All Forum Posts by: JP Crowe

@Steve B., I guess it all depends on where you are on your investor journey. Your blow-hard companion may not fit the bill but I've noticed that more mature investors are just naturally more skeptical of future growth outside the metro.  If I was a more experiences investor that had rode the wave of appreciation since 2008, I would be a lot more conservative in my outlook as my goal would now be to protect the wealth I'd already built while aiming to sustain growth. In that case, staying in the metro is a safe bet, and there's still great money to be made if you can compete. This is a nice vantage point, but I do think it tends to distort the picture a bit. 

Well that is until the wave comes crashing down again and the west coast metros prove them right, as they certainly are equity havens during a downturn.     

In my case I'm at the start of my investor journey (and not ashamed to admit it, after all, you have to start somewhere). As such I would rather not compete in the metro and am happy to take on a little more 'risk' and earn less, if it means I get some solid deals and most importantly, get the learning experience. From this perspective I see opportunity in the feeder markets and generally a more rosy vista. 

@Chris Parrish, thanks for reaching out, I've sent you a PM. 

Hi there,

I'm a young and hungry investor on the hunt for deals. But I live in Portland, OR so that means contending with high prices and fierce competition. 

I'm wondering if there are people out there in a similar position, and what areas outside the metro area they are focused on? 

I have my eye on Salem, which seems to offer a lower barrier to entry (price-wise) and, considering it's where the state government is run, provides for a stable demand for housing.

But are there other pockets (say, within 3 hours from Portland) that are worth looking at?

Thanks! 

Dani, 

I will definitely be looking into the Home Depot project loan.

The capital gains exemption, and HELOC options are also definitely worth bearing in mind.

Thanks for the feedback!

Brent, 

You are correct sir! 

After looking at the numbers again, they only make sense as a flip. In other words, if we sold for the predicted ARV (351k) we would have created 116k in equity. We could then pay off the 60k loan, and net 56k. This is roughly speaking of course. Holding on to the property via a BRRRR would not be a cash-flow positive option, as you point out.

Better a correction on BP than a financial disaster. Thanks for the great feedback! 

Hey All,

I have a live-in BRRR and would be interested to hear what you think of my plan.

Background

My wife and I bought a fixer-upper in Portland OR at the beginning of 2016. Our reason for buying this particular house is because it has an unfinished basement. Once finished this basement will take the house from 660 sqft to 1320 sqft, and from, essentially, a 1 bed 1 bath to a 3 bed 2 bath. We also plan to refurb the upstairs bathroom and kitchen, as well as replace the siding and improve the landscaping of the 3100 sqft lot.

Questions

I am now looking for a way to finance the refurb. The main questions I have are: 1) should we refinance with a FHA 203(k) loan, and 2) should we rather attempt to get a hard money loan?

• The refurb will include structural so I’m assuming I would have to use the Standard 203(k), which has no price cap but limits you to a single contractor, six month deadline and requires inspections of all the work
• I’m guessing this would mean a much higher price tag for the refurb, and less flexibility around scheduling and execution of the work
• I am unsure whether a hard money lender would favor such a deal, but I would imagine that if we could secure a loan we would not be limited to using a single contractor and could get the job done for less.

Exit Strategy

Ideally, we would like to do a cash out refi after the refurb and roll the profits into the purchase of a multi-family. We would then rent (or sell) the SFH (depending on the market at that time) and house hack the multi.

Considering our exit strategy the 203(k) seems financially inefficient, as we will have to refi via the banks twice (once for the 203(k) and again for the cash out refi). It is for this reason that I want to really push to see whether hard money is an option.

Here are the numbers:

• SFH purchase price: $235 000 (5% down payment conventional loan)
• Refurb est: $60 000 (this is conservative, and with some sweat equity we should be able to keep it lower)
• ARV: $351 000 (avg of 5x recently sold SFR comps in my local neighborhood)
• Difference: $56 000
• Assuming LTV of 80% on the refi that's $44 800 cash out

Of course there are closing costs and loan payments to consider, but bearing these added expenses in mind this still seems like a feasible plan.

If someone on BiggerPockets has executed a similar strategy I’m all ears and eager to learn. Lastly, if there is something about this plan that isn’t lender friendly, how should we restructure the plan to improve the deal from the perspective of the lender?

Any feedback would be a great help!