All Forum Posts by: John Hutchison

@Nghi Le - thanks for pointing that out - good to know in the future. Now that I think about it it makes sense - nobody is just going to turn you loose with that much cash right from the get-go.

I don't have any experience with HML, but I'm in the midst of my first Homestyle renovation and I can tell you a little bit about the potential negatives (compared to cash or hard money)

• you'll need to pay $500 or $600 for a "renovation loan consultant" who represents the bank in seeing that the work gets done to the extent and standards that you've arranged in the loan. Also, draw inspections will run you $125 each or so.
• there is a limit to how much you can spend on the renovations, and what type of improvements are financed - however this is much more loose with Homestyle than FHA 203k
• there will be additional work and time involved in closing since you need to do a lot of paperwork and get a number of parties on the same page signing papers, etc (buyer, seller, lender, GC, consultant)
• you will need to come up with the renovation costs out of pocket first and then submit a draw request, get inspected, and then get reimbursed by the bank - so even though you're financing the renovations, you'll still need a good amount of working capital during the project

Those are the main downsides I see - the obvious upside is the relatively low cost of the loan (I'm paying 4.375%) and the single closing. It's a good amount of work and coordination up front, but a nice product in the end. I personally might try hard money on my next deal (since I'll have a track record after this one) just to compare and contrast the two. I will say if time is of utmost importance, it will probably be hard to beat cash or hard money. It took me over 60 days to close on my property - with some things you'll just be at the mercy of the lender and the process in general.

Best of luck with however you decide to move forward.

My girlfriend is from Bogota and I've always thought about investing there. Is anyone familiar with the specifics of the tax law compared to the United States? Are there tax deferment strategies like the 1031 exchange or similar benefits? From what I've read, financing there is not as readily accessible - higher down payments and interest rates.

Thanks Bill! I should add that in addition to finding the property and submitting the bid, my agent also recommended the lender I ended up using as having lots of experience with renovation loans. They suggested the Homestyle product after assessing my goals and amount I was willing to invest. While there are some areas where I felt they could have done better, I imagine things could have also gone worse. We got to closing and everything is working out well now!

Hello Bigger Pockets!

I've been lurking and binge-listening to the podcast for most of 2017 now, and currently working through my first deal so I thought it was about time to reach out and make an introduction.

My name is John D. Hutchison, most people call me JD for short. I'm from the Capital Region and went to school at RPI in Troy, currently work at an engineering start up in Delaware county.

I've been trying to invest in Troy, NY for the past few years and almost made a few foolish purchases before I really understood the underlying strategies and how to run the numbers on an investment property. I was mostly looking for a multi-family in downtown Troy to occupy and house hack, but the local market is hot right now, it seems highly speculative, and at the end of the day the properties are 100+ years old, many needing extensive masonry work, etc.

My realtor ended up showing me a HUD property in Rensselaer / East Greenbush area - a 2 bed, 1.5 bath townhouse built in 1988. The kitchen had been ripped out in a failed attempt to remodel, and otherwise the baths, carpet, flooring, etc. were just original and tired. We ended up bidding and winning the place for $97.3k. I financed the property with a FNMA Homestyle loan, conventional at 10% down with around $23k of improvements rolled in for a total of about $120k. I imagine with some miscellaneous expenses I'll be all in at around $125k when we move in, with a brand new kitchen, new LVP flooring down and new carpet upstairs, new baths, new front door, and fresh paint throughout. The property appraised at $165k subject to these upgrades prior to closing, so right now I'm weighing out selling next summer or refinancing and renting it out when we move to our next property (BRRRR).

I really love this idea of live-in flips and/or BRRRR from a standpoint of minimizing our housing costs and having multiple exit strategies when the project is done. Knowing what I know now, my goals in real estate are to continue doing 1-2 live in flips and/or BRRRR annually to minimize (or eliminate) our living expenses and build a small portfolio of strong newly renovated rentals that should require minimum management effort and provide some cash flow. I like my career in engineering, but would like to achieve financial independence within the next 10 years just to have the freedom to work when I want, on what I want, where I want.

The biggest thing I've learned so far in this process is that there is significant work involved in coordinating and closing a renovation loan, be it Fannie Mae Homestyle or (I imagine) FHA 203k. Definitely negotiate yourself at least 60 days to close in the contract, as I only got 45 and I had to purchase extensions at a rate of $25/day for about 20 extra days. There are many entities that need to fill out paperwork, come look at the house, and just generally all be on the same page (lender, seller, general contractor, renovation loan consultant, and of course you the buyer). That being said it seems like a great way to get into building equity quick in a distressed property without resorting to hard money, large gifts, private loans, or big reserves of cash that take years of working to amass. Just keep in mind that the lender generally reimburses you as you go for the work - they don't put the money out up front - so make sure you have some working capital left over after the down payment and closing costs.

Here are some pictures of the property as purchased, and now as we're in process:

Kitchen as received: (remodel gone wrong - why close it all off?)

New kitchen coming together - opened back up, fresh drywall, recessed LEDs.

Thanks all for getting to know me and my project - I'm interested in hearing from anyone else investing in Rensselaer or Troy, or who has townhouse experience either as a fix and flip or rental!

Best regards,

JD