All Forum Posts by: Joseph Walsh

I'd put it into an index fund, reinvesting the profits, and in 5 years, start living off the profits, retired early, letting my traditional retirement funds grow until eligible age and add those disbursements to my income.  at first I thought I'd take the profits each year and leverage that into a rental.  But the point for me is to get to a point of completely "hands off" investing, and RE is a means to that end, not the end itself.  If I had that capital suddenly available, I could skip to the end.

That ceiling that @Jerry Padilla mentioned only applies to the deferred financing option.  Something I mentioned only because it might be something that would apply to you in a future deal, and not on this property.  The ceiling on a regular refi is whatever the max % the lender will give based on the current value.  The others here have given  you the info on how much this can vary, my original response should of be couched with "typically".  But you should be good to go if you follow all the advise here on documentation, shopping around, and being mindful of your cash flow.  One other thing, they won't just give you a loan of x%(let's use 80%) of "whatever" it appraises to.  They can lower the amount if the appraisal comes in lower, but they won't automatically give you more if the house appraises higher. So when you apply, try to have a good idea of what it likely will appraise for, and apply to take it to 80%(or whatever) of that value.  They basically treat it like you are trying to "buy" the  house from yourself, from a paperwork perspective.

Congrats!

You can do a "cash out refinance" and effectively "refinance" into a first mortgage.  There is typically a "seasoning" period of 6+ months of owning/living in the home before you can do that.  And the max you will be able to do is 80% of the new value of the house (depending on credit rating, it could be a lower %) and of course the rate also depends on your credit rating.  

There was an article recently on how that seasoning might be avoided by  using "deferred financing" , but you need to actually document that at the time of sale.  Seems like it would be worth learning if you repeat this process.

 Sure, I  think I used Homestyler, I liked it because I could drop representative doors/windows and adjust their elevations (it was a basement reno) plus it would calc sq. footage etc.  But I suspect anything similar would work.  I was doing electrical as well, and I just over-layed the electrical diagrams on a copy of the floor plan by hand.  You'll likely have an electrician for that, especially in a rental.  Good luck

 Fair enough, you are right on the scaled drawings, I forgot about that.  Thanks for adding context that I failed to include.  And you are 100% right on find out what they require first.  My Municipality is typically more   particular than most, requiring permits for bleeping everything ( A shed, replace a lamp post....).  However, I find that permit offices, and inspectors are very helpful.  And they are there to help and protect the home owner, and most don't seem to mind a giving a little helping educational info along the way.  I still stand by most places don't require an architects stamp if you aren't making more significant changes.  In which case you likely need a structural engineering report as well.  But just ask.

All that said, one of the biggest things to keep in mind, when doing a "renovation", you are pretty much required to update everything you touch to the "current" code, don't assume you are grandfathered in.  Add a bath fan?  Yep, you also have to update the outlets to gfci....etc.

If you aren't doing any structural work (removing walls), in most places a decent hand-drawn floor plan, with electrical box/switch/light locations typically will suffice, maybe hand-rails etc for stairs, etc.  Door and window sizes, the total count of electrical fixtures (don't forget hard wired smoke/CO2 in the counts) and that should cover remodel and electrical.  They need something they can mark up and tell you, "need 32-inch door here, 40" window for ventilation, etc.  that said, I just used some online floor plan tools,printed, and had put in the electrical overlay and stuff.

If I had know what I know now at your age, I'd be retired already.

Your advantage is your youth:

You have the time/energy to do a "second job" in real estate.

You have no wife/kids (assumption there) to support, so you can live like a hermit for a few years, house hack, and rack up some serious starter capital.

- plus you can move every year and get low FHA owner-occupied loans

You have a good paying job as an engineer, which will help you build your credit score and also make loans easier, negating the need for "alternative" financing to get started.

you have time.  The power of compounding applies in real-estate also, you can leverage time to acquire more and better properties, while still working your "real" job at a rate you can handle.

unless you fall suspect to "lifestyle inflation", your investment capital from work should increase quickly since as a young professional, you should see regular raises early in your career.  Don't spend it, invest it!

you can also hedge  your bets by maxing your employer 401k match and max your roth now, giving you options later on, because you never know.

Your penalty for failure is less., if worst case happens, and you crash and burn, at your age, overcoming a bankruptcy or having to walk away from a property, you can rebuild your financial picture well before it's a more significant part of your daily life when you are older, and might need to leverage credit for the bevy of financial demands that come later in life. when you do have kids, a house in the burbs, 3 cars, and college payments....etc.

Your lack of experience is the same as anyone else getting started, like me, twice your age.  Now that  I have a few years in, I "get it", you just can't learn it all sitting on the sidelines.

Good luck

I found after being an "accidental" landlord (how I got my start), I don't have the personality.  I have a good, but unreliable tenant, and couldn't crack the whip to get him paying on time regularly.  After about 3 years, I hired a quality property manager, and haven't looked back.  The tenant is now regularly paying before the 1st! (his due date is actually the 5th)  I factor it in to all my cash flow evaluations now, even for something I did decide to self manage.  Also of note, student rentals are more involved than sfh, so a property manager experienced with students might be something to look for.  The only downside of not doing SOME self management first, I did learn from that and use it to be very specific in what I wanted in property management.  You don't have to just take their "package" of what they typically do, if you decide you want them to do regular visits, and send pictures, or say manage repairs up to X$ without calling you (from escrow), outline that upfront, as long as it's reasonable, a good company should accommodate.  They also should have recommendations of things you didn't think of.

Seems like you are referring to the FIRE mentality. Which a lot of those on BP are advocates of. What I think is missed, is this is not a FIRE site, so there's the second part that get's glossed over. The mentality is: Live on as little as possible, invest/reinvest the rest....and here's the other part.... Until you don't have to anymore. So, if you can put away $25k a year, for say, 10 years at ~10% ROI, you now have 500k (compounding/snowball) with which you can "take" 50k a year of, every year, forever, for example. Now, look at that from a real-estate perspective. if you BRRRR and leverage, you can cut that down to 5-6 years, in theory. So the key is, put yourself in a good position early, with some frugality, and reap the benefits for decades to come.

You probably can get them at Home Depot in the Tek screw area, for attaching metal lathe.  Or, if you're area has a Farm supply, like Fleet Farm here in the upper midwest.  They are self tapping screws.  I am assuming you need to replace a missing one?  You probably don't want to use the same hole, but to fill the hole and drive another one nearby.