All Forum Posts by: Mike Levene

Thanks @Scott Trench this makes a lot of sense. We have talked about things such as rent by the room and acknowledge that the operating model will likely be very different while living in the property vs. when we move out.

I think the point you made about assumable loans is very helpful to get into a property you might not otherwise be able to afford. Of course "hoping" rates will come down is not a sound strategy so finding a way to assume a loan that already took advantage of low rates is a great option.

If you were starting over and targeted a large SFH, would you try to maintain the property in a way that would still attract regular homebuyers (not investors) if you needed to sell? I suspect maximizing the investment might make it slightly less desirable as a owner or at least the renovations might have lower ROI if sold to a homeowner. For example, an ADU is nice for a rental, but not every home buyer wants to pay a premium for an ADU on their property.

I jumped around between a few different platforms and ultimately ended up with Baselane. They make it so easy to separate the financials for each property and have great analytics around cash flow, profit, etc. that you can customize to your needs. If you're still using excel spreadsheets, Baselane is a huge upgrade and for little to no cost.

Hi all, I recently started an informal real estate group with some old college friends. They are all looking at strategies to use for their first deal and many of us are leaning towards a house hack to reduce the amount of capital we need upfront. The problem many of us run into is being in New England, many of the markets are high cost, high appreciation markets that we either can't get pre qualified for, or even after moving out will struggle to cash flow.

Another big constraint is that many of us have W-2 jobs in engineering that require some days in the office, and these types of higher paying jobs are primarily in major cities (most of us are in the Boston area).

Lastly, a lot of us have significant others that may be less interested in living somewhere "random" because it makes sense as an investment. If they were married, I'd think it would be more of a conversation about their future, but I can understand that if you are only with someone for 1-2 years they might not be willing to pack everything up and follow you on your real estate journey right away.

Any thoughts or ideas to help us sort through the weeds on how to go about finding a house hack with these constraints? Are there any markets outside Boston that any of you have had success with a house hack or tips to succeed in this type of market? I'm sure something similar applies to those who live in high cost cities like NYC, San Francisco, San Diego, Seattle, etc.

Hi Justin, thanks for the well thought out response. I feel I am falling into the trap of the first time investor of falling in love with a deal and then trying to make it work. If my repair estimate is exceeded by $10,000 I should still be able to profit ~$20k on the flip but the BRRRR would likely not make sense anymore as I wouldn't be able to pull enough cash out of the ReFi (~$5k after holding costs, closing costs, etc.) I need to look at the numbers again and make sure this is a risk I am willing to take on but I imagine there are better flip opportunities that yield similar returns and may carry less risk as I am aware finishing a basement can yield all kinds of unforeseen issues.

I have experience as an HVAC technician so I am relatively familiar with the constraints of renovating near or around HVAC systems, how much space is needed if walled off, ventilation requirements, etc. but I am sure there would be other issues like needing a larger window for egress and needing to do a window well, needing a drop ceiling to cover pipes in an already short basement, etc.

Hi Jonathan, thanks for the feedback on the repair estimate. I'm excited about getting into my first deal but I think this one might need to just be a flip if I pursue it because I want to make sure I get a decent amount of cash out of the deal and it seems like a BRRRR wouldn't yield much after the ReFi.
This property is in Champaign, IL, so a few hours away from Chicago. In this specific neighborhood, the houses seem to sell in 30-60 days from what I can tell. I'm not sure if I am looking at it the right way, but by looking at recent sales on the MLS, I can see when it was listed, pending sale, and sold. The pending sale is typically within 2-3 weeks so I understand that as offers are made in the first 2-3 weeks, and the remaining time is what it takes to finalize the sale for both parties.
As for permits, I would likely need a permit for removing the non-load bearing wall, walling off the bathroom in the basement, and possibly for the additional bedroom although this already has walls and a door, just not finished so not sure how the city would decide on that one. There may be some small electrical adjustments in the kitchen so I would like need a permit for moving some outlets around once the wall comes out. 

Hi all, I'm looking to get into my first investment property and have ran the numbers on what I think is a great opportunity. I have 2 questions, see the details on the deal below:

1. Does my math check out? Am I missing anything (besides the fact that all numbers are estimates and there is always risk involved)?

2. What is the best way to get the property under contract? Do I reach out to the seller first or do I find an investor friendly agent that can represent me as the buyer first?

The Deal:

610 sq ft. 2BR, 2BA unit in Illinois with an unfinished basement that I will convert into a 3rd bedroom and add ~30% more livable sq. ft. to the house (610 sq. ft. to ~800 sq. ft.) and one of the bathrooms is already in the basement with necessary plumbing but needs serious cosmetic work. I am aware of typical code requirements such as an egress window and minimum room size, but if there is anything else I should look out for in the new room let me know. 
The whole house is functional, but outdated. The renovation will cover the following:
Kitchen - new floor, cabinets, appliances, paint, and remove a non-load bearing wall to open up the kitchen and living room.
Living room - new floor and paint
2 main bedrooms - new floor and paint
Main bathroom - gut renovation, new floors, vanity, sink, shower
Basement - convert portion of the basement into a 3rd bedroom with new sheetrock, paint, and flooring for finished part of basement and staircase, - wall off 2nd bathroom and gut renovate

Purchase Price: $60,000
Repair Cost: $30,000 (my own initial estimate came in around $25-30k so I am using 30k to be safer)
ARV: $130,000

Down Payment: $13,500 (15%)
Hard Money Loan: $76,500 (85%)

Monthly Expenses (6 Month, Interest Only Term):
Interest: $825 (11%)
Taxes: $220
Insurance: $40
Total Monthly Expenses: $1,085
Total Expenses Over 6 Month Loan Term: $6,510

Cash in the deal by the time of ReFi:
Down Payment: $13,500
Monthly Expenses for 6 Months: $6,510
Purchase closing costs: $2,500
Total Cash in Deal: $22,510

Refinance:
ReFi Loan: $97,500 (75% LTV)
HML Payback: $76,500
Closing Costs: $3,000
"Profit" after ReFi: $18,000
Equity after ReFi: $32,500


Rental Income:
Gross Income: $1,300/month
ReFi Mortage Payment: $642/month
Fixed Costs: $260/month
Variable Costs: $299/month (23%)
Cashflow: $99/month

My 2 exit strategies would be to simply flip the house, or, if the valuation comes in slightly lower than expected, I am confident I can still rent it at this price because it is a very rent heavy area compared to owning and continue with the BRRRR method with slightly better cashflow because of a slightly smaller ReFi loan amount.

I would love any thoughts, feedback, concerns, etc. about this deal. Thank you in advance!