All Forum Posts by: Dennis Bragg

You bring up an excellent point about the trade-offs between second home and investment property loans. It’s true that while the 10% down payment for a second home sounds appealing, the fact that rate adjustments are now similar makes the distinction less about cost and more about strategy.

A few years ago, I helped a couple in San Diego navigate this exact decision. They chose a second home loan for their beachside property but later realized that refinancing as an investment loan was more advantageous when they started generating consistent rental income. Their lender even noted how this switch opened doors for them to secure a third property within two years.

From what I’ve seen in Forbes, this decision often depends on the investor’s timeine. For short-term use or one-off properties, a second home loan might be the better fit. But for someone thinking about scaling and possibly repeating the strategy in multiple markets.. say, Austin or San Antonio-going the investment property route might provide more long-term flexibility.

Have you noticed lenders trending toward stricter definitions of “second homes” versus investment properties? Would love to hear your take, especially with the way trerms have evolved in the last few years.

Hi Peter,

Great question! Your idea of using a second home mortgage for house hacking is both creative and practical, especially given your flexibility. Based on my experience, you're right that many lenders allow the use of a second home mortgage for properties intended for personal use, provided you meet certain conditions. Renting out the property for less than 180 days in the first year is typically one of those conditions, as you've mentioned. However, I'd recommend discussing this with a knowledgeable mortgage broker to confirm the specfic terms based on your lender's guidelines.

I once worked with a client who had a similar idea in San Diego. They bought a second home near a popular tourist area, lived there for the summer, and rented it out during peak seasons. They managed to cover the mortgage and still had a comfortable place for family vacations. Their biggest challenge was finding a reliable cleaning crew, but once they built a team, everything ran smoothly.

Let me share another example. A friend of mine, Sarah, and her husband bought a second home near her family in Phoenix, lived there for a few months each year, and rented it out as an MTR the rest of the time. They used the income to cover expenses and reinvested into a second property in San Antonio two years later. Their strategy focused on targeting traveling nurses, a niche market with reliable demand.

As for repeating the process in the same city, it's doable but requires careful planning. Some lenders might scrutinize multiple properties in the same area under second home mortgages, so you'll want to ensure your intent to use each property personally is clear and genuine. Diversifying into different markets, like Omaha or Austin, can help reduce any lender concerns and also spread your risk.

Have you thought about the specfic market for your STR or MTR? For example, areas like Chicago have a strong demand for furnsihed rentals, especially in neighborhoods near medical centers. Identifying the right market can make a huge difference in the success of this strategy.

Curious to hear...are you planning to manage the property yourself, or are you considering hiring someone local?

 Exactly!!

Quote from @Devin James:

Quote from @Dennis Bragg:

Quote from @Devin James:

Quote from @Dennis Bragg:

Hey @Devin James

Your thoughts on affordability and density resonate with me. I’ve seen developers in Phoenix transform underused lots into thriving micro-communitie. One developer I worked with built smaller homes around a central courtyard, and buyers appreciated the balance of affordability and community.

In San Diego, where I’m based, density has taken a different shape...like ADUs (Accessory Dwelling Units) that maximize land value. I read something recently in The Economist about how smaller units increase land efficiency.

Have you explored micro-communities or shared amenity setups in Orlando? I’m curious how those resonate with buyers there.

My first home here in Orlando had an ADU. Great use of space and provides additional income to offset the monthly payment.

Orlando, and many other cities, have a "missing middle" problem in regards to housing. 

Municipalities either want Class A multifamily, or 2000+ sqft homes on .25 acre lots. 

There's a huge demand for Townhomes, Duplexes, Triplexes, Quads, and smaller multi's.

I love cities who can implement those micro communities. I can see the vision but they are not yet put to use here in Orlando.

It's great to hear your first home had an ADU...those are game-changrs for both space efficiency and offsetting costs. You're spot-on about the "missing middle." I've seen this issue in San Diego, where a friend of mine worked with a city planner to rezone a lot for duplexes and triplexes. They framed it as a way to provide workforce housing, and the project not only sold out but became a model for similar developments.

I read a piece in Forbes recently about how smaller multi-units are reshaping urban housing. In Omaha, smaller multi-unit builds with shared amenities like co-working spaces are cacthing on. People appreciate the balance of affordability and livability.

