All Forum Posts by: Jeremiah Fender

@Clayton Plank The neighborhood does indeed have a good healthy mix of houses that have ADU's not sure how many of them have attached ADU's, I have designed the structure to be used as and ADU but can be changed in the future back to a single use dwelling should a future owner ever wish to change it. I do not think that it will be an issue to sell it should we need to get it sold.

We plan on holding it as long as possible as the location is one of the most desirable in town, and once the kids have left we could even take over the smaller portion and rent out the larger house which in the current market would rent for about $2100 to $2300 a month, meaning fully rented with the ADU and house we would get about $3300 to $3400 a month, the loan service, taxes, insurance etc. for the house remodel and ADU is estimated to be about $2200 a month. The rental situation in Bend is really competitive and probably will not change for a long time due to the land use laws in Oregon even with a new expansion of our development zone. I believe we can keep the rental filled even in a down economy which would be better for us on a monthly basis.

I just do not understand enough about leverage and the house burden to evaluate the deal well enough, meaning even if we have equity in the house at $650k how does this get leveraged in the future as with our current paychecks I dont think we would qualify for a larger loan out of the house.

Interesting situation that I am analyzing and could use some ad(vice), questions, discussions to help me flush out the nuances of the two options.

My wife and I purchased a house 4 bed/ 1 bath (built in 1937 @ 1500sqft) from my father for $220,000 which appraised at sale for $374,000 two years ago in very rough shape, it has probably increased another $25,000 in value since then as the market here has been off the hook and I believe overvalued. We have a current HELOC for repairs at $30,000, but need probably another $30,000 for bringing the original structure to "finished" standards. This is our primary residence.

If the value of the property is conservatively $380,000 and we have $55,000+$220,000 = $275,000 - giving us about $105,000 in equity to keep the 80/20 we can pull appx $30,000 for buying another property. Given a traditional 80/20 loan (no house hacking as we cant move yet, I could place my mom in it perhaps) we could get a $150,000 house in the area may be tough but with diligence we could do it. (Our position here may be a little understated but I would rather be conservative)

We currently pay about $1,500 for our mortgage payment including the $30k in HELOC and the FHA PMI. Removing both of those due to a refinance would bring us down to about $1,400 a month for the $275,000 value at 4.5%. That would be for us to stay in the house and finish it out.

The other option is to build an addition with an ADU (accessory dwelling unit) finishing the house and adding another 650 sqft to the main house ( 3 bed 2 bath ) and a 550 sqft attached ADU (1 bed 1 bath). we could rent the ADU for appx $1000, to $1200 a month. I am a PM for a local contractor and get my construction work at cost as well as some personal sweat equity for a build out of $150,000 in costs.

Doing a quick comparison of values for the now 2100 sqft and 550 sqft dwellings that value is around $625,000 in the 1 mile radius of for sale and sold properties on Zillow. I will be getting a friend (local appraiser) to give me a confirmation number on my value assumption.

A refinance of our $220k + 30k +150k gives us a loan of $400k for which I have already been prequalified for. Our payment would be $2,191 at 4.5% if we could get $1000 for the rent of the ADU it would drop our personal monthly payment amount by $200 all of which would be reserved for upkeep on the property and vacancy. As it is an attached ADU I imagine that the tenant will be less likely to destroy the property.

If the value of the property is $625,000 and we owe $400,000 we could leverage $75,000 for future purchases keeping the 80/20.

I am worried about being over leveraged on the property but as long as we keep the ADU rented we should be ok, and ARB is possible as Bend is a very touristy destination.

We would like to move in a year or two when our last daughter gets out of school and rent both portions of the house or sell outright.

This is our first deal and to be honest I am pretty darn nervous and so is my wife about these numbers as they are very big for us. We lost our first house in the crash and want to make better financial decisions this time around, This is a big opportunity for us and playing things right could really change our lives and the lives of others.

Any questions, comments, discussions that you have regarding this or similar deals would be great to hear about.

Interesting situation that I am analyzing and could use some ad(vice), questions, discussions to help me flush out the nuances of the two options. 

My wife and I purchased a house 4 bed/ 1 bath (built in 1937 @ 1500sqft) from my father for $220,000 which appraised at sale for $374,000 two years ago in very rough shape, it has probably increased another $25,000 in value since then as the market here has been off the hook and I believe overvalued. We have a current HELOC for repairs at $30,000, but need probably another $30,000 for bringing the original structure to "finished" standards. This is our primary residence.

If the value of the property is conservatively $380,000 and we have $55,000+$220,000 = $275,000 - giving us about $105,000 in equity to keep the 80/20 we can pull appx $30,000 for buying another property. Given a traditional 80/20 loan (no house hacking as we cant move yet, I could place my mom in it perhaps) we could get a $150,000 house in the area may be tough but with diligence we could do it. (Our position here may be a little understated but I would rather be conservative) 

We currently pay about $1,500 for our mortgage payment including the $30k in HELOC and the FHA PMI. Removing both of those due to a refinance would bring us down to about $1,400 a month for the $275,000 value at 4.5%. That would be for us to stay in the house and finish it out.

