All Forum Posts by: Matthew Porcaro

Join us at Sand City Brewery for an evening dedicated to empowering aspiring homebuyers, house hackers, and future real estate investors! At this casual meetup, you’ll have the chance to:

• Network with like-minded people who share your interest in real estate, house hacking, and investing.

• Learn about house hacking and renovation loans like the 203k, ideal for buying and fixing up your first property for little out of pocket

• Get tips on navigating today’s housing market with strategies that make homeownership and investing more accessible RIGHT NOW here on Long Island

Whether you're just starting or looking for your next property, come by for great conversation, insights, and a drink with a community of motivated action takers!

 The ways to make a house hack work well are either: 

1. You save yourself part or all of your living expense by house hacking. A win could be, if you're currently (or potentially could be renting) at $2,000 a month, and you find a house hack where you only need to contribute $1,000 a month, you're saving yourself $12,000 per year which could be saved or better invested into other assets. 

2. You buy a good deal. You want to be a house hacker because you want to invest in real estate. Being an active investor in real estate means first and foremost seeking out and creating profitable opportunities. 

In the case of your deal, its negotiating down with the seller to get the property at a discount. 

Or, renovating the units using a 203k or other renovation loan to increase the value of the property and subsequently the rents of the other units. 

Properties arent listed on the MLS to make you rich or wealthy. You need to seek out the opportunities by having a sound deal finding strategy or exit strategy (or both) by having a true plan to find deals that work this way.

 If your lender is only working with a "list of qualified contractors" thats against the 203k guidelines and a huge red flag. 

Any licensed and insured contractor qualifies to do a 203k loan. 

I'm not sure what you're used to, but getting paid in draws is common in professional construction. Progress payments, AIA billing, etc. 

Also, you absolutely have control of the money. The check is written to both you and the contractor. You have to endorse it, and the HUD consultant verifies the work has been completed. It's actually the safest possible situation for an inexperienced homeowner.

Any licensed and insured and legitimate contractor is used to getting paid this way. 

The bank is giving you all the money to purchase and all the money to renovate in exchange for just 3.5%. It's an incredibly powerful form of leverage. So yes, they expect the contractor to be licensed, insured, and qualified. 

Any contractor that has done insurance work or commercial work this is commonplace.

@Jaron Walling

Specific contractors? What are you talking about?

@Brody Veilleux

Yes you can absolutely still get tax benefits! You do not need the property to be in an LLC or business entity to be able to take deductions, write offs, etc. It's a very common misconception.

@Brody Veilleux

I did all my house hacks with renovation loans. FHA 203k and Fannie Mae HomeStyle.

Doing the house hack + brrrr strategy using these loans is absolutely the best way to do this.

You can find fixer upper multiunit properties which will in turn cash flow better after you renovate.

Youll be more likely to buy at a discount and don’t need the property to be move in ready to purchase.

You’ll use the banks money to completely fix it up, also increasing the equity of the property which comes in very handy when you’re ready to refinance to get rid of mortgage insurance, potentially pull a heloc, or just be more bankable in general.

One of the concerns above is not being able to do the work yourself on a 203k.

I’ve been in this game a while, and I can tell you that the people that are new that think they can do work themselves often times get in over their heads and think they’re saving money. But they actually end up costing themselves a ton more time, stress, and about the same money.

You’re getting the bank to finance the reno. So find the right contractor for the job and get it done quickly and efficiently.

I grew up in the construction business and swung a hammer since I was 12. I still don’t do any of the work myself on my properties.

It's. Great strategy and you have a lot of options now with Fannie Mae now allowing low down payment owner occupant loans on up to 4 units. It used to only be FHA.

If you have any other questions please don’t hesitate to ask!

Hi Brody - first, why do you want to transfer it to an LLC? I'm not a lawyer, and you can speak to an attorney about this, but in my experience people are typically thinking that putting their property in an LLC "protects" them.

If you're the sole owner of the LLC, it just acts as an extension of you. That alone will not protect you from litigation.

So there really are no pros, in my opinion, to putting your property you're house hacking in an LLC.

The reason you get the low down payment and the low interest rates are because you're personally guaranteeing the loan based on your stable income. 

If your concern is liability, what I did was get an umbrella insurance policy on the properties I house hacked under my name. That covered any incidentals or lawsuits that could arise with my tenants on the property. 

Buying a property to house hack with an LLC basically defeats the purpose of doing it. The idea of house hacking is using owner-occupant low risk mortgages to become a real estate investor and a landlord, to jumpstart your journey.

But ultimately, that's a decision you need to make with your attorney. 

You could possible explore a second home fannie mae homestyle loan. The points up front might be a little high, but if you have some equity there you could refinance into it and wrap the costs in. 

The homestyle will give you the money to close out the other lien and the additional money you need to fix it up. 

If you have multiple people on the loan, it's going to make things trickier later.

In my opionion, the best way to do this is to buy the property yourself. You lead the way. Then you find friends to rent it out to. 

Outside of that, your other options would be to buy a house using investor financing with an LLC that you're equal members of, and share equity of the property.

That would require a lot more money, and partnering with more than 2 people would just sound more work than its worth. 

Just my opinion. 

This is correct, a lot of the FHA guidelines have changed in the last year making ADU financing a lot more acceptable and easier. You can do brand new builds on ADU's and you can use 50% of the future income from that ADU to increase your approval amount.

Fannie Mae HomeStyle does this as well. 

Caveat is these are owner occupant loans.