All Forum Posts by: Drake Shadwell

Hey Rea,

One thing I'm a little confused on with your post is that you mentioned the SFR would be a house hack. I just want to make sure I understand correctly - Would this house hack be getting you out of currently renting or have you just already owned another property for a year so you can now purchase again with a loan for primary residence?

If you're currently renting and purchasing a property would allow you to avoid getting on a lease - I would say you definitely want to make a move now rather than later. Nathan makes a great point about values possibly dropping over the next 6 - 12 months, but depending on how much you're currently putting towards rent it might still be advantageous to secure a SFR to avoid rental costs. If you lose $20,000 in market value on your home in 10 months, that is still better than losing $20,000 in rent over 10 months. At least one of those you have the chance of getting back in a more favorable market!

Hey everyone,

I'm considering going into a deal with a friend where I provide the full down payment and they secure and pay the full mortgage. What equity split for that would you think is fair? I know the cash up front is more valuable, but I'm not sure how much it compares. If I put in 5% of the loan as a down payment, then how much equity of the houses should that equate to? What if I put 20%? I'm assuming that's how I should think of calculating it, but I'm not certain on the conversion rate I should expect.

He would also be living in the home and I would purely be operating as an investor. I'm also considering talking to him about if he's willing to House Hack and we would then split that income based on the same equity split of our ownership in the home. He'd essentially then be acting as a property manager as well.

Any advice would be appreciated,

Drake.

I absolutely understand what you mean - I got into Real Estate directly from being a freelance performer. It was DRILLED into me that you never know when you're going to go 6 months without a gig and have to live off savings. With that mindset I became a frugal fiend and I still am to this day. I closed 30 transactions over the year and a half and I'm still in this mindset of... What if I don't get a single client for the next year??? So I completely relate to your fear of not having money, you're not alone in this struggle!

As far as dopamine to make yourself feel good when you do good - YES! Dopamine is the motivator hormone that not enough people focus on. Our brains choose what they want to do based on the dopamine that it EXPECTS to get and so if you don't reward yourself you may find that you stop seeking out those things. It's not important what the reward is, but it is important that you find out what you consider a reward. You've already said you don't like buying things in favor of investing. Maybe you can have an investment reward for yourself? If you know your expenses for the month, then would it feel like a reward to you if you could spend that leftover $200 investing in a smaller cap project? (Using Wefunder or another private investing app) Or it may just be a matter of finding WHAT feels like a reward to you that is outside investing or work. Work is great, I love being an agent, but it's important that you have variety in life and sometimes that means you have to spend money/try 20 things you don't like to find that dopamine hit. Then once you find it - You set metrics to reach in order to give yourself the time/money to go do that thing!

I hope this was helpful and would love to hear if you find a good solution/reward for yourself! I am working on this same issue in my own system and life so it's always nice to see other people's growth!

There is a lot of great advice and detail on the requirements for DSCR in here and one small detail that I haven't seen mentioned - You have to already have a primary residence. I know it's probably rare for someone to be looking to buy an investment property before their own residential. I ran into this issue because I had made enough for the 20% down payment but hadn't been an agent for more than 2 years, so I couldn't get a conventional loan with my DTI. I thought DSCR could be the answer and planned to rent it out until I was able to qualify for a conventional so I could move in as my primary, but unfortunately it didn't work out.

Very specific circumstance, but thought it was worth mentioning!

This is what I keep coming back to. Crashes happen because of a high amount of foreclosures. Foreclosures happen for one reason: affordability. When someone can no longer afford a home it's usually because of job loss or a drastic increase in tangential expenses (taxes, insurance, HOA, etc...), but I would argue that the former is more common than the latter. Someone's home is going to be their LAST resort when cutting back on expenses during a recession.

With how strong the job market has been (even in the face of a recession) I think the likelihood of a drastic increase in foreclosures is unlikely. The largest driver I anticipate for lowering prices is new construction contracts falling apart because of interest rates and dissatisfaction in homes because of rushed purchases causing quick re-sales. Both of which could cause a gradual decline or correction, but not the crash that people are expecting.

 I think we'll see a decline in prices that tracks well with affordability changes caused by interest rates. Possibly a little deeper because of the psychology of the market, but not much deeper than that.

Hey Danielle,

Something I check every time when I'm on a walkthrough is the age on the water heater and AC Unit. You can usually find it on a sticker on each appliance. If it does specifically say "MFG Date", with most brands it is the 3rd/4th digit of the serial number. (ex. XX20XXXXX would be 2020). The other is the roof - In Florida there is a line on the Seller's Disclosure that usually says how old the roof is, but I also like to use my drone. I'm an agent and use it for work so I have a Part 107, but I'm not sure if you would need one for this. The general rule of thumb is that if you make money using it, you need a part 107, BUT since you're not really selling the footage for money... It's a grey area. If you plan on buying a lot of investment properties, I think it is worth the investment. It's a game changer when you can pop that up and in 5 minutes get a good idea of the condition of the roof regardless of the actual age.

Since these three things are some of the most obvious capital expenditures you could be facing, it's always a good idea to get their age written down. I know a 4 year unit can shut down and stop out of nowhere and I've seen 20 year units still chugging along, but it's still good to have an idea for it.

Another thing I like to keep front of mind is bathroom space. If you're looking at a 4/2, but one of those is the Primary Bedroom with exclusive access then you're looking at 3 of your room sharing a single bathroom. Which is doable, but then if you plan to take a room and make it a 5th... You're starting to get an unrealistic number of bodies going through one bathroom. Especially if you're going to be house hacking. 

Hey Andre,

I think the important thing here is to get on the same page with the wife. From what I understand, you want to house hack and she doesn't or she doesn't want to get involved with investment properties at all and wants to only have one home?

Do you think if you laid out a plan for her of showing how house hacking sets you up to have a larger home in the future/faster? Set the "goal" to be you dream home and see how much faster you can achieve that through house hacking. Not sure, but it might help!