All Forum Posts by: Heather Shannon

Hey All! I have had a rough go with mortgage brokers—can you recommend a good one? My first guy got so busy that he basically just stopped responding. And someone else wanted 20 documents from me before they would quote me a rate. And then somebody else was saying that if I wanted to do more cash out on my condo refinance that the rate would go up. I am ideally wanting to leave just 20% equity in my place (primary residence) and hoping that will not mean a rate increase, but wanted to get some feedback here to see what is possible. My credit score is 756 and I’d obviously like the lowest rate/closing costs possible. I owe $200k on the mortgage and the place is worth $325k. Thanks!

@Henry Lazerow 100% It adds interest!

Thanks for all the feedback.  That's really helpful to know that only GCs can pull permits.  I'm definitely not looking to get in trouble with the city. 

I also wanted to apologize if my language about GCs offended people.  I was just being casual as if I was talking to a friend, but re-reading it I can see how it could be inflammatory.  I also want to clarify that I don't think all GCs are bad . . . or I wouldn't be considering hiring one.  It's just that the stereotype exists for a reason usually & so it's also a process to weed through the riff-raff and find a good one.  Same goes for my profession, so I don't mean it as a personal jab.

And as Robert broke it down, there is a lot more overhead in hiring a GC, especially a good one who expects to make a decent profit and is organized.  So, whereas on my kitchen, I spent $12K (and yes dealt with some headaches) and added $25K of value to my property when I got it under contract . . . in the scenario of hiring a GC, there's no profit at all for me, so why bother with any of the headache then?  A project manager adds another layer of cost and then I'm actually in the hole.  Adding the level of cost I'd incur with a GC just makes a lot of properties ineligible or much less attractive as investments. While I want to get a beautiful B&B set up, I also want to create equity for myself in the process or it's not worth all my own time and energy.

So, I guess we'll see where the quotes come in and if the equity is there!

I know I'm new and thus ignorant. That's why I'm posting here, reading up on the topic and working the phones to find available contractors with good reviews before I take any actions!  If I knew what I was getting into with my other business 5 years ago, I might have never started it.  I think delusional optimism is sometimes an asset as long as you're also determined to meet each challenge along the way.

I am planning to buy a fixer upper and make it a B & B.  I'm torn about using a general contractor vs. doing the general contracting myself.

CONs of Hiring a General Contractor:

1. They are reputed to suck big time and not be very professional in terms of showing up on time, getting the project done on time or sticking to budget. The stress of this might kill me on a large-scale longer-term project.  In rehabbing my kitchen, the contractor was full of s@#$ and unprofessional, which was pretty stressful to deal with.

2. I just spoke with one general contractor who said their basic material kitchen remodels start at $25-30K.  I just did a kitchen remodel that I general contracted myself for $12K all-in and it even had quartz counters and marble backsplash.  I hate the idea of throwing money away.

PROs of General Contractor:

1. It will free up a lot of my time, especially if they're actually good.  I won't have to research, interview and get quotes from tradespeople myself.  I also don't know how to manage a timeline very well--what needs to happen in which order or how far in advance to order things.  Of course these are things I can research & find out . . . but with lots of time spent.

2. They can help me assess what can be done with the space & design it.  I have no idea how I'm going to figure out if walls can be moved or how the space can be best utilized/divided without them. I don't have access to 3D (or even 2D) layout software to help with this.  I'm good with spacial stuff, but just not experienced with it at all. Maybe I can hire a structural engineer or a designer for a consult?

What else should I be considering?  

Any good resources I should know about if I general contract it myself?

I live in Chicago and have been contacting contractors the last day or two and I am getting responses.  I've reached out to 10 with good reviews and have gotten 3 responses already. Not sure how you're finding or contacting them.  Or it maybe they're put off by you being out of the country and not taking it seriously?

Perhaps you can arrange for a realtor or friend to meet the contractor at the property and not even mention you're out of the country?

I am also not sure how the value-add will come in.  As someone looking to rehab and AirBnB, I can't imagine paying someone a premium to find a fixer upper for me.  Do you have a secret stash of off-market properties that are better deals?

