All Forum Posts by: Jimmy Lieu

Thanks for your thoughts.  I renegotiated the offer to 142k cash and as-is condition.  Surprisingly the seller (who interestingly is actually some kind of court-appointed trust actually as the seller may be incapacitated) is trying to get approval to accept it.  The listing agent says it is outside the bounds of what they're allowed to accept without approval from their main office.  I guess that means I didn't offer too much!  Unfortunately they're closed for the weekend so hopefully they don't get any better offers before Tuesday morning.

They did a pre-listing appraisal which came in at 175k.  So I'm at 19% below fair market value.  This is a stable town of a top-tier public University also so I'm not too concerned about a big downturn.  At this point, though it's not sealed yet and I have yet to get a full inspection of my own, it seems like as close to a home run deal as I could expect.  Still, any other thoughts are appreciated.  Thanks all for your input.

When possible, and applicable, the first position HELOC is the most powerful financial weapon in the investor's arsenal. It's cheaper than any refinance and can be used over and over again.

Investors who spend more than they make CANNOT use a first position HELOC: period. The interest will get away from them and they'll lose their home.

All other investors will be able to quickly, efficiently pay down the HELOC, use only what they need, and have a constant supply of cash on hand to offer and purchase properties. Only the first position HELOC gives an investor the chance to snowball rents and a growing portfolio as aggressively.

And it is a debt tool, so it must be used with tremendous caution.

@Laneetra Miller

I used a HELOC on my primary residence to buy my first rental. Tenant has not missed a payment in 6 years. With low interest rates, rent covered the payments easily. Eventually my house appreciated and I refinanced before being paid off in full by the rent. I owned the rental free and clear, I then took out a HELOC on it, which I use as an emergency fund for all of my properties so I don't have to keep huge piles of non- performing cash around.

Congrats on studying the market and your plans, but as any investor will tell you, TIMING is everything!!! This is a horrible time to invest for multiple reasons. It's an extra horrible time to house hack.

Reason #1 this is a bad time for RE investing: Most investors will tell you that a great deal is a great deal no matter the market conditions... but we are at the end of a 12 year RE boom. Prices are in the stratosphere. Prices will continue to rise or go flat in the near term and then they will drop off slowly but steadily for the next 6 months to 5 years. Wait!! Whatever great deal you find now will look positively expensive compared to what will be out there at the bottom of the market in the next 1-5 years. Nearly 50% of small and medium sized businesses in America are set to close and won't have the resources to reopen when this pandemic is over. That will affect household income for nearly every American family. Household income equals buying power from the bank. Americans will qualify for less and less. That necessarily drops housing budget. The FED announced interest rates will likely stay in the gutter for the next 5 years... So low interest rates is not a good reason to buy now at the top of the market.

Reason #2 this is a bad time to invest in RE: Uncertainty

Never invest in uncertainty. We are seeing many unusual trends due to Covid. Some trends that could greatly affect the market in which you are interested include: Mass exodus from urban centers and population dense areas, a decimation of student housing because of no foreign students and mostly online learning, people not wanting to live around or with others. This is the trend that is most concerning to your house hacking strategy. It's also important to know you will be exposing yourself to living with strangers during a pandemic and they will be doing the same. Not a good idea for anyone. You will also have the incredible challenge of moving during a pandemic and trying to stay safe. Not easy to do.

Reason #3 it's a bad time to invest in RE: For the first time in history (that I am aware of) if your tenants stop paying rent, you will have no reasonable legal recourse. Courts around the country have halted all evictions. The assumption that we can evict someone that does not pay no longer exists for the entire nation through the end of 2020.

Reason #4 it's a bad time to invest: I already covered this above, but since you want to house hack... wait! No one wants roommates during a pandemic and it's not safe for you either.

If EVER there was a time to WAIT... THIS is it. I am a very experienced investor and very successful house hacker. I just sold everything I own... did very well. I'm going to rent until the market hits bottom and take advantage of what I believe will be the buying opportunity of a lifetime. My wife and I do finances for the Small Business Administration Covid relief program, so we have an excellent insider look at the books of many American businesses. It is not pretty at all.  We are in for one very tough recession in my opinion. ALL of this does NOT mean do nothing in this time.  It means study the market, prepare to get approved for a loan... One thing that concerned me in your post was I wondered where your income was coming from since you are a student moving across the country to a strange city. No one will loan to you without a solid job history (usually two years) and excellent credit. This is the time to make sure you have those two things together (income and credit) so you can pull the trigger when the timing is right. 

Wishing you tons of luck and happy to help any time! You are asking all the right people here on BP!

@Jimmy Lieu yes the closing date is the 20th of the month