All Forum Posts by: Logan Loughmiller

@Patrick Roberts Thanks for that info!

After yours and others input here I think I'm just going to take the lowest FHA rate I can find - currently 5.5%/5.875% APR and refi as soon as I can. It makes sense to have that lower rate safety net.

I was curious about one of the things you said - "mortgage insurance (MI) on FHA loans is permanent unless you put down 10%+". 

I thought mortgage insurance was permanent on FHA loans for the life of the loan, regardless of down payment amount?

I had a creative lender pitch this to me, it has a lot of moving parts, but considering where we are at with mortgage rates, the logic makes sense to me.

Essentially they broker a lender paid temporary rate buydown, then refinance in 6 months before (or within the first year) before the one year temporary buydown ends. To a better rate. Which with everything were seeing, it seems highly unlikely we won't be lookiing at significantly better rates in 6+ months. They also said if I refi with them, they'll waive lender fees.

Worst case scenario, rates don't go down and I have a 6.125% FHA loan, which isn't terrible in todays rates and I can still refinance at some point.

Is there something I'm missing? Anything I should look out for with this?

Or is it a fantastic strategy given the climate.

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The mortgage brokers words:

FHA Lender Paid Temporary Buydown with 3.5% down, with this option your full rate would be roughly 6.125% (no cost associated to it) however, for the first year we as your lender would pay for the rate to be 5.125%.

If you lock your rate in with us before the end of the year (which you would be) we will waive our lender fees on a refinance for you when that time comes. In the event that you chose to do the temporary buydown we would ideally aim to refinance you before reaching the full rate of 6.125%

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My numbers:

Credit Score: 703

Home Purchase price: $629,900

Loan Type: FHA 30 YR Fixed Rate

3.5% down

Can anyone recommend a good/inexpensive company in Portland, Oregon for pouring concrete?

I need to add a sidewalk and also pour a foundation for a 12x10 shed

And/or for a good/inexpensive shed company that will build to completion on site?

I need a 10x 12 shed put up. Pre-fab is fine, whatevers cheapest, as long as the company will fully construct it on site.

Thanks!

Does anyone have a recommendation for a tax professional for AirBNB/real estate/small business owners?

I've had a heck of a time trying to find someone since I moved back to Portland. Most of the popular/highly rated places don't seem to be accepting new clients.

I also own an online retail business as well, that and the AirBNB are my sole income stream. That being the case, the usual HR Block "W2 factory" processors haven't been very helpful.

At this point I would also be open to remote processing with someone in state of Oregon that's reputable, I'm not stuck on them being in Portland.

Any and all recommendations greatly appreciated!

Yes! I did end up buying the property. It did check all the boxes/the cash flow numbers added up and I'm happy with the decision. It's really just a difference of a year or two of accumulated value, which already, is on it's way to making up for. Arguably. Currently Zillows estimate has it 25K below my price, Redfin estimate has it 40K higher than my price, for whatever that's worth. I'd be curious if anyone has any thoughts on the accuracy of their estimate calculators and/or if one is more accurate than the other. I've got a few more updates to get the AirBNB humming, but from everything I've learned from the local AirBNB community, I'm pretty confident it will produce in the way I expect.

Thanks @Karen Margrave - That's a good call. Though I would likely not do that kind of work (dense building projects) just yet as this is my first real estate investment, but it's definitely a reselling point as this area is rapidly expanding. It's currently mostly residential single families, but condominiums have been popping up left and right, one very nearby. It's on the outskirts of Woodstock, a very popular Portland neighborhood and in the direction that it's growing. 

The square footage lines up with that as well. A few people I spoke with advised that the end profit may be in the land if I hold it long enough, the lot is 6500sq ft, whereas the standard around here is 4000-5000. 

Very frustrating. Cold feet round 2. Appraisal problems. Sincere appreciation to previous and future thoughts and suggestions.

Appraisal came back $20K under offer. The appraisal seems wildly inaccurate in my opinion, ALL 6 of the comps were 13+ blocks farther away towards 82nd Ave, a sketchy area, NONE were in the other direction, Woodstock, of higher value. I was shooting for the path of progress and the place is truly square between a fancy neighborhood and a sketchy one, in the direction it will be forced to grow. Seems very lop sided, but I'm facing the circumstance that when I go to sell, it could be tallied the same and that 20K is just gone. 

I will note, that I do have the 20K, if I want to press forward. It is something I can do. But that's a big chunk away from other potential investments that wasn't expected. And obviously, I do have an out to walk away now. 