Thanks Dhru--totally hadn't thought of that!  I appreciate any ways to get creative : )

Yes, small world!  Totally agree about leverage.  You're right about option 1 and it's also the least stressful.  I'll shop around for LOCs.  Thanks Nick!

Hey All,

I'm eyeing a property in a nice neighborhood in Chicago that is listed as a single family.  I think I can get it for $650k and would estimate putting about $150K into it to make it truly shine as an AirBnB (I'm already a SuperHost with my nearby condo).  The single family place is already zoned properly for the Chicago Bed & Breakfast license : )

I'll have about $65k as a downpayment. My credit is right below 740, but should be shooting up as I just paid off a big credit card balance.  Not sure how long that will take though . . . 

What do you think is the best way to go about financing this?

Currently I'm considering:

Option 1: Put 5% down and buy it like a regular old single-family that I'll live in.  Ask for a 2% closing credit and keep about $32K of my cash.  Maybe investigate the Home Depot line of credit (8% interest, up to $40K, but no idea how much I'd get approved for).  And just deal with $85k as my reno budget.  This is doable as the property doesn't have THAT much that absolutely needs to be done. But I think it will leave some things to be desired and eat into how much I can charge on AirBnB per night.

Option 2: Commerial loan for $800k, which would cover the purchase and construction.  The lender I spoke with today said I'd need 15% of that or $120K down and it would be about 5.75% interest rate.  Where do I get the other $55k for a downpayment though?  And I'm kind of screwing myself when I can get a 3.75% interest rate or something on the $650K with Option 1 above, right?  What am I missing here--do you refi after a couple years? The mortgage broker seemed to indicate you can't do it sooner than that.  But, I've heard of Guild Mortgage refinancing within 1 year of getting a hard money or construction loan.

Option 3: Attempt the BRRRR (Buy, Rehab, Rent out, Refinance, and Repeat). If I go this route, any recs for a private/hard money lender in Chicago? Will they be willing to finance the amount that I need given my limited down payment?

Thanks ya'll!  Looking forward to mastering this financing stuff as a newer investor!

Heather

Hey All,

I'm eyeing a property in a nice neighborhood in Chicago that is listed as a single family.  I think I can get it for $650k and would estimate putting about $150K into it to make it truly shine as an AirBnB (I'm already a SuperHost with my nearby condo).  The single family place is already zoned properly for the Chicago Bed & Breakfast license : )

I'll have about $65k as a downpayment. My credit is right below 740, but should be shooting up as I just paid off a big credit card balance.  Not sure how long that will take though . . . 

What do you think is the best way to go about financing this?

Currently I'm considering:

Option 1: Put 5% down and buy it like a regular old single-family that I'll live in.  Ask for a 2% closing credit and keep about $32K of my cash.  Maybe investigate the Home Depot line of credit (8% interest, up to $40K, but no idea how much I'd get approved for).  And just deal with $85k as my reno budget.  This is doable as the property doesn't have THAT much that absolutely needs to be done. But I think it will leave some things to be desired and eat into how much I can charge on AirBnB per night.

Option 2: Commerial loan for $800k, which would cover the purchase and construction.  The lender I spoke with today said I'd need 15% of that or $120K down and it would be about 5.75% interest rate.  Where do I get the other $55k for a downpayment though?  And I'm kind of screwing myself when I can get a 3.75% interest rate or something on the $650K with Option 1 above, right?  What am I missing here--do you refi after a couple years? The mortgage broker seemed to indicate you can't do it sooner than that.  But, I've heard of Guild Mortgage refinancing within 1 year of getting a hard money or construction loan.

Option 3: Attempt the BRRRR (Buy, Rehab, Rent out, Refinance, and Repeat). If I go this route, any recs for a private/hard money lender in Chicago? Will they be willing to finance the amount that I need given my limited down payment?

Thanks ya'll!  Looking forward to mastering this financing stuff as a newer investor!

Heather

The numbers are beautiful...when my plan was to run it as an AirBnB...but they are currently voting (like right now as I type this) on all sorts of terrible legislation in Chicago that would limit Airbnb to 90 days/year and prevent it from being an entire Airbnb building. Good thing this is happening before I buy!