All Forum Posts by: Karissa Sampson

I own a duplex across the street from an elementary school on a corner lot. I love its location. Attracts families and people comment on how it seems like a safe place to rent because its so close to a school. There is some congestion on the roads in the morning and afternoon for about 30-60 min each time but its not bad. The city also just installed a few 4 way stops (former 2 way stops), repaved the road and added speedbumps to keep traffic moving slowly through the neighborhood since the kids cross the streets. There's a good amount of lighting in the neighborhood as well. Overall, I think its a very attractive location to be near an elementary school.

Hahaha...I love these! I do live-in BRRRRs in the Front Range of Colorado. My fiance is an accountant and carpenter/construction. We renovate ourselves. Expensive to purchase small multifamily but the appreciation has been and continues to be phenomenal and the rent appreciation has still allowed cash flow. The cash flow seems to be declining as I see purchase prices rise to the point that rent plus maintenance/cap ex is netting little cash flow, is break even, or in some cases (appreciation speculation) is upside down. 

I'll add one to the list..... You bought a SFH hoping to turn it into a multifamily property only to find out after closing that the zoning doesn't allow for it, you're in a sea of SFH zoning and the city zoning department doesn't like to spot re-zone.

From others...

15. You saved on materials, because you did not understand the difference between commercial grade and cheap (plastic shut off valves can cost you $$$!)

-YES! Something my father taught me early on. Don't buy the cheapest thing on the shelf. If you are buying and holding, spend the money. You'll save yourself headaches and repairs in the future. Use tile, real wood, metal, stone, and the more expensive paint whenever you can. Rarely do you need the highest end product (think Behr Marquee paint) but don't cheap out. I put ikea laminate countertops in my first BRRRR because I was simultaneously renovating 3 kitchens on a shoestring budget. A month in, my tenant was using the counter for wet dishes without a rack or towel under them and water damaged a section of the laminate. I think I'll bite the bullet for either custom-cut laminate or stone in the future.

16. You did not want to pay $4,000 to get that huge old dying tree removed, so mother nature did it for you

-Havent had this happen yet but I do look for ominous trees around properties when purchasing. I have a love/hate relationship with leaves. I want trees around my own home but not my rental. They fall on houses and their roots damage pipes and foundations. 

17. You thought the tenants would actually maintain, weed and mulch a dozend flower beds.

-I drool over xeroscaped yards now.

18. You finished the basement, but did not invest in a new sump pump, buried downspouts and improved exterior grading

-Thank god for Colorado. Also....test for and mitigate RADON! Other than smoking, its the top cause of lung cancer.

19. You thought you could save money by replacing only half of the bathroom instead of a full gut

-Meh. If the tub and toilet look fine no reason to swap. This depends on your market and class though. A full gut is probably needed in A class.

20. You thought you could save money by painting old cabinets and installing new stone tops on them

-I'm torn on this one. I swore after renovating old cabinets in 3 1978 kitchens that I would just tear out and go new next time. But the expense of cabinets is crazy and the quality of the older cabinets is better than a lot of the cheaper new cabinets. I've become quite efficient at cleaning, degreasing, sanding, adding shaker framing, priming and painting, and replacing hardware on older cabinets. The prep work is arduous but worth it if you ever want the cabinets to stand up to abuse. Using expensive Valspar cabinet enamel is the key too. I found that oil based primer (kilz) provided a nice even cover and filled in some of the larger oak wood grains to give a smooth finished look to the cabinets. Cost me $900 total per kitchen and looks incredible.

Reviving an old thread here...

I give gifts each year. Nothing crazy...a card accompanied by a bottle of wine, treats/toys for their pets, chocolates, the like. I have great tenants who know me personally and they are long term tenants. I think its completely appropriate and they tell me its appreciated. One of their dogs died suddenly and we sent a basket and a card. I'm sure it wouldn't be sorely missed if I didn't give gifts. I do believe that the cumulative way in which you treat your tenants can have a positive or negative effect (on whether they stay, how they treat the property, on-time payments etc.) depending on how you treat them. There's a difference between being a caring landlord and a pushover. Better to attract more bees with honey than to be an a$$hat. I don't plan to have thousands of tenants-but then again I don't see how this would be hard to scale. Set up a system for it each holiday season.

In my experience, this is called an 80-10-10 loan. Basically you bring 10% cash down and the lender will lend you money for the rest with a first mortgage for 80% and a second mortgage for 10%. Rates likely to be higher, but if you have no other options then you just pay the piper. Look at credit unions.