What’s been the biggest hurdle for Orlando in pushing these types of projects forward? Zoning issues? Or are developrs hesitant to take the leap?

Love to hear it!

Mostly zoning issues. 

Specifically for us, we focus on the outskirts of Orlando. Many of our developments are turning unprofitable citrus groves into SFH's.

I do think there's a trend towards BTR (Horizontal Apartments). Here's a project we sold to Taylor Morrison that will have this new type of housing. Super cool apartment style living, but all one story.

Repurposing citrus groves into SFHs is a smart move...turning underused land into vibrannt communities. I’m also a big fan BTR developments, especially horizontal apartments. They offer renters a unique option that feels like home but without the long-term commitment.

A developer friend of mine in San Diego recently completed a BTR project on a former industrial site. I saw a report in Forbes about how BTR developments are shaping suburban rental markets. The concept of single-story units with private patios caught on quickly, especially among young families and empty nesters.

Do you think these horizontal apartments in Orlando could help bridge the gap for middle-income renters? Or are they more likely to appeal to renters in the higher-income bracket?

Hey @Van Lam, I’ve actually seen a few folks in Gainesville work through a similar scenario. A buddy of mine who invests out in Phoenix once had a client facing a similar timing mismatch on a rehab project.. they ended up working closely with a local credit union who was more open to interim valuations. If your property’s rehab isnt wrapped up until 2025, your current rent roll might look a bit different than what your lender expects when they run the numbers. Generally, lenders base their refinance valuations on the property’s in-place income and existing condition, not future projections. So, if your current rent roll is still on the lower side, it could limit the amount you can borrow right now.

However, if you have even a partial track record showing improvements.. say a few of the units are already updated and attracting higher rents.. a lender might take that into consideration when underwriting. Some local lenders familiar with Gainesville’s market (from what I’ve read in Bloomberg) like SunState Federal Credit Union and Ameris Bank have been mentioned favorably latley and might be a bit more flexible if they understand the repositioning story behind your property. Keep in mind, though, that each lender has their own criteria for how much future potential they’ll factor in, so it might come down to some skillful negotiation and presenting detailed projections that don’t feel like puffery.

Just be careful not to come off as overly speculative…lenders tendd to shy away from what sounds too good to be true.

Anyway, I’m curious.. have you spotted any other investors in Gainesville facing a similar refinance puzzle and what kind of terms were they able to secure?

It's great to hear your first home had an ADU...those are game-changrs for both space efficiency and offsetting costs. You're spot-on about the "missing middle." I've seen this issue in San Diego, where a friend of mine worked with a city planner to rezone a lot for duplexes and triplexes. They framed it as a way to provide workforce housing, and the project not only sold out but became a model for similar developments.

I read a piece in Forbes recently about how smaller multi-units are reshaping urban housing. In Omaha, smaller multi-unit builds with shared amenities like co-working spaces are cacthing on. People appreciate the balance of affordability and livability.

What’s been the biggest hurdle for Orlando in pushing these types of projects forward? Zoning issues? Or are developrs hesitant to take the leap?

Hey @Marc Shin

Look, I’ve been at this for a couple of decades now, and I still remember this small bungalow I fixed up in Hillcrest back when I first got my start.. it was a 1920s place too, a bit rough around the edges. One friend of mine had a client who recently tried running an Airbnb in a little Craftsman duplex near North Park. After some back-and-forth, they ended up snapping a dusk photo that softened the imperfections and capturd a charming glow from the front porch light. To their surprise, bookings actually ticked up a bit.

You dont have to highlight every detail of your exterior if it’s not your property’s strongest suit. But I’ve found that a well-chosen angle or a unique architectural detail can give guests a mental anchor point.. something that says, “Yes, this is a real place with character.” In more established markets like Austin or Omaha.. from what I’ve heard in Bloomberg, guests value transparency as much as good rates. If you truly can’t find a flattering angle, consider ading a small touch: maybe a new house number plate or a couple of potted succulents by the doorstep. These minor tweaks won’t cost you much, and I’ve seen them help properties in Phoenix and Chicago stand out, even when the paint is a tad faded.

So what’s your take - do you think guests these days actually prefer a hint of authenticity over a picture-perfect exterior?

Hey @Devin James

Your thoughts on affordability and density resonate with me. I’ve seen developers in Phoenix transform underused lots into thriving micro-communitie. One developer I worked with built smaller homes around a central courtyard, and buyers appreciated the balance of affordability and community.

In San Diego, where I’m based, density has taken a different shape...like ADUs (Accessory Dwelling Units) that maximize land value. I read something recently in The Economist about how smaller units increase land efficiency.

Have you explored micro-communities or shared amenity setups in Orlando? I’m curious how those resonate with buyers there.

Hey @Craig Sparling

Love seeing someone approach real estate like Benjamin Graham or Warren Buffett might tackle stocks... methodical, data-driven, and grounded in fundamentals. Your mention of using GRM as a first pass and then diving deeper into cap rates and IRR is exactly how I've seen some of the sharpest investors I know operate.

I had a buddy in Chicago who bought a four-unit last year in Pilsen. We spent weeks analyzing the details. GRM and cap rate both looked great, but when we pulled utility records, we found heating costs in winter were brutal because of old, inefficient systems. That added a 12% expense bump- totally changed the vacancy dynamics. Little details like that are why I obsess over digging deeper than just the metrics.

Metrics I find useful:

Expense Ratio: Look at operating expenses as a percentage of gross income. If it's way out of whack with the market average, dig deeper.

Debt Service Coverage Ratio: Key for nderstanding if the property's cash flow will cover financing comfortably.

Historical Vacancy Trends: Especially in areas like Chicago, where local job markets fluctuate, knowing vacancy trends can help you anticipate rough patches.

Rent Growth vs. Property Appreciation: For long-term holds, I always compare rent growth with broader market appreciation. For example, I once walked away from a deal in Austin becaus rents lagged behind the crazy property appreciation there.

You mentioned employment levels and income-to-rent ratios... great calls. One other market-wide factor I’d throw in is local government policies. For instance, cities like Chicago are known for landlord-tenant laws that skew heavily in favor of tenants, and that risk should be baked into your underwriting.

What’s your take on balancing short-term cash flow with long-term equity growth? Always curious how others weigh that trade-off.

Hey Trevor,

Man, this situation sounds incredibly frustrating, especially since you’ve clearly done your due diligence on this property. I’ve seen something similar with a friend in San Diego, who bought what he thought was a legal duplex. After months of back and forth with the city, he uncovered an old permit proving it had been a two-unit property since the ‘70s. That little piece of paper saved him a fortune in legal fees and stress.

Gather Hard Evidence: You’ve already got a strong start with appraisals showing the property as a four-unit. To add more weight to your case, dig deeper into local records. My friend once found an old zoning map from his city archives that helped prove his property was being taxed incorrectly. Try reaching out to the Thornton Planning Department for any documentation they might have on file.

Check Legal Precedents: Look for similar cases in your area. Other landlords or investors might have fought similar battles. Sometimes, these cases are documented in public records or landlord forums. If you can find a precedent, that could bolster your argument significantly.

Lean on the Physical Details: Four mailboxes, four sewer lines-those are big indicators that the property has been treated as a four-unit for some time. Be sure to take high-quality photos, and if possible, request utility records that confirm separate billing for four units. In my experience, physical evidence like this has been a deciding factor in cases like yours.

Consult an Expert: Even if you plan to handle the hearing yourself, an initial consultation with a real estate attorney could be invaluable. They might spot arguments or angles you hadn’t considered. In Colorado, zoning disputes can get complex, and local attorneys often know how to navigate the system effectively.

Engage Your Tennant: Transparency is key. Let your tennant in the “disuputed” unit know what’s happening and discuss temporary solutions in case this drags on longer than expected. Keeping them in the loop could help avoid conflicts or complications down the line.

Lastly, think about framing your case around fairness and practical impact. Cities don’t want to displace tenants unnecessarily, especially when the property has been used as a four-unit for years. Focus on the human aspect as well as the legal side.

Have you tried connecting with local landlord associations or zoning consultants in Denver? Sometimes they’ve got resources or connections that could help speed things up.

What’s your biggest concern going into the hearing? Maybe we can brainstorm some strategies to address it.