All Forum Posts by: John Hall

Yes it's a VA loan. I'll be moving into the vacant unit this week. Once I get passed the 1 year residency requirement I can move out and buy another multi.

Since it is my first deal I was conservative in my underwriting, but I definitely learned a ton from this deal so far. I'm starting to get a true understanding of capex and monthly bills. 

Quote from @Crystal Smith:

Quote from @John Hall:

Hey BP

Need some advice for a newbie who's just getting started. I recently closed, this friday!, and will be house hacking a 2 unit building in Chicago in a B/A+ area. The purchase price is right around a fair market value for the area. The loan product is 100% LTV so I'm fully leveraged on the deal.

It is cashing flowing day 1 with room to increase gross rents by about 200-400 a month. Going into the deal I knew it had some capex expenses off the bat and it will be about 30-40k in capex total. Capex needed is a new roof which is near the end of its life, some exterior maintenance, and some other issues.

One reason why the capex is so expensive rather than in previous years is obliviously inflation and labor shortages. According to the contractors it would be about 5k cheaper if before the pandemic.

My question is that with the recession incoming, if we aren't already in one, and the softening of the housing market and maybe a 5-10% dip in housing prices nation wide would you spend the money on the capex now or wait it out?

I plan to be a Long term buy and hold investor. So would you pay the high inflation cost now to fix what needs to be fixed and not have to worry about it for 20-30 years OR wait till after the recession/inflation maybe the capex prices drop a little in price and do the projects then? Would you hold off on investing that much money into the building with little to no equity into the deal but still cash flowing off the start just in case the house prices take a deeper dive that what many think?

My fear is spending all this upfront capex expenses now and then being under water on the deal, but then again since I want to hold the building the life of the loan and need a place to live that even if I'm underwater if the market takes a deeper dive than expected I'm still cashing flowing strong and can wait for the equity to eventually come 5,10,15,20 years from now.

Thanks BP community!

Spend the money and fix the problems before it piles up. If you're a buy and hold investor and you purchased at 100% LTV (Really like to know your lender) then your current ROI is infinite if you exclude closing costs. Spending 30-40K in CAPEX is nothing. Regarding a housing price dip- So what? Every-time there's a dip it eventually comes back and you're in it for the long hall.

You're right Crystal, it is a military loan for veterans so it's no money down and no PMI which make air cash flow. I'll bite the bullet now and make the capex improvements and save up money for my next deal. Thank you. 

Quote from @Paul De Luca:

@John Hall

You're cash flowing with a 100% LTV loan while house hacking a duplex?

If you knew that you were going to need to spend the money on capex, you have the money, and you plan on holding the property for the long term, why would you care about the short term fluctuations in value? I don't think inflation is going anywhere in the short term, and truthfully nobody knows.

How old is the roof, and what other capex needs to be done? It depends on what the issues are and it may not be necessary to do everything all at once. Maybe you could spread the cost out over time.

Thank you Paul! I should have mentioned that it's a military loan for veterans with 0% down. It also has no PMI which gives me the ability to cash flow. 

it's a 2 flat on the north east side and needs a new roof, tuck point, and some repairs to the garage. I've been leaning on the side of just spending the money now but I wanted to get some more advice from some experienced people just to make sure I was making the right choices. 

Quote from @Allan Smith:

Do not wait. This is an excuse made when fear is doing the talking. Take action and adjust course as you go.

Thank you Allan! You are right and I might as well spend the money now. 

Hey BP

Need some advice for a newbie who's just getting started. I recently closed, this friday!, and will be house hacking a 2 unit building in Chicago in a B/A+ area. The purchase price is right around a fair market value for the area. The loan product is 100% LTV so I'm fully leveraged on the deal.

It is cashing flowing day 1 with room to increase gross rents by about 200-400 a month. Going into the deal I knew it had some capex expenses off the bat and it will be about 30-40k in capex total. Capex needed is a new roof which is near the end of its life, some exterior maintenance, and some other issues.

One reason why the capex is so expensive rather than in previous years is obliviously inflation and labor shortages. According to the contractors it would be about 5k cheaper if before the pandemic.

My question is that with the recession incoming, if we aren't already in one, and the softening of the housing market and maybe a 5-10% dip in housing prices nation wide would you spend the money on the capex now or wait it out?

I plan to be a Long term buy and hold investor. So would you pay the high inflation cost now to fix what needs to be fixed and not have to worry about it for 20-30 years OR wait till after the recession/inflation maybe the capex prices drop a little in price and do the projects then? Would you hold off on investing that much money into the building with little to no equity into the deal but still cash flowing off the start just in case the house prices take a deeper dive that what many think?

My fear is spending all this upfront capex expenses now and then being under water on the deal, but then again since I want to hold the building the life of the loan and need a place to live that even if I'm underwater if the market takes a deeper dive than expected I'm still cashing flowing strong and can wait for the equity to eventually come 5,10,15,20 years from now.

Thanks BP community!