All Forum Posts by: David Sisson

Budget $7500 towards clean out and carrying costs. Start on a private sale immediately and try to get it cleaned out and sold for $350+ within a month of purchase. Don't spend your time doing clean out, hire some guys to clean it out, mainly so you can get it done faster. If you want to dedicate your time to clean out too, that's fine, but get it done. 

If you can buy for $260, clean it up for $10, what's your sell price? What's your carrying costs? I suspect in Seattle you could unload it quick for $350? Not a bad deal for 1-2 months. 

You want - especially for your first property - to play it safe. You are using your money to learn. 

I like:

- Properties that have multiple exit strategies (a flip, or a buy and hold, or a house hack, etc)

- Properties where you can add value easily, and maybe in several different ways (split the land to multiple properties, simple cosmetic rehab, add another bedroom, add another bath, add another unit, etc). 

The ideal first flip project is a single family, roughly 1100-1200 square foot granny house. This is a house that's fully functional, in good condition, but has dated finishes. You COULD rent it out right away, but you PROBABLY want to clean, paint, put in new carpet, maybe some new fixtures in the baths and kitchens. This home is sold at a discount, probably because the family just wants to quickly unload it. 

Personally, I'm starting to get interested in gut rehabs in homes that have good "bones". These homes should be MUCH cheaper. They are a bigger project for a newbie. 

My wife and I have good equity in our primary residence and want to take out a HELOC for investment properties. I'm not finding an "ideal deal" at my local lenders.

Can anyone recommend a nationwide bank, or online bank, with good, investor friendly HELOC rates and terms?

You might want to consider partnering with someone for this project. You need a bit of a cushion. Or talk to your HML about doing several disbursements, and paying interest only on what you've taken.

Additionally, for the clean up, just get a huge (30-40 yard dumpster) and hire guys to throw EVERYTHING into it. Offer them a $500 bonus if they get it done in 5 days. Then, you'll have it cleared out quick. You'll probably need several dumpsters, so get ready to call the dumpster company to come every 1-2 days. It won't cost $20k to clean it out, just the hourly cost of the guys, plus dumpsters, plus the $?? bonus to each guy. That will reduce your carrying costs significantly. It shouldn't take several months to clean it up. 

We have done the zoning work on some properties like this. Generally, you have to get a variance, and you go to the board in an apologetic manner, "trying to do the right thing". With that said, it's possible they'd require you to tear it out. Regardless of anything, you'll need to make this legal. First talk to zoning, planning, building dept, etc. Then get the required consultants (possibly: surveyor, architect, lawyer). File your case w/the zoning and/or planning boards. Go to the meeting(s) and be nice to them, be honest. Be prepared to wait a lot and be frustrated. 

Worst case is a full gut rehab of the bathroom. Ask for $10K off the price and move forward, then replace the toilet/wax ring and you'll have saved $10K.

I hear a lot of similar rumblings about the lack of affordable housing. My observations:

- Limited available land in desirable areas

- High cost of construction for any type of structure

- Developers are only making money on rehabs and luxury units, so are ignoring starter homes

- Many people do not want small/starter homes

- Very restrictive zoning in many communities

Some communities (San Fran, Seattle, etc) have a crisis, and they won't solve the crisis until they ease up on zoning and also work on public transportation in a meaningful way. 

But as an investor, I can see why the costs are what they are. I doubt we, as a country, will make any meaningful changes. 

Talk to some local agents. Sounds like the home is already similar to surrounding properties in terms of beds/baths. I'm guessing your attic project will be $10k-ish for a basic bathroom+flooring, so you'd want to see an increase in value of $20k++. 

I get this question all the time, and it's REALLY difficult to answer. It's impossible to answer in your case - because we don't know the size or condition of the existing home. However, these points (below) tend to tell me what to do with a structure:

1) Are the "bones" (wood framing) of the home worth saving? Generally NO if they a) have extensive rot or b) were poorly/lightly built in the first place. 

2) Is the home worth saving due to location, size, architectural features, etc? 

3) Is the cost of the renovation cheap enough vs the after repair value (ARV)?

4) If you want to change (add on to) the property, can the existing home accept the addition?

A couple of examples:

1) A client wanted to lift and add another level to a single story coastal home. This home was in a flood zone, it was old, and lightly built, although in good condition. It was more affordable demolish and rebuild. 

2) A client wanted to renovate an existing 2 family home that was a massive 1800's farmhouse. This home was built from very heavy duty timbers, had nice architectural detailing, and very high ceilings. The home also had a rough exterior including damaged and rotted siding. We kept the home, and repaired the exterior. The home's frame / bones were in good condition. 

As a side note, I don't believe that a "tiny home" is an investment. These are trailers, not buildings. A small home can be nice and a good investment. 

Another note: if the home is rotting above, and the foundation is damaged below, there's little left to save.