All Forum Posts by: Marcela Correa

Tim, 

After only a month on BP, I'd venture to say that the BP answer to your situation is "better to have a $27,500 deal than no deal at all." We closed on our third investment property this week and I'm already frustrated that despite hiring the architect weeks ago I'm only now seeing schematics to review (we were willing to take on the expense despite not yet owning the house because it would save a lot of time on permitting). But I keep reminding myself that this is our third deal and we're doing things much better than the last time. Congrats on pulling the plug quickly with each wrong turn so that you didn't lose even more $$.  Good luck on the resale. 

Thanks, @J Scott . I like all of my risk to be well-informed risk! I'll take this opportunity to thank you as well for all the knowledge sharing. I am pouring through your books right now. Look forward to meeting one day. We're in DC.

 It may be time we had another consultation with an HR attorney. As of last time we checked we hit enough bullets on the list that we didn't have to acquire WC: our day laborers can manage their own hours, are not bound to a schedule when they have to arrive or leave by, and they use their or our tools depending on the work that day. We do have extensive GL. This is an expense that's covered by the GC side of the business (as opposed to the investment side) so the investment side gets benefit from the GC's overhead costs.

We own a general contracting company and we use a lot of day laborers. The risk with using them is that they are not committed to being available to us every time we need them. We pick up non-skilled labor for demo. If we find that they're disciplined and have a good work ethic, we'll have one of the other day laborers teach them additional trades. It pays off in that we get the work we need done and we have someone that is more loyal to us and will likely return to us if we need them. Even for the same wage, we've found people prefer working for us if they feel that they have learning opportunities. 

Thanks, @Joe Villeneuve for providing alternative scenarios. I'll keep thinking it through and studying similar posts on BP for other possible options.

Thanks @Joe Villeneuve . We're definitely itching to get the equity out. Kills us that it's been tied up this long but we're trying to make decisions now that will put is in the best place one and two years from now. Just writing the post has helped me think thru this better!

@Eric Black 

Thanks for correcting that BIG misconception on owning for five years. I'll complete me two years of occupancy in September. 

Because I quit my day job to dedicate 100% to real estate investment, I have been informally told by my mortgage lender that I won't qualify for a HELOC. I'm establishing relationships with community banks because they're less concerned with my employment status and more interested in the return on our future investments. That's why I include the refi costs. I hadn't considered doing the refi and the conversion and then continuing to hold the properties. According to a post I read earlier, it sounds like I could get the units reappraised then to update my LTV and access more equity.

I’m a newbie investor with all my starting capital tied up on my second deal. I’m seeking advice whether to: (1) sell; (2) hold and pull equity out; or (3) a creative financing solution that I have not yet thought of…. Here’s the scenario:

My uncle and I own a general contracting business. We used a 203k to buy a single fam house that we totally rehabbed and converted into 2 units. Our mortgage is $670k and the property currently appraises for $1,050,000. We have the option of converting to condos, a process that will take about 6 months, and sell the two units for a total of $1.2 million. That’s a fair number given the comps within a 10 block radius. I believe I’d need to refinance to a commercial lender because my residential mortgage won’t allow me to do the conversion process. With conversion ($20k), refi ($7k), closing costs (7.5%) and a little debt ($20k) we still have from the renovation, we’d net about $393k.

The alternative is to hold the property. We are in year 2 of a 5 yr ARM with a $3500 monthly payment. We rent one unit for $3800 and occupy the second. In September, we can move out and rent the other unit for $3200. If I can hold on to the property till 2017, then I could sell and take advantage of the capital gains tax relief for holding the property for 5 yrs and occupying for 2 (and net $42k a year in rent). As I understand it, to pull equity, I would still have to refi to another bank (commercial lenders have said they'd charge me a point) and then I'd get 80% LTV or $170k (I'm at 64% assuming the $1,050,000 appraisal). I don't know if I could still do the conversion and hold both properties in a portfolio and then my LTV would improve. Back of the envelope tells me that I'd be around 58% LTV and I'd then have access to $263k in equity.

Our goal is to buy, fix and flip--no more condo conversions in the near future--and we want to access this equity to do so. Holding seems like the better option but is there something I'm not considering? Are there other ways to leverage this property? I welcome all advice on this scenario and on how to identify a mentor in the Wash, DC area. @J Scott, I will buy you coffee or lunch anytime. THANK YOU SO MUCH to @Josh Dorkin, @Brandon Turner and everyone on BP: this site is now the wind under our sails! 

Thinking ahead of the curve for a future good rental market, I'd look at upcoming or underway transportation projects. In the DC metro area, there are several large transportation projects: new metro line extending to the international airport, Dulles in VA, and several proposed street car lines in the city. There is tons of development going on around these new transport corridors. These are potentially future good rental markets. An investor would have to analyze the potential and the trade-off of buying cheaper early on in the redevelopment plans with the need to hold the property for a while before knowing whether the bet will pay off.

Good luck! I am in business with my family. I know that it doesn't work for everyone but it has been a blessing for me. It totally addresses the trust aspect of a business partnership and also provides a lot of flexibility in terms of the time committed to the business. Real estate is a 24 hour endeavor for us and working with family means we can "talk shop" even while at the family Sunday dinner.