What the actual heck is going on in some underwriting departments? Does anyone know why a lender, who initial told us we could pull $159,000, then countered with $99,999, then countered again with $20,000 would do this?

Applying for a primary residence HELOC on a duplex, in the range of $110-150k to perform some renovations and use for down payment on new duplex purchase. Primary residence HELOC because my partner still lives there as his primary residence. Property is located in Boulder County, Colorado.

Current value: $545,000

Current remaining mortgage balance: $335,000 (Myself and my partner and both on the title and mortgage in our personal names)

Bank: Local credit union (the same bank that holds the first mortgage on this property)

Background: My partner still lives in the duplex as his primary residence. I've moved on to another property. Owned the property for 1y8m. Did a lot of interior renos (bathrooms, kitchen, repaint, fixtures, flooring) and added a bedroom. Have not renovated the exterior yet. Rented with 0% vacancy and 100% on-time rent payments.

Partner AGI is $106,320 (self employed x 10 months as an accountant. Was laid off for just over a year -due to COVID layoffs- but prior to that he has been employed consistently as an accountant since finishing his masters degree over 10 years ago. Also rental income) Credit Score 780.

My AGI $138,400 as a medical provider and rental income. Credit score 774

We have 4 mortgages (1 each and 1 shared as well as 1 shared HELOC) all of which are paid by our 5 tenants with $2000 monthly cash flow after the mortgages are paid each month. Other debts include a little credit card debt that he has, small auto loan of mine, and my student loans which equate to $9,240/year in required payments)

So, the HELOC loan officer was useless and told us she is frustrated with her job and basically dislikes her UW dept. because they work from home and she doesn't get to. But anyways, she shuffles the papers off to UW. They tell us they don't like that my partner only has 10 months of self employment and no tax return for this self employment. Tax return for 2020 was abysmal due to the layoff only 2 months into the year. Prior years look great (50-60k AGI). The UW refused to accept some of the rental income we have claimed (despite the fact we provided proof of rent payments and DocuSign signed leases from all tenants showing consistent tenancy and payments for the past 1 year 8 months.) We are also currently applying for a new mortgage to purchase another duplex and our loan officer and underwriter seem to understand all the moving parts that make up our portfolio (they "get it"). This HELOC lender does not. After the initial counter of $99,999, we very politely emailed back the HELOC loan officer to try to clear up any misunderstanding (things we learned can be confusing to some loan officers and underwriters in the past and that our other lender suggested we tell them to ensure they were understanding our financial situation). The HELOC loan office apparently forwarded that email to underwriting. From there, our HELOC application was escalated to the senior VP of underwriting for their bank who responded back by countering their initial counter offer with $20,000 final offer.

I am completely dumbfounded as to how this went down. We are under contract for another duplex and depending on the HELOC to make it happen. Lesson is learned-do your refinancing further ahead of time because you never know when something crazy like this will happen. We are already in contact with other lenders to obtain a HELOC before we hit deadlines on our contract. We'll ask to extend deadlines by a couple weeks to make it happen and if all else fails, we will bow out due to financing before our deadline. I feel bad for the seller if that happens (but I also know she had 18 other offers, so not that bad.) There have been some big lessons learned here as stated.

But back to this lender.....what could possibly explain a $20,000 HELOC offer when there is $210,000 equity in the property? Also, should I pay for an appraisal on my own in the future once renovations are done as we BRRRR (vs. waiting for the appraisal during the refinance/HELOC process?) Any other advice or things I am missing?

@Andrew Postell I noted this comment of yours from another post regarding this subject earlier this year:

"....you will likely NOT find most long term loans based on theARV. This is mainly because they don't fit what we do. For example, Fannie Mae has a renovation loan that will based the loan on the ARV of the property. The interest rate is 1/2 the rate as hard money and 1/2 the fees as hard money. So why don't we use that loan? Because it takes 60 days to close and STILL will require us to have a downpayment. So even if I find an EXCEPTIONAL deal I will still need 20% down or so with this Fannie Mae product. But with Hard Money I won't. Hard Money does mean though I will need to refinance later. And THAT is exactly what the BRRRR strategy is. We use short term money to BUY (because it closes faster and has less out of pocket) and then use a 30 year, fixed rate to REFINANCE because we built in the necessary 20% of equity."

