All Forum Posts by: Kenton LeVay

Investment Info:

Single-family residence other investment.

Purchase price: $200,000

Bought for $200k on 12/31/2018, this was originally a SFH House Hack. I lived in one bedroom and rented the others while rehabbing the property. I ended up doing a cash-out refinance at 80% LTV on an appraisal of $339k. To the dollar, I got everything I originally invested back out of the deal despite going over-budget on my rehab (it was my first rehab! Lessons were learned...) and am cash-flowing at $800/mo!

What made you interested in investing in this type of deal?

It was my first deal. I bit off more than I could chew - combining a BRRRR and house hack in one. I tried to maximize my return and this was the best way I knew how at the time.

How did you find this deal and how did you negotiate it?

It was listed at $200k, I offered $205k the first day it was on the market. Was able to negotiate back down to $200k after the inspection.

How did you finance this deal?

Original Purchase: 20% down, 30-yr fixed, 5.25%
Rehab: Self-financed

Refinance: 80% LTV, 30-yr fixed, 2.875%
HELOC: 100% LTV, variable interest

How did you add value to the deal?

Did a full rehab: new kitchen, bathrooms, tore down a load-bearing wall separating kitchen and living area, floors, paint, landscaping....the works

What was the outcome?

Refinanced in July-2021 and got every dollar invested back out and am now cash-flowing at $800/mo!

Lessons learned? Challenges?

I suck at and am not a fan of DIY rehabs. Also, the cheapest labor is likely going to cause more headaches than it's worth. I tried to save every dollar I could so I started doing the project DIY. Turns out, I had no idea what I was doing so the project was taking way longer than I would have liked and stressing me out beyond my normal W2 job. Then I hired the cheapest labor to finish. They stopped showing up. Then I hired a better contractor to finally finish.

Sounds like you're pretty set on the Home Depot loan. I still would rather just pull out one personal loan and pay for the labor and material together but to each their own as long as you run the numbers and it works that's all that matters. I still would highly advise against giving a contractor access to your Home Depot loan. Even if you can dispute charges, you still are giving Home Depot the power in that scenario to give you the money back and for no real benefit other than it saves you a few minutes. You can order it and have your contractor pick it up in store.

I would absolutely NOT give a contractor (especially a contractor you are new with) log-in information to your Home Depot project loan! They could take that money and buy some new fancy tools or materials for other projects. I don't know why you need to use the Home Depot Project Loan to fund the materials instead of just another personal/home renovation loan from a different lender. This way you can buy the bulk of the materials up front and then when the contractor needs to run out to Home Depot/Lowe's for some random material, which is inevitable, have them keep the receipt and pay them back after. You won't be able to do this with a Home Depot loan because I'd imagine they only let you spend at the Home Depot...

I'm on an email list but haven't bought any properties through them yet

Well given recent moratoriums and law changes, you should seek a lawyer first. Not only will they give you guidance on what the local laws are around eviction but also if your weed clause in the lease is even legally binding. Because it's legal in CA, he may be well within his rights to have possession of it. If there's a clause in your lease agreement that is against the law (e.g. prohibiting tenants to have possession of marijuana, possibly) it could render the entire contract out of good standing. This is why you need to check with a lawyer first.

If the lawyer gives you the green light to evict, ask them about remediation. If he is refusing to leave you may need to hire someone to kick him out and I would imagine a lawyer that specializes in this or a large property manager would have a contact for you.

If the lawyer gives you the red light you really have no choice but to wait until the end of the lease term and then not renew the lease. I wouldn't inform the tenant of this until about a month before (or whatever the minimum length is in your lease) that you won't be re-signing him as to not cause any more tension in the relationship which could result in damaged property or him not paying rent.

I have an inspection scheduled for next Monday in Raleigh with Tim Cox. I'll let you know how it goes...

My advice is to just be clear about your goals and don't be afraid to ask questions. Any lender worth their weight should guide you in the right direction. Specifically, I'd ask about FHA loans and 203k loans if you plan on doing any renovations.

If you like the income and want to keep it, I'd say maybe consider a HELOC. Interest rates are still historically very low and it sound like you have about ($415k x 2 = $830k - $325k =...) $505k of equity! I say the HELOC because it would give you plenty of cash to pay for that $15k renovation now and you can pull the line of credit now that you could use to renovate the property when the time comes. I think lenders giving you the line of credit for 10 years is pretty standard but I'd confirm that before agreeing to anything.

I say HELOC over Cash-Out Refinance because while you're cash-flowing now, I don't know if you'd cash flow the property if you pulled out 80% LTV on a new mortgage, though you don't NEED to pull out that much if you don't want to...

All that being said if you're at a point in your life where you want to be done with it, a cool $500k (minus selling fees) seems like a nice option as well ;)

Hey BP,

I've looked around a bit for property management that is willing to rent by the room but haven't had much luck. This isn't something I ~need~ right now but it is something I'm looking to for scalability. Is anyone out there aware of or has had experience rent-by-the-room property management?

Ps: Located in Raleigh, North Carolina.

There are samples available on Bigger Pockets. You could also just search "South Carolina Lease Agreement" in Google and I'm sure you'll be able to find a website with templated Lease Agreements for you to use.