And just like the repairs, they're not budging an inch. Claiming to have other offers and bring on the termination if I don't like it, etc. And with how the market is right now, it could very well be the case. I'm trying in the midst of this to be realistic about the market, but not stupid. There was a duplex I was looking at that was listed at $450K and sold 2 months later at $595K. That blew my mind. The other thing that blew my mind is that the house I'm closing on, the Zillow estimate was 95K lower in March 2020. (and current Zillow est matches the appraisal)

I know people always say there's a housing bubble brewing, but the state of forbearance and eviction moratoriums has also crept into my fear state. As far as, what will happen when those things expire. There will never be a time when people aren't speculating about a bubble, but those two things are pretty concrete and will have an undeniable cause/effect. 

Some experts are saying to weather the storm by only investing in cash flow properties, no flips. As rental price increases are a much more secure stat right now.

I've talked with a local house hacking aficionado here, very smart (thanks @Brad Hammond!) that said it's very unusual to nail down a place that will cash flow here, the more common scenario here is a significant chunk of your mortgage. 

This place is ideal in that sense. I've ran the numbers through AirDNA and as an Airbnb, the 2BR/1BA in front can generate enough to pay the full mortgage. (While I live in the separated 1BR/1BA ADU on the back of the lot) A lot of work to take on to run that, but the numbers work to pay the full mortgage. No profit, no repair/upkeep $ mind you, but still. The cashflow is me not paying for a place to live. If I rented the 2BR out as a standard, lower maintenance, month to month rental I would contribute to the mortgage about the same that I pay for the house I'm renting right now, $1000.

Zero living expenses sounds amazing, but running an AirBNB with no cleaner is a lot of work to earn that. Not very passive and I'm already a business owner with a packed work schedule. A pivotal part of the whole plan though is cashing out at some point and I don't like starting out that game $20K in the hole. 

The numbers work, but there's nothing saying I need to do this deal, now, this month. It is arguably a perfect property for me with the layout (it also has a large detached garage I can run my online retail business out of), which is uncommon, but there have been others that would work. I'm sure there will be others in the future that would work and I'm patient. In the future after all the forbearance and eviction moratoriums tap out and the effects from those things roll in.

Thoughts? Suggestions? Past relatable experiences? Anything I'm missing?

@John B. As long as you're living on the property I think you can rent out several units. Confirm, but that's my understanding. I don't know how they tally the 2BR vs 3BR+ permits, but I've been asking around for a property I'm working on thats somewhat relate-able. Also in Portland, 2/1 in front that I'd like to make a 3/1, plus a 1/1 detached ADU where I live in back.

I don't know for sure if having multiple, separate units on the same property means you have to add them all for a BR total on a whole property or if each unit counts as its own >2BR easy to get permit. That would be a big thing to consider in your calculations.

Two people I talked to that have the 3BR+ Airbnb permits have said they paid 17K and 25K, with the basic fee of 6500, but there are a lot of other requirements, many of which require property adjustments. They did use a service to obtain the 3BR+ permit, which may have added to the cost (but taken away a lot from the headache).

I've mulled it all and looks like I'm going to go for it. Thanks for the wise advice all around! It did help me hash it out logically vs the emotional drive that can come once you've invested some interest. Actually just creating this post made me revisit all the profitability factors that drove me to put in an offer in the first place. 

Thanks for the words of caution @Karen Margrave. As mentioned in the last quick post (only had a moment) - 525K, 25K over asking, pretty standard right now and actually less than it should've gone for by my estimates. They picked a bid ending date of 7/5, a national holiday, which was preceded by an intense weeklong heatwave. The lot is 6500 SqFt, zoning is R5 Residential. Great location, on the outskirts/path of progress of a very trendy neighborhood and near the aforementioned $60K/semester fancy college. 5 new build houses on the block.

I did get an estimate for the foundation before the inspection period ends (today at 5pm!). They quoted me at $13K for the crawl space dig out/foundation fixes. Which I'm not thrilled about, but is acceptable for a down the road expense that I can tie into an upgrade job. I do have funds for expenses of this caliber, if they can save money or contribute value in the long run. However I am trying to allocate most of those funds for a 2nd STR property at some point in the next year. So I'm keeping that in mind. I don't want it all to disappear making improvements to this property, but I have the comfort of knowing it's there.

I'm considering the long term possibility of just digging out a basement. If they're going to rip up the floor, dig it out, solidify a foundation anyways, turn it into an ROI project vs just getting up to parr. I was considering an outside addition anyways to turn it from a 2/1 to a more marketable 3/1. It would only be around 600SqFt (house is about 700) so it wouldn't be building an underground lair or anything. Have to run all the real world numbers on that of course, I realize finished basements are very expensive and it may not be worth it.

