All Forum Posts by: Bryan Montross

First, welcome and glad you are getting into the investing side of real estate. Hopefully these insights will help you on your current house. If you are looking to build money faster so you can do more upgrades, I would ask if you could rent out the 3 bedrooms all the time instead of just while you are away and then rent the 4th bedroom as well while you are gone. You might need an owner's closet to lock some things up, but could help you earn more.

Next, I would look at doing more value add upgrades first. Upgrading your electrical service to 200 amps doesn't really increase the value of your home, same as new windows. If the kitchen needs an upgrade or the bathrooms, or flooring then you could add value to the house and potentially cash out refinance or get a HELOC based on the new value and use that for more upgrades. Just be careful with the upgrades you choose because some are great for maintenance and longevity, but not necessarily adding value. If you do have to sell in the short-term you might not recoup all the money you put in.

Jimmy, I agree that location is important. Students don't want to have to pay for a parking permit if they don't have to. Walking distance is best, the easy biking to campus (sidewalks, bike paths, etc.), then public transportation. Also, look where other students are living. If all the students live on one side of campus and you buy on the other, it may not be rented as easily.

I'm glad you found a niche to go after and master. Stick with it and let everyone know how it is going.

This is one that I personally would recommend staying away from. A deed is for the land. So when he builds the house, the house would be your property, not his. I would actually be surprised if a lender would lend to your friend to build a house on someone else's land because he would not be the owner when it is complete.

If you're going to do this, buy the land in a partnership with your friend. Then have the partnership build the house. And as everyone has already said, you need to make sure every little detail is covered in the operating agreement. Even if you don't think the situation will happen, you should probably have it in your agreement in case it does happen.

I don't think I am going to say anything too different from the previous posts because they all answered really well. I do agree that you need to go in person to see what is going on. It's a choice we make when we invest out of state that we may have to take time off from other things to check on our properties (and managers). Let the property manager know when you are coming, that you want to see the property, and that you want to talk with them. While there make sure you spell out expectations and put it in writing. If they are not willing to meet your expectations, you need a new PM.

Another thing that others have alluded to is that a property manager is not always the best at managing a rehab project. It may not mean they bad at property management, so maybe you are asking them to do something they don't really know how to do. It might be worth exploring options for someone else to manage the rehab and for them to just manage the property once it is ready to be rented.

Stay on top of things and don't let it get out of control. You need to be able to manage the property managers if you are going to be successful with out of state investing.

First, I would agree with the previous posts and you should get a property manager for an out of state property. I did manage a couple of my properties while I lived overseas, but I already knew the tenants before I left and I knew good people in the area to look after the property and help with repairs if needed. I also had a real estate agent that would list the property for rent and fill it for me if it went vacant. Because I had everything in place, it wasn't that bad, but even now, I always use property managers for my out of state properties (and a couple local one's as well).

Second, You just need to search around for a property manager that meets your needs. Some charge a bunch of fees, some don't. They may charge lower percentages, but make up for it in the fee, or charge higher percentages to include everything. Fees are also negotiable. Tell the property manager your intent and maybe if you bring them more business they will remove fees or adjust fees. Just calculate based on how well you think the rental will do and choose the manager you think will best look after your property, even if they do charge a little more.

@Rhyna Orillaneda - There are really only two exit strategies to get money out of the house to pay off the HELOC. 1) Cash out refinance. If you are holding long-term you can do a cash-out refinance, but unless you really buy it for a deep discount or do huge value-add with little money, you probably won't get all of your money out of the project. If the only money used was from the HELOC, you probably don't pay it off. If you used cash + the HELOC you might have some cash equity that stays in the property, but you get enough out to pay off the HELOC. 2) Sell the property. If you buy a property using a HELOC, fix it up, then sell it, you should always have enough to pay off the HELOC unless you are losing money on the flip. I use this as my backup in case my BRRRR doesn't go quite as planned I can always just dump the property and start again.

I would just caution doing anything that could constitute mortgage fraud. If you truly plan to live in the house as your primary residence, then you can put that down on your application. If you also rent out part of the property, good for you. House hacking is a great strategy. You don't need to tell your loan officer you are going to rent out part of the property, and most likely shouldn't tell them as others have said.

If you are trying to find ways to make it seem like you are living there, but it's not really the place you call home, it will probably lead to issues. You forget to claim a homestead exemption on taxes. You have a different address on insurance or your license. People always forget about something that throws a red flag and if you can't prove that your original intention was to occupy the house as a primary residence, then it is mortgage fraud. And by you posting in this forum that you are looking for ways around the requirement or to prove the requirement just gives them reason to not believe you.

Either do the house hack and live in it as your primary residence, or treat it as an investment and get the appropriate funding for that.

With your high income I would caution, as others have, about having to work too much in real estate at the expense of time with family or hurting your high-income job. I think STRs require quite a bit of your time and if you have a property manager quite a bit of your cash flow. You could find an investment property HELOC for your current investments and use them to essentially by a property all cash to BRRRR and pay off the HELOC when you refinance. This also takes some time and you're not guaranteed to cash flow after the refinance. One option I would throw out there that no one has mentioned yet would be investing in a syndication. You have to do your due diligence up front, but once you put your money in it is very passive and you just get your monthly or quarterly return (if you picked a good investment). Hopefully that gives you something else to think about and consider and you find the right strategy for your situation.

First, if you are not willing to be the "general contractor" yourself, meaning, talking to and hiring specialty workers, making sure the timing is correct, etc., then hire a General Contractor. Some people are good at just hiring our specific tasks, but I find it easier to hire someone to come in and do the whole project.

Generally, I wait until I have a property under contract to bring a contractor out to walk the property and give me quotes for the work I want done. Occasionally I will ask a contractor before I get a property under contract for a rough estimate on certain things if I am just not sure what it would cost, but I usually send along a video walkthrough or pictures. Some will give you the numbers, some will want to look at the property and may or may not charge a fee for the service.

I will say, if you start bringing more business to a contractor and develop the relationship, they are more likely to help you out and walk the property with you. However, by that point you probably start to have a good idea of the rough costs and can put in an offer using rough numbers before needing to get quotes from a contractor.

@Grayson Grzybowski, Let's run some numbers to show you how this should work out. Let's say you bought a property for $100K with 20% down. You will owe the bank $80K. Now let's say you put $50K into the property for rehab. That $50K rehab should be adding at least $50K in value you to house, but let's say the market is really bad and the rehab you did wasn't so much value add. So maybe the property is now worth $125K. If you refinance the property now the loan would be $100K at 20% down and $80K would have gone to repay the original loan.

First, if these are your numbers for rehab cost and after repair value, it is probably not a good deal to begin with and you shouldn't be doing it. But even if the numbers looked good going in and a black swan event happened, it would take a lot to lower the value of the house below your purchase price if you are doing value-add renovations. Don't expect to get all your money out, but you should always be able to cover the first mortgage. I hope that helps you understand some of the risk.