All Forum Posts by: Matt Vogt

Another option is spending your time to run the wire and have the electrician do the connections. Cutting holes in drywall, drilling through joists, and fishing the wire is definitely challenging, but this isn't the dangerous part. It definitely is time consuming, so if you can do a lot of that work yourself, you'll save some on the labor expenses. Also ask your buddy if you can help him out to reduce the costs. 

To run wire, you'll need a drywall saw (~10 bucks), a paddle bit (3/4" or so), and a few long drill bits (I bought a 72" long x 1" bit for around $40 online). A 36" bit would also be nice to have. 72" bit - link to see what I'm talking about. You'll also need a fishing tape or fish poles (~20 bucks) and some electrical tape.

Youtube is your friend... 

Good luck

It all boils down to the deal specifics. Here's a very basic formula that would need to work out in order to BRRR successfully... keep in mind, this doesn't account for your rental portion, just the buy, rehab, refi portion.

Purchase price = [75%ARV] - Rehab costs - carrying costs

@Bryan C. The person spending the money doesn't dictate what are acceptable methods of payment, it's the person receiving the money who chooses. Some restaurants don't accept credit cards, nor do most street vendors. Just because I have the funds available on my credit card doesn't mean that I should be able to use them with any and all vendor simply because I'm the one buying. A transaction is a mutual agreement, mutually meeting on terms etc. 

I assume you have a bank in the states right? Can you setup an bill pay service online that your bank mails out on your behalf? There might be a few day delay, but usually it's within 5 business days. Additionally, you'll be able to pay funds larger than 10K (it will all be domestic). 

Good luck

Some lenders have a residency clause in your mortgage requiring you to live there for a certain duration. Typically its 1 year, but as you just re-fi'd, I  would read those loan agreements to verify. The likelihood of getting caught probably isn't high, but the risks certainly are (having your mortgage called, god knows what else). Sounds like the 5% down conventional route might be a good option for you. 

Best of luck

Due to PMI lasting the entire length of the mortgage, you may be better of coming up with 5% for a conventional... that way your PMI will drop off when you reach 20% equity and you'll save yourself the cash of a refi or the PMI cost.

Typically there is an occupancy clause in a mortgage that requires the borrower to live in an owner-occupied house for a certain duration. I believe it's typically 1 year, however this could vary depending on the mortgage. Best bet to ensure you're on the up and up is to look through your loan docs. My bet is that you're totally fine. Good luck with the ventures!

How much is the property? I assume its more than the 50K needed down (typically 20-25% down), so maybe 200-250K? 

Are you trying to finance it with conventional financing and just need the down payment? If so, that's probably going to be an issue for a lender to see borrowed funds used for the down payment. Banks look for the funds to be in your possession for at least 2 months for conventional financing. 

Maybe you could do a hard money lender, explain that you'll need 6 months to get it re-fied and go from there? Alternatively, do you have a 401K you can borrow against, friends with 401k's, parents that have idle cash, etc? Do you own another property that you could pull equity out of? When all else fails, turn to friends, family, and anybody else you can round up to borrow cash from. 

Good luck

@Bill Exeter

The OP stated that they bought it to live in initially, and are now considering selling it as a flip. As long as the house is owned as a primary residence for 2 out of the last 5 years, then all capital gains are tax free. 

It sounds like the underlying question is if the house has been their primary residence for the past year. 

If a cash-out refi is out of the question due to being self employed for a relatively short period of time, then maybe a HELOC could be a good option. The HELOC is going to cost you far less to originate, but will have a higher rate.

@Anderson Morgan, how much are you looking to get in cash to pay off debt etc? If the immediate cash needs aren't tremendous, you probably wouldn't be too exposed using a HELOC for 12 months until you can sell it without incurring capital gains. The downside to the HELOC is that your monthly cash outlay will increase to service the additional debt. Additionally, the HELOC will be prime plus, so your rates could fluctuate. In the short term, this shouldn't be an issue... however long term it likely would be.

How long do you plan on owning the property? You're going to cash-flow more on the back-end if you go with a 15 year, however you'll be able to scale faster with a 30 year mortgage (higher income, lower monthly debt). How many other properties do you have, and how many do you want? That will likely dictate what works better for your strategy. I would probably do a 30 year fixed, then pre-pay the principle down with your extra cashflow. That way your income will still be inflated, and your DTI will be more impressive allowing you to acquire more properties in the future. It doesn't take too much more than a 15 year mortgage payment to prepay your 30 year down to 15 years, and for that added cost you'll have more flexibility in the event of financial hardship.

What are your strengths, what are your weaknesses? Whatever your weakness is, find someone to compensate for them. If you're not a designer/contractor/GC etc, then get somebody who is to help you know your approximate rehab costs prior to going under contract. A few extra dollars up front could save you tremendous amounts in the long run. 

Create a design/plan for the renovations and deviate as little as possible. Change orders will quickly increase your project costs and will kill the budget.

The unknown items will kill the deal, so do your due diligence to find potential issues before you close on the property and dig in. Also, find out what your ARV is going to be after all the renovations. From there, multiply out your re-fi amount (75-80% LTV of the ARV), then subtract your renovation expense to ensure you'll have enough equity to get all (or most) of your money back out.

Good luck