And thank you @Joe Scaparra for lowering my blood pressure. :) I did get a really great inspector, who has followed up with me a lot and we talk pretty candidly about some of the things mentioned. I tried to negotiate the sale price, (I did respectfully drum it up as much as I could) but the owner is doing no concessions and adamantly not budging after 2 attempts at compensation. And quite frankly, I'm not surprised. A lot of sellers in the area are doing that right now and as mentioned above, they picked a bonehead time to do a bidding period, I was only competing with one other person in a very hot market. I'm confident the added property cost would've been more than the repair costs under different bid period circumstances. So it's not ideal for a normal market, but in current market circumstances and considering the average annual equity increase of 5-7%, I think I really scored, repair costs included.

I am finding friends for advice here and there. Chiefly the inspector. He's an investor that owns rental properties too and is the only person in the scenario who doesn't have stakes on contractor costs/whether I buy the house or not (I hired him directly, not a realtor referral) and intimately knows the structure situation. He stops short of saying things like "yes you should get it" obviously, given his job there are *some* liability/return business stakes. But he's had a lot of great "do with this info what you will" kind of advice, mostly in the form of either supporting or cautioning things I bring up, about contractors, seriousness of the issue and acknowledgement of the profitability of the property.  Definitely consider him part of the team for future properties. 

@Jeff S. Yes, I’m financing. It’s at 525k, 25k over asking. Gotta love this market!

It’s got about 6000SqFt of lot space

Would greatly appreciate input as this is my first investment property and my nest eggs going into it. 

Stats on the place: 2/1 with a completely detached 1/1+office, back lot ADU and detached garage. Main house is 1944 build, ADU is 2017

I paid for a lot for a very thorough inspection and I got just that. 190 pages photos included. Naturally to cover themselves, everything even slightly askew is marked as "should be looked at by a professional" on up to "should be repaired/replaced". 

ADU is golden, no surprise. Issues with the main house, also no surprise. Lots of suggested repairs, most in the $1K-5K and not immediately necessary, I'm ok with those. The numbers work.

Structure on the main house is the big high dollar concern and I'm having a hard time getting past it. I will note that there is no visible problems with the floor/interior, everything is visibly normal. The inspection stated not all was level, but fully functional.

Main problems:

- Low soil clearance or *no* clearance crawlspace - under the entryway and under the bathroom could not be accessed at all unless crawlspace is dug out. There is enough room for someone to get around the rest of the crawlspace. Some beams are on or too close to the ground which is a concern for moisture/wood rot/pests. The bathroom is of specific concern for plumbing access.

- Improper footings/foundation - They have done some work to increase stability but looks as though it was not permitted, as is sometimes typical with early 1900s homes, there are no footings underneath the vertical foundation wall. They added footings to vertical beams around the house, but they're pyramid type footings mostly used for decks, etc. 

Inspector said its not something that would need immediate attention and could (*could*) be fine for years, if not indefinitely. But very costly fix to correct. 

The Value:

I'd be living in the ADU and AirBNB-ing out the front house. I've considered that in Portland, with an average annual equity increase of 5-7%, even one years equity put back into the structure could potentially solve the problem. I don't want to eat that right at the start though. I'd like at least a few years of profit/equity from it before embarking on anything like that. From the inspectors perspective, I'd likely have that. Although if plumbing issues occur in the bathroom with no crawlspace access to it, that could become a very front and center problem quickly.

The value of the property aside from all this is fantastic. As pretty much everything else I looked at even close to the price point were mid 1900s duplexes, several of which were upper/lower and could very well have similar or other issues. This was one of the only detached ADU situations I could find at a good price point. This is particularly ideal for Portland AirBNB's, as the owner must live on the property they're renting for at least 9 months of the year. So there are very few setups where you can STR a full house year round. Less competition. It's also very close to Reed College, a $60K/semester school, so it would be a strong draw for wealthy visitors, campus tours/visiting parents, etc.

Also- my primary job is an online merchant, selling on Amazon/Ebay and I require a large space for daily inventory/shipping prep. No other duplexes I saw had anything that would work for this. A *few* had basements that could work, but not ideal. This place has a detached garage that's perfect.

I realize every house will have *something*, I'm just having trouble grappling with where you draw the line with "this is too much, I'm walking" and "this is acceptable to take on for the value of the property". All input appreciated.