All Forum Posts by: Nik Moushon

The majority will say to never touch your retirement and I'm with the majority. The penalties to me is just not worth it. Granted The 401k I do have is getting me somewhere around 8% so its doing well enough that its worth keeping in there. Its tough not to touch it though. I got enough for a very nice down payment. Personally I think the risk is not worth it, especially on your first property using a new financing method (BRRRR). Once more experience I think I would be more open to it, but that just me. I know there will be people who say to do it in a heart beat. So I'm sure youll meet both sides here.

You can always look into self directed 401k/IRA if you have some from a former employer. @Dmitriy Fomichenko can answer any questions on that topic for you. 

Not from Alaska but if I remember right it weathered the last recession better than most the other states. Not saying it did well just not as bad. So I doubt there will be a 25% drop in prices. Maybe a 15% if its a really harsh correction but I would say, like others, a 10% drop everywhere is probably going to be the most. But you never can know and its probably a worse gamble to try and play the market like that than just to do it right from the beginning.

First I think you need to try and narrow down what areas of REI you want to focus on. Do you want to be a full time flipper or do you want to do more on the developer side or something else. Theres a dozen ways to make money in real estate and theres a dozen way for each one of those to have an advantage gained through college.

Use me for example example: I'm an architect and didnt get serious about REI until recently. Its going on 10 years since I graduated college. From the several offices I have worked at i have experience in almost every major building type and business field. From Health Care and Commercial spaces to SFR and large MF. Now at first glance you might not think this ties into real estate since I took no business or accounting classes. I've never worked for a realtor. I don't make a huge amount of money like a doctor or lawyer. But now I know how to figure out what can be built on site in detail and get a good rough estimate on costs in a matter of hours. And because I have nearly 10 years of doing this I can look at a listing and with in less than a minute figure out if that land is worth doing detailed analysis of or not. And because of the similarities between codes and jurisdictions and other government entities I can do this for just about any part of the country (granted the largest cities like LA & NY are their own special case). I can list off a dozen things that my professional experience has given me an advantage in the REI world. But I can also list several dozen other things that I am still very much a newbie at (like anything accounting).

My point is that there is no REI degree so you will not find an all encompassing knowledge in one degree. If you try to pick a degree that gives you the "best leg up" (so to say) just so you can have an bigger advantage in REI eventually you will surely hate school and waste tens of thousands of dollars. Pick a degree in a profession you LOVE! The money is not going to matter if you hate studying, hate waking up to go to work and hate yourself for picking that profession. If your passion truly is to focus on something REI pick a degree that parallels with it in some way that allows you to love doing your 9-5 job while you gain experience and save money to eventually be a full time REI. My profession is an example of one that parallels very well with REI. Business and accounting also parallel well. Banking or Construction mngmt does too. There are plenty of examples that this works with. There also nothing that says you can't take an extra class to help cover areas your profession doesnt cover. I wish I had taken accounting classes even though they are not required for my degree. 

Another thing you have to consider is if you go for a higher degree. (Master or Doctorate) Because at this point you gain more income but you now gain debt. Weigh the pros and cons. It might not be worth becoming a doctor if you now have $200k debt form med school and only plan to practice medicine for ~10 years before you want to transition to REI full time. It could work out or it could not. I'm not suggesting one way or other. You need to do the numbers and decide for yourself. 

Its still under design so I'm not sure. My guess would be to hit about the $120/sqft mark or a bit higher. In WA construction prices are a bit higher than in LA.

The arch fees I gave where just a guide line. Every office is different in how to bill. Some bill strictly on a per hr basis other do a flat percentage. And all that can change depending