recently sold a rental and have some cash- ($60K) we are bidding on a partially  restored farmhouse at auction. 

We are not investors at this point, my wife loves this house- dream house. perfect house - best house EVER. 

So if i win the auction at $100K i have about six weeks to settle up.  We could borrow from our retirement to close the deal then finish the restoration and do a cash out refi to pay retirement back. 

But with 50% down i'm thinking  there might be other ways to finance this?  My bank is a credit union, i've done two renovation loans with them and they are too slow. 

Can an amateur get financing on an unfinished property with 50% down?  I think the  house needs about $20K to be great. 

thanks 

Thanks, lots of good input here. 

The higher total rent is one of the pros.  I want that tenant who can do math and is not looking for the cheap initial cost.  

I want to put in the splits mostly because I love this house and may end up back in it.

This HVAC has been amazing in my current house.  Even if I don't include it in the rent it will add value to have an efficient comfortable home year round.

I installed my current 3 ton system myself for a total cost of $2500.  This next project would be four tons for around $3K.


I am still researching the operating cost but it looks like the most it cost to run a 3 ton system 24/7 at full blast is $200/mo/   Supposedly it's 2500 watts.   If that info turns out to  be correct then this makes more sense. The only question would be how much to the tenants waste on laundry and dishes.

The property is in Eastern NC. Summers are hot winters are mild.  I installed a  ductless minisplits HVAC system in my house and I CANNOT get my electric bill over $150 year round.  We keep it very comfortable. 

People around me pay so much more to keep cool in the summer ($3-400/mo is normal)

So, I'm renovating a rental. The HVAC needs some attention and I am thinking of installing splits and renting it for $300 more than prevailing price with utilities included.

This is not common around here and neither is this type of HVAC.

Thanks, I had a mental block.  It's a "repair" in that it's broken right now and  MUST be fixed but once the drain field is rebuilt then it's a long term improvement.  Makes total sense. 

I have one rental, about to buy another home for the family and convert my current home to rental.  I've read the IRS stuff about repair versus improvement but I want to make sure  I do this right.

The soon to be rental  house needs about $5000 in septic drain field work - that's a repair, right?  THen i plan to do about $8K in landscaping to fill in low spots that flood and get the water to drain.   Also replacing some appliances and redoing some floors. 

All of these projects will commence after we close on the next house.

What's the best way to separate  improvement form repair and not make myself an audit magnet.

Yes, the rental needs some updates.    We've been in it ten years making a few improvements but it needs a second full bathroom and some fixing.  All of which will be a lot easier after we move out.

But I hear what everyone is saying- it makes more sense to do the work for the next reno for free and it becomes instant equity. If I need to borrow short term to fix the rental then that is a better move and I can avoid all this workers comp hassle.

Thanks

This is awesome- no, I'm not being sarcastic.  I like when people who know stuff tell me I'm wrong.

So let's start from the beginning and see what other ideas pop up.
I'm just  a middle-aged guy with two small kids whose wife wants to move to a better school district.   A normal person in my situation would just buy one house and sell the other one or rent it for whatever it's worth now.

But I want to turn it into  a better rental and I need some cash.  I could just borrow a few thousand but additional payments really hurt the monthly cash flow.

On the other hand, based on what ya'll are telling me,  borrowing  $10K short term might be better than adding it to the mortgage at about $45/mo for 30 years.

Trouble is the short term loan will be a more painful monthly payment.
But this gives me a lot to think about.  Owing less money means having more equity.

thanks

Thanks, this is a pile of good information. 

I have no interest in doing anything illegal or unethical.  The lender said I could do some or all of the work as long as they had a licensed contractor in the loop. 

My friend the contractor said he would be happy to but needed to collect the 19%

OK, fine, i can live with that. But  we're both new at this so that's why I'm here asking.

Say we decide on hardwood floors at $11/sq foot installed, and say I find  a deal at $3/sq ft and sell them to him for $9/sq ft and then earn minimum wage for the installation, and we pay the 19% for the hours worked and I collect  $4000 for the completed floor? 

Have we done anything illegal?   I hope not because I just laid out my plan on a public forum. :-) 

I am very thick skinned and I learn a lot through what sometimes looks like arguing. TO me it's just an exchange of ideas until the best idea prevails.

I see what your saying about the long term cost but debt  is just a tool in toolbox, right?   I want to put as much as I can into converting my rental to target the best tenants.   My neighbors have built grand homes around me and raised the neighborhood.

It looks like the consensus here is that there is no work-around.


I can still keep the workers comp to minimum with the tricks I mentioned.

Patrick,  he's paying me because I'm doing the work. The works needs to be done  by someone.   Yes, I could do the work for free and reduce the overall cost (debt)   But I need the cash for this house and/or my rental.