All Forum Posts by: Matthew Lewis

Thank you for your reply! I think the part I quoted above is the crux of the matter. If I'm reading this right, buying at a discount basically means one of two things:

1. Buy a livable place that needs some updates and cosmetic work for a lot less than market value, like finding an owner who needs cash fast for a life event, etc., OR...

2. Buy a place that's solid but REALLY run down and needs a serious amount of work to be considered livable. In this case, the property is so far gone that paying contractors can still be profitable.

Do I have it right, or are there other ways of getting a property at a discount that I should consider?

I keep hearing examples about paying contractors $15k for a rehab that adds $40k of value, and similar numbers, which seems highly unlikely to me. Am I still missing something?

So I totally understand how to add value to a rundown property by doing the work myself -- it's good old-fashioned sweat equity (more properly termed "trading time for money.")

What I don't understand is how it works to add value (at least profitably) by hiring it out. I mean, every realtor I've ever discussed home improvements with has basically the same list of improvements, and all of them claim a negative ROI. For instance, spend $10k on a kitchen remodel, increase your value by $8.5k (or whatever, but it's always less than the expense).

I figure I must be missing something, because BiggerPockets is full of investors talking about their contractors, etc. I just don't understand how to hire out the improvements and still make a profit on them.

Could someone explain how this works?

Let me preface this by saying my wife and I are real estate newbies, so this idea might be horrible. That said, it seems to make sense conceptually, so I'd be interested in more experienced opinions.

In a nutshell, we're thinking of taking out a HELOC on our home, buying a piece of land, building the shell of a house on it, renting out our primary residence, and then going to live in the shell of the new house as we build it out into an off-grid homestead property a little at a time. When it's done, we'll either decide it's our own forever home, or we'll sell it and move on.

The main risk I see is that we don't really know what we're getting into when it comes to building an off-grid home. We'll be able to get some ballpark figures on the big pieces, like solar, septic, well, etc., but we'd definitely be learning as we go along, which means there will be a lot of financial variables that we won't know about at the outset. 

My W2 job will cover a couple thousand dollars of expenditures per month, and we'd have the rent money from our current home, plus some HELOC funds available if needed, so I don't see financial survival being an issue. That said, I want to avoid getting into a situation where we want to sell but we're under water on the property.

Ultimately, we'd be counting on property appreciation and our sweat equity to provide enough value to make a profit if we decide to sell a couple of years down the road. The problem is I don't know how much of a pipe dream that might turn out to be. ;)

I should add that this is only one "strategy" we're considering, and we're only considering it because we do desire to personally live off-grid way out in the country someday. However, it might be more feasible to invest in a few more traditional deals first and use that as a springboard to eventually pursue our own personal dream. It's just that this seemed like potentially a way to have the best of both worlds; i.e., get some experience as landlords while also moving to our preferred environment.

I feel like I'm opening myself up to a slew of "you're crazy, pal" responses, but if so, better to find out now than later! Any and all productive feedback is welcome and will be taken to heart.