All Forum Posts by: Jordan Grimstad

From my perspective, it sounds like you should treat it like a duplex (where the units are not symmetrical). I don't think it's strange at all, and assuming the numbers work, you should absolutely go for it.

Making offers without a pre-approval letter is dicey, although it doesn't appear to be necessary (full disclosure, when purchasing my first home, I personally treated it as a necessity).

If I was in your position, I'd likely try to pursue a means of funding first before deal hunting too aggressively. Here's how I'd approach it:

1. Exhaust available solutions within the scope of your current earnings/lifestyle:

- Are you talking to a loan officer or a mortgage broker? Talking to a mortgage broker might allow you to get more creative with funding options.

- Have you looked into FHA loans at all? 

- Are you interested in pursuing a hard money loan?

2. If your sources of income continue to be an issue, press pause on the property search altogether and look to make a shift into more conventional sources of income (or otherwise regulate your income in some fashion)

- What this shift entails is a completely different issue - for example, if lenders would like to see a higher earnings level, this is a different question than seeing steadier/more regular earnings

Obviously I don't know the full context around your earnings situation, which is why bullet point #2 is extra light and only comes after exhausting other available options within the scope of your current lifestyle.

Partially depends on your primary exit strategy (or maybe just your 5-10 year strategy) - are you planning on holding + renting once you move out? Living in it ~permanently? Doing a live-in renovation and look to sell in less than 5 years?

Based on your focus around cashflow, I'm assuming you're going for a long term buy & hold strategy - I would evaluate it as if you were not occupying the 4th unit. If you were to rent out all 4 units immediately, what would the cash on cash return be? I think if that clears your hurdle rate, then I think it's a winner. You're still saving a *ton* of money vs. not house hacking. 

Any perspectives on what gutters offer the best tradeoff between durability/reduced maintenance and value-add for a single story SFH?

I plan to hold + rent the home for 10+ years, and I'd rather not have to spend a lot of time/money/energy maintaining the gutters (nor would I expect renters to be diligent about maintaining them, even if I included such a specification in my lease).

I chatted with a gutter repair contractor, and he advised me to stay away from aluminum seamless, although that appears to be the most widely-promoted option. Wanted to get people's thoughts on if baked enamel steel gutters provided an appropriate tradeoff for the extra cost.

@Will Eagles Alternatively, friends/family could theoretically provide funding for a deal such that their money does not constitute a loan - it just constitutes an equity share. That way, they just get a cut of the profits each month (and share in the risk directly) rather than having some kind of preferred claim to cashflows from the house.

Goes without saying, but going into a business venture with friends/family under such an arrangement would require a lot of introspection/discussion/preparation to mitigate potential issues down the road.

Hi @Nick Koegen & welcome - I have two (general sets of) follow up questions for you based on what you wrote:

1) What are you optimizing for in your down payment? Are you just trying to avoid PMI in general or are you trying to pay as little as possible for your down payment? If it's the former, is there any particular reason why you're trying to avoid PMI?

2) When you ask "what should I do with the extra 20k," I guess I'd answer with another question - what are you doing with your funds currently? It really depends on how and when you want to deploy the $20k - if you want to save up to $100k and that'll take you x years, then maybe it's best to put it in a market index, etc. If you want it to be immediately available for a real estate partnership opportunity, maybe you put it in a safe vehicle that provides great liquidity. Ultimately, the $20k doesn't *need* to be spent during the home purchase just because you have it, it should be providing some return benefit to you in some fashion.

Hope that all makes sense - let me know if you have any questions/thoughts.

I might not be following completely clearly, but here are my thoughts - in my understanding, the chief benefit of the BRRRR strategy is the big post-rehab cash infusion that offsets your project costs and allows you to roll into a new project.

Under my understanding of your description, the cash infusion from the bank is being used to fund the project, so there will be no big post-rehab cash infusion (unless you somehow sell the property for enough to cover the refinanced loan + make some substantial profit).

A possible option would be to get the property in rental shape and make the repairs over time as you accumulate cash from rental income - this would help you avoid taking on debt (and likely decreasing your monthly cashflow). Unless the rehab boosts your monthly cashflow to some significant degree, I don't see how it makes sense in this case - in other words, why would you pay a bunch of money up front/take on debt to make less money per month? Obviously I don't know the specific situation, so please let me know if I'm misinterpreting.

Edit: The one situation that would make sense was if you were willing to take smaller cashflows for a some number of years in return for larger cashflows after the refi loan was paid off. These larger cashflows would be delayed by however many years the refi loan is for, so depending on your investment horizons this may or may not make sense for you.

Hi Andre - from everything I've seen/heard, general doctrine on the LLC vs. no LLC debate is typically "get an LLC if tenants could come after you for a lot of money, but don't let a lack of LLC get in the way of scooping up a good deal."

I'd say keep things simple for your first property in the short term - close on the property as an individual, do more research and understand the nuances of what an LLC could/would do for you (by talking to an accountant/lawyer that understands your specific situation), and go from there. You can theoretically defer the decision - transferring property to an LLC later on can trigger a 'due on sale' clause in some mortgages, but lenders are not looking out for this as long as someone is paying the mortgage on time (at least in my area). 

Where's your maintenance assumption from? And, does it include capex?

Possible third option - could you refinance to pull some of the equity out of the home and rent it out? That way you get a nice cash infusion but don't lose a moneymaking asset.

Generally speaking, though, it seems to make more sense in this situation to keep the house & rent it out to keep a steady stream of cash coming in. How long would it take you to save for your first flip if you were sticking with just the rental cashflow? How are you thinking about partnership opportunities?