The other option is to build an addition with an ADU (accessory dwelling unit) finishing the house and adding another 650 sqft to the main house ( 3 bed 2 bath ) and a 550 sqft attached ADU (1 bed 1 bath). we could rent the ADU for appx $1000, to $1200 a month. I am a PM for a local contractor and get my construction work at cost as well as some personal sweat equity for a build out of $150,000 in costs.

Doing a quick comparison of values for the now 2100 sqft and 550 sqft dwellings that value is around $625,000 in the 1 mile radius of for sale and sold properties on Zillow. I will be getting a friend (local appraiser) to give me a confirmation number on my value assumption. 

A refinance of our $220k + 30k +150k gives us a loan of $400k for which I have already been prequalified for. Our payment would be $2,191 at 4.5% if we could get $1000 for the rent of the ADU it would drop our personal monthly payment amount by $200 all of which would be reserved for upkeep on the property and vacancy. As it is an attached ADU I imagine that the tenant will be less likely to destroy the property.

If the value of the property is $625,000 and we owe $400,000 we could leverage $75,000 for future purchases keeping the 80/20. 

I am worried about being over leveraged on the property but as long as we keep the ADU rented we should be ok, and ARB is possible as Bend is a very touristy destination.

We would like to move in a year or two when our last daughter gets out of school and rent both portions of the house or sell outright.

This is our first deal and to be honest I am pretty darn nervous and so is my wife about these numbers as they are very big for us. We lost our first house in the crash and want to make better financial decisions this time around, This is a big opportunity for us and playing things right could really change our lives and the lives of others. 

Any questions, comments, discussions that you have regarding this or similar deals would be great to hear about. 

@Jay Hinrichs,

I think you made my point exactly, their are bugs in the system that for sure need to be changed, no system is perfect. Lets be honest I never stated that "I love it", i have problems with the system on every level, I would still rather see some restrictions over none at all. I can tell that this subject is something that you are passionate about and I respect that, however I processes and approve dozens of CU permits for non-ag dwellings every year, I went through measure 37 and 49 working with private land owners to develop the lands the way they had hoped to when originally purchasing it (Again a flawed effort, someone always gets hurt, from restrictions or doing nothing). I also see many, manuy larger parcels being partitioned out into smaller parcels outside the UGB that will then be approved for non-farm dwellings. Development outside the UAR and UGB areas is alive and well here in Central Oregon. Here is an example of a recently approved development outside the established UGB that is moving forward as a case in point...

http://www.bendbulletin.com/newsroomstafflist/3537601-151/subdivision-west-of-bend-earns-county-ok

My views on this subject come from my personnel feelings about the environment, the importance of Ag, and my geographical location. Because I am east of the cascades I may not see the same type of restrictions from the counties that you do. Bend has tried to do several UGB expansions, that were fundamentally flawed and therefore were rejected, I believe their latest attempt will be successful, bringing in new lands for development. Redmond had no issues bringing in lots of land that has subsequently gone up for development or is awaiting master planning.

I think this subject is a hot topic that you and I may disagree with on some levels and am not sure that this is the forum to argue the merits of the "draconian" legislation, that we both agree is fundamentally flawed and needs changes. I understand that your changes are to abolish the laws completely, I just believe in a little over-site that controls rates of growth. If at all possible lets move forward with an agree to disagree on this subject. I appreciate your view points. 

@Jay Hinrichs I am more of the mind and it may come from the fact that my primary source of income and job is working in agriculture that the land use laws are a good thing. I wont deny that there are problems with the system and that there could be changes made. However I would much rather see some restrictions than complete sprawl as can be seen in California. As with any system things can be improved. 

@Everyone Thanks for all the welcomes.
@Ned Carey

@Ned CareyRaw land has always been an interest but it seems like a difficult direction to go for a beginner. We have some interesting land use laws in Oregon as well. Not sure if you are familiar with a UGB (Urban Growth Boundary - 20 year growth ring) or UAR (Urban Area Reserve District) but they can really affect the costs of raw land. Lots of speculation on what is going to get in and what is not when they expand the UGB area. It makes urban infill projects more desirable but also land prices can be really high as there is little developable land. It is an area that I will definitely be looking into as a possible niche. 

Hello,

I have been on here for a little while but only as a lurker. I really enjoy reading everything people have to say on here, it is a great community. 

I live in Bend Oregon on the sunny side of the Cascade mountains and absolutely love it here. I moved her 10 years ago with my wife and kids for a job as a Land Use Specialist with an Irrigation District, it has been a great job with lots of interfacing worth local developers, engineers, surveyors, real estate professionals and lots of others. 

I have a Bachelors of Science in Business administration with an emphasis in Realestate and Land Use from California State University Sacramento. I have been fortunate enough to work in the industry and it still remains a passion.

I have bought two houses in the area and have been working on a long term flip for a little while now, great investment if I can ever finish it. ;) I am wanting to get into more of the investment side of the industry (vs policy) and looking for knowledge. 

I know a lot about easements, easement law, water rights, land use policy, the Cary Act, and urbanization (In Oregon). I love to discuss this stuff if you have a question lets chat.

Thanks so much for community and I hope to be a valuable member.

Jeremiah Fender