All Forum Posts by: David Sisson

very nice resource. Thanks for the link. 

thanks @JD Martin  . You mean refi is max 75% of value? 

@JD Martin thanks. Your second point - especially "leave a little cash behind". What do you mean? I assume that:

$300K property. I use $75K of HELOC and conventional financing to purchase.

I wait approx 2 years. The property goes up 4% each year, so ends up at ~$325K after 2 years. I refinance, but only have ~$25K to pay off the $75K HELOC.

I'm assuming this does not work, unless I magically come up with the other $50K. 

Maybe I need to be looking for properties that I can see an easy 20-25% increase in value with some rehab. 

I'm trying to figure out if this is a good idea, or pitfalls to avoid.

I'm interested in purchasing a local multifamily (3 family) in my area - buy and hold - with the goal being cash flow to help fund my daughter's college education. I think this may take 2 or 3 homes total, but I'm starting with one. I prefer to purchase properties that are ready to go, but willing to do some renovation. Not interested in a gut renovation (for example). 

I don't have the $ for a 20-25% down payment, but have plenty of home equity I could tap. I could do a cash out refi, a home equity loan or a home equity line of credit. 

I've heard that a HELOC might be a good option - essentially get the HELOC, use it to fund the investment property, wait for seasoning and refi the home, repaying the HELOC in the process. Repeat with the next home.

I'm confused about the refinancing of the home - doesn't this imply that the investment property has to rise at least 20-25% in order to cash out and refi? If I'm buying a 'ready to go' property, isn't it harder to get it's value up this much in a year or two? Wouldn't this work better with distressed properties? 

I can run the numbers the various scenarios, I just don't understand the refi portion of the deal. 

Thanks @Anthony Thompson. I also use local tax assessor databases (google search example: "providence ri tax assessor database") and local GIS maps (when available). (google search example: "providence ri gis"). 

To add to what @Kevin Romines said - be sure to discuss the agreement with your professional insurance provider before you sign - they will have a lot of insight on this type of arrangement. 

Ari - the local building department will consider this a "change of use" - which triggers a bunch of code issues. It's important to get a licensed architect onboard soon - to do a feasibility study to see what this means. Example: will it require fire sprinklers? Fire alarm? An elevator? Replacing stairs? Is it structurally compatible with your proposed change? All of these things can drive cost up in big ways. 

I used to live and work in the Ann Arbor area - there are tons of great architecture firms in Metro Detroit and also A2. Either just start calling around or if you want a lead - try Richard Mitchell at Mitchell and Mouat in Ann Arbor. I'm sure if he can't help you, he'd point you to someone who could. 

Be careful if you are architect AND GC- liability issue if your insurance does not cover both. Usually professional archi insurance does not cover GC and vice versa - this is where design/build partnerships can get in trouble. Obviously, you have a lot of important financial concerns, be careful that you don't have liability concerns either. If you are doing "GC" tasks - but not actually wearing the GC hat - then don't do "GC" tasks - do your regular Construction Admin tasks, but increase it to do the Construction Management. The GC still needs to be responsible for the construction quality, code and sticking to the schedule. 

I do some investor type work. It's often fairly basic "permit drawings" level work - not a full "design" project, so not huge dollar for your firm. Learning to bring work in to your firm is challenging as an everyday architecture employee - you are mostly at your desk doing work, and not getting out there and talking to people - this networking is what brings in work. Finding the RIGHT people to talk to is also challenging - I find that commercial realtors, contractors are both great to talk to and network with. Then, just talk to everyone you know and talk about what they might know about or be interested in doing in the future, or who they might know is considering building/renovating in the future. Word of mouth eventually builds up. Open "networking" events are usually a waste of time - same with BNI type stuff. Networking with investors might be useful - not sure. If your firm does a particular type of work - multifamily residential for example - then you need to network with contractors that do MFR and developers who do MFR.

Balance cost vs reward - will the buyers pay a premium for vinyl siding? If not, then just paint and be done. Could you do siding on just a portion of the home, like the front, or 3 sides?