This makes complete sense to me. Our plan is to rehab the property as fast as possible but probably looking at 1 year turnaround. What kind of terms are there on hard money loans? It seems that I would be looking at a significant amount of interest over the course of a year, if I'm holding it that long to do the renovations ourselves.

@Andrew Postell Thank you for bringing this up. I have heard people on the BP podcasts mention this, but am not familiar with it. How would I approach this with a lender and what is the terminology used for this type of loan? 

@Jason Wray

Thank you for your thoughtful input. I am using traditional owner-occupy residential lending at this point, so buying multiple properties will require more money down in a market that I cannot afford to spend 25% down on multiple properties. I have thought about out of state investment properties, but my inexperience with them is daunting. I know my local market is good for cash flow and phenomenal appreciation. With rising property values, cash flow is getting slim. If I move my money elsewhere, I have concerns that the property will be an either/or situation between cash flow and appreciation. Whilst I know David Greene and others preach that appreciation is the key to wealth (not cash flow), we would really like to free ourselves from trading our time in a seat for money. I rely heavily upon my fiancé, myself, and some of our friends/family who have construction experience to do the renovations. We buy properties primarily in winter when our local construction crews are a little less busy and our friends/family have some extra time. My fiancé and I have jobs that tie us to the area (for now...) but allow us some flexibility to have time to work on the renovations from home. This is how I renovated a duplex in 2020 with only $6,000 (entire 2800sqft interior painting, refinished/re-faced two kitchens and replaced all appliances in each with used/like-new appliances, new sinks, new tile backsplashes, new hardware, new sinks/faucet, 25% flooring replaced, and one bathroom (everything but the shower which was fine as-is). I know the places to go around here for deeply discounted items like vanities, cabinets, appliances, light fixtures, etc. What I have not been able to figure out, is how to find deals on properties in my area for way below market value (I'm working on this now). I have been successful in purchasing for 4-10% below market value at least and then adding value. That duplex I mentioned, we bought for $434,000 with about $87k of that as our down payment, put $6,000 into it, and had it appraised recently for $570,000. I don't have the bids on the work to turn the new duplex into a fourplex yet. I don't plan to contract it all out to someone. We will be doing the majority of the work ourselves again. Some things we will contract out (new city electric connection and breaker box, cutting the concrete for egress doors and windows (not installation, just cuts, we'll do the rest) and the rest we plan to do ourselves. 

If anyone else has input...I'm all ears over here!

I would appreciate experienced investors' input for my BRRRR plan. My primary question is, does anyone have experience converting a duplex into a fourplex? The additional 2 units will be basement level units. The property is zoned appropriately to allow this (allows SFH, 2/3/4/10/50/100 unit complexes, co-ops, literally everything) and would require only a site plan change application (to change from current county duplex/triplex status to fourplex status) and normal renovation building permits. I spoke with the assistant director of both the building coding/permit office and planning department about it and they didn't see any issues. Based on code requirements, setbacks etc., the property seems to be a great candidate for this. The duplex sits on a 1/4 acre and is centrally positioned on the plot of land. Its a brick ranch and has an unfinished basement that is the same square footage as the main floor (2,100 upstairs and 2,100 downstairs; so 1,050sqft per unit), basement is subterranean and ceiling height is only a few inches above ground level. I have experience renting multiple units in this town and am sure on how much rent I can get. Current value of 2:1/2:1 duplex is $550k.

If we just add 2 bedrooms and 1 bathroom by finishing the basement, the total rental income of $5000/month. ARV estimated to be between $625-650k.

If we make it a fourplex, accounting for lower rent for lower level units, the total renal income is $6400/month. ARV estimated to be between $725-875k.

So I'm wondering if the conversion from duplex to fourplex is worth the extra renovation costs. We are going to have a general contractor friend come out and bid it both ways for us.

Has anyone else done this before? Was it worth it? What should I anticipate that I'm not anticipating?

thanks in advance!

I live in Colorado and see the view from both those wanting to rent out STRs and the affordable housing issue for workers on which the overall success of these mountain towns rely on. I think a reasonable approach and middle ground would be to require any property wishing to obtain a STR license to have to offer LTR at the same property-whether that's renting out their STR for long term part of the year or having at least a portion of the units be LTR. I was looking a while back at a property in one of these towns which had been converted into a triplex. I was planning to rent out 2 units as STRs and 1 as LTR (or vice versa) to keep some of the housing in the community.