All Forum Posts by: Michael Tompkins

I’m looking into a property that is in a known slum land that is being heavily renovated and changing its clientele base. The door and window is both missing in its current state. It’s a 2:1 condo and the units are being remodeled and posted for $70k max since this particular area is up and coming but investors can swipe up the property for $15k as they come available in their bad condition. 

Any Houston based, investor-friendly contractor recommendations? I would like to get their advice on current estimates. I’m ready to pull that trigger!

I know folks don’t like to give up a great contractors name, so I’d be happy to help you in return. Let’s talk!

Light cosmetics, generally a quick rehab and low cost

I'd start locally doing BRRRs, use your experience. You can also do TLC projects, won't be full BRRRs but they'll cashflow and have equity

I disagree with the others. HELOC is a form of borrowing money. Why would you borrow money against House A and use it as a downpayment for House B? That's two loans to purchase one house and is a great way to over-leverage.

I also disagree with selling. Hold on to every property, unless you can sell it and invest in something else that produces a better return.

I would consider keeping the current house as a rental. Save the cashflow - and everything else you can - to build a pile of cash for another investment. Rinse and repeat. Keep putting the cash flow right back into building your portfolio. At some point, you may decide to pay off properties so you are 100% cash flow and living off the income.

One thing that hasn't been mentioned so far here are the psychological red flags and possible pitfalls involved in the process of moving out of and then turning your old home into a rental property. I've done it, and so I believe I can say something useful about it.

You mention in your profile that you have 20 years of experience as a contractor. You're not a spring chicken. Are you married? Do you have children? How do they feel about your idea? If they're all behind it, great! If not, this is going to add stress to your marriage and your relationship to your children, and typically significantly more than most people expect.

Your house is inevitably going to be damaged and changed during the time that it's a rental. Seeing the place where you made so many memories with your family trashed, and then going through the emotional turmoil of repairing and remodeling it, knowing it will eventually just get trashed again...are you prepared for that? Is your wife prepared to come home to "her" granite countertops, the ones she pleaded with you for year after year before she finally got them, and find multiple chips in them? The carpet you both picked out, stained and ruined? Someone scrawling all over the accent wall you put up so many color swatches for to find the right paint? It takes a toll.

As a contractor, you may not have the same reservations someone else would have, knowing you could fix it. But rest assured, any built-ins, any woodwork, doors and windows, anything "nice" in the house that you put it once upon a time for yourself to enjoy is going to get damaged.

I am closely related to a guy who moved out of his house five years ago to a new house, with the intention to fix up the old property a bit and rent it, and yet his old house has sat empty for five years and he's paid holding costs for out of pocket. It happens a lot. His wife talks all the time about how much she loved her old kitchen, which they paid out the nose to remodel in the years it was "their" house.

In our case, my wife and I both really disliked our old house, so it wasn't too much of a struggle to move and rent it out. But I still don't like going back there. I just like the rent money the place brings in more.

What is your current mortgage rate?  How much would it sell for vs what you paid for it?  If you sell it as a primary residence, capital gains are very different than if it has been a rental.

@Michael Tompkins get a HELOC