All Forum Posts by: Eric Rosiello

Hi All, thank you for the responses!

@Michael Noto

Yes, they currently live in the property.

@Patti Robertson

Thanks! I will call the inspector and ask for an extension. It was an issue with the Post Office.

In my situation, I get paid the rent on the 1st of the month. It sounds like if I pass the inspection on 3rd of the next month, I would get back paid for 28 out of 30 days rather than missing the whole month of rent. Does that sound right? Thanks again!

If, however, you go into abatement on a day in the second half of the month, and you can’t get your passing inspection until sometime into the next month, you will not get the next rent payment, and will only get a back payment for the days starting on the day you pass.

Hi BP Community,

I am new to renting to Section 8 tenants and have a question on the inspection process.

I received a notice that an inspection was performed on the unit and that it failed for a few reasons. I was delayed in receiving the notification, so I only have a few days to make the repairs and I’m not sure if I’ll be able to get it done ahead of the deadline.

My question is - if I don’t get the repairs done before the deadline but do a few days after, will I receive a prorated government rent payment or none at all?

Any advice is greatly appreciated!

Thanks!

Eric

@Florian Kuehne

For a duplex, there would be 2 units and 1 roof.

2 x $50 = $100 per month for repairs

1 x $150 = $150 per month for capex

Best,

Eric

@Florian Kuehne

Hi Florian,

I think those cash flow and return numbers are definitely attainable for a house hack, especially if you force appreciation through the initial renovation. Just remember to stick to your numbers during the bidding process!

One tip is that if you put low money down (i.e. 3.5% for an FHA mortgage), it will be easier to hit your Total Return target but more difficult to hit your Cash on Cash ROI target. If you put more down, you'll see your Cash on Cash ROI improve and your Total Return compress.

In terms of your variable operating expenses, I use the following:

Vacancy:  8%

Property Management:  8%

Repairs:  $50 per unit, per month

CapEx: $150 per roof, per month

I think it makes more sense to use a flat amount per unit for repairs since repair costs aren't necessarily correlated with rent collected.

I use similar thinking for CapEx, except it's a flat amount per roof rather than per unit.

Are you planning to self manage to some degree? I'm not sure where you can find 3.5% for full service property management, but if you've found it please let me know!

Regards,

Eric

@Mohsin Mazhar

That makes sense - the right move is what's best for your situation. My suggestion definitely requires more work and additional management. With my current lifestyle I don't know if I could go back to BRRR / house hacking . . . so it's all about your own personal goals and life situation.

If it helps, I had no rehab experience going into my first project. I shopped around for contractors for the things I wasn't comfortable with and did work with my parents on the weekends. I learned from BiggerPockets which rehab items were worthwhile and the expected costs. 

You'd be surprised how much of a difference you can make yourself through cosmetic updates learned from YouTube videos (paint, flooring, cabinets, countertops, vanities, mirrors, & lighting). In less than two months I had a fully renovated and rented property, was in a position to refinance, and had gained valuable experience for the future (knowing how much things cost, knowing how much time it takes to complete a rehab task).

In regards to management, it is definitely true that managing 2-3 tenants is more work than just 1, so it's really dependent on how much time you have and how you value your time. If your time is better spent at your day job, you can always higher a property manager. You should factor management costs into your numbers anyways even if you plan to self-manage. For instance, I self-managed while living in the property, but found it more difficult once I moved out so I hired a PM and couldn't be happier with the decision.

Lastly, I don't think you need to spend over $1m for a 3 / 4 family. I just picked up a 4,200 sq ft 3-family in an appreciating area in Boston that needed no rehab for $800k. Stay patient and analyze a lot of deals. I can recommend an investor friendly agent that has helped me a ton if you'd like. I'd also be happy to share how I run my numbers.

Hope this helps,

Eric

@Mohsin Mazhar

First off, you are miles ahead of the curve by considering house hacking and seeking advice on this forum.

As someone who has house hacked twice, here is my advice for you:

1) Target 3 and 4 family properties over 2 family. They tend to cash flow much better.

2) Take advantage of the FHA or Masshousing first time home buyer programs. This will allow to buy a 3 or 4 family for a reasonable down payment. Here are purchase price limits:

http://www.loanlimits.org/wp-content/uploads/2018/12/2019-between-floor-ceiling.pdf

https://www.masshousing.com/portal/server.pt/community/home_buyers/225/income_and_loan_limits

3) Value lower-priced properties that need work over higher-priced properties that are move-in ready. Your rehab will build you equity and you will be able to refinance out of your FHA / Masshousing mortgage to a conventional mortgage. Refinancing will lower your interest rate and/or remove PMI, which will lower your payment and improve your cash flow.

4) Value areas that have a high chance of appreciation. These are the markets that have easy access to Boston.

5) Request the seller pay all closing costs. This will leave you additional funds for your rehab.

Feel free to reach out with any questions.

Regards,

Eric

@Joan-Marie Pagan

Property 1: 

I used my savings. However, to afford this I had to bring in a 50% partner and we did almost all the renovation work ourselves. We worked on weekends and each took 1 week off from work.

The down payment was $23,250 (5% of purchase price using MassHousing, seller paid all closing costs). 

We spent $17k on the renovation. I estimate we saved $15k in labor by doing the work ourselves. 

By the time everything was said and done we had a property worth $570k that had only cost us $40k of our own money and roughly 15 working days of our time.

Property 2:

I used a 203k FHA loan (renovation loan). The renovation costs are borrowed from the bank with this loan type. The down payment was $20k (3.5% down payment for owner-occ FHA).

To help with the down payment, I took out a Home Equity Loan against the first property at 90% LTV at an interest rate of 5.25%, raising $71k.

I later refinanced and took out a Home Equity Loan against this property as well, raising another $102k for future purchases.

*Note: I invest the HEL funds in the stock market while searching for my next purchase.

Property 3:

I used the home equity loan funds from the previous two properties and added another partner to cover the down payment and renovation costs. I didn't live in this one, so I needed to put 20% down ($160k).

Going forward:

I plan to use continuing cash flows from the three properties, leftover HEL funds, and add more investors to fund future down payments and renovations.

A couple things to be aware of with this strategy:

* You must add value through renovation. If the property is not worth considerably more after your renovations you won't be able to refi / HEL without contributing additional funds.

* Factor in the cost of the HELs to your projections as they will significantly cut into your monthly cash flow. Your deal must have high upside and/or a lot of room.

Not sure if you are going to be able to get a lot of cash out at this point. For future reference I've been successful with this strategy:

1) Buy using a low money down product (5% or less, FHA or other). Add value through renovation to increase your equity to 20% of the post-renovation value.

2) Refinance to a conventional mortgage at 80% LTV.

3) Take out a Home Equity Loan (not HELOC) up to 100% LTV. You must live there to take out the home equity loan.

4) Move out.

5) Buy another property with home equity loan cash proceeds.

@Steven Rubino

Thanks very much! I came to terms with the previous owner's PM, but I will keep Hancock Realty Group in mind for future deals in this area.

Regards,

Eric

@Account Closed

I sent you a direct message.

Thanks,

Eric