All Forum Posts by: Jesse Thurston

Vince,

James had an excellent response to your question. I do a majority of my business in the Saint Paul market and most my clients that are staying in the market are taking advantage. There was supposed to be a vote this week, but have yet to read into it yet. A lot of the 3% cap has been ripped apart since the new rules allow owners to a right of a reasonable return. I have heard of many people being able to get self certified from attorneys and clients. I have also heard that people have got as much as a 15% raise approved by the city. Saint Paul is not dead in my opinion and gives an advantage with owners running for the hills. 

@Rashad K. Love the vision! What's the holding period on a project of this sort? 

Pashew,

It sounds like you need to define what you're looking to do for people to give advice. BRRRR and flipping are two different strategies (long term wealth vs short term cash). If I had to guess a multi family building that needs work sounds more up your wheelhouse. Buying a 4 unit building with a FHA loan to save money, live in one unit, update the others, and rent out as you go. Seems to be the best fit for that amount of money. Gives you flexibility to pay for the rehab and eventually refinance the property to a conventional loan. I recommend you figuring out what you want to do instead of people telling you. What opportunities are in your market?

Best of luck

Zhi,

Since I don't know your agent or the conversation that took place. Remember that multi-family values that are more than 4 units are considered commercial. These properties are valued based off more the income. So that means based off your renovations on multi family units how much can you raise the rent to justify to the bank the new value to refinance. The BRRRR method for multi family buildings is a thing and I have clients that do go that route. The major difference on it is usually you will not be able to pull out as much on the refinance as you're getting more of a return in the next x amount of years from those renovations. These projects are also more expensive due to the building costs, amount of units to renovate, and time. Technically he's right, but it's very much doable in the apartment world. I would recommend starting out in single family to get a hang of it. The larger commercial multi family buildings can come over time once you get the experience and capital. The plus side to the larger multi family buildings in my opinion is having to find less deals and you get a great cash flowing asset (of course if the numbers are right) in the end. My last thought is that if you want your original investment to last longer single family will be the way to go as you're likely to get more back in the refinance.

Good luck!

Vanessa,

Great idea to get into the house hacking to start out. I would start by buying what you can afford without having your rooms rented. Protect yourself incase you can't fill the rooms or people leave for any reason. I house hacked my first single family home, but only with friends. It worked out well for my situation. Start by looking up market rates for 1 bedroom apartments to give you an idea of what you can charge for a bedroom. You will likely have a discounted rate since you're sharing a house and not giving someone their own living space other than the bedroom. It can get tricky unless you get lucky with good friends that needed a place to live like I did. I would recommend a duplex, triplex, or quadplex if possible. It could be worth paying a bit of a premium if it's in a nicer area just to get you in the game. It will be worth it in the long run. 

Good luck!

Chris,

I'm not super familiar with the depreciation. I really just wanted to chime in and thought I would recommend talking to your CPA about refinancing your existing to pull out equity. My only thought on this is if you're keeping the current home for more than a couple years since capital gains will become an issue in the future.

I would highly suggest reading a book on estimating rehab costs. J Scott has a good book that was helpful for a starting place. This will help give you an idea of what to expect and to see if contractors are giving fair prices. The investors I work with started out getting three different bids and eventually found someone that they do everything with now. Most of the time you will have to estimate the rehab on your own and once you purchase you get can get bids. I know some teams that have a go to guy will check it out before purchasing, but that can be hard to find starting out. 

If you find a investor friendly real estate agent it's worth a shot. I see a lot of duplex's go for 20 to 30k less than the listing price. I have also seen some go for 80k less than listing. It's worth a call to an agent if you have a realistic number in mind. I have presented offers that were 50k off list before for clients and just missed out on the building. Keep in mind that using the FHA loan is an advantage to at least get a start into investing and just because the numbers don't work now it doesn't mean they won't in a few years. Rental prices have gone up drastically in my area over the past few years. Not saying that will make this particular property work, but something to keep in mind depending on your strategy.

This is a tricky situation. I believe the reason you house hack is to take advantage of only putting in the 3.5% FHA loan down payment. You have to evaluate your options and see what makes sense for your situation. If this gets you into real estate and you can't find any other duplex's that make sense I personally would go for it. You're going to pay rent anyways so it makes sense to get started. If it saves you enough money to jump on another deal in the near future with only doing the that small down payment it makes sense. If you're okay with waiting for a while and are focused on your current numbers with cashflow put the 20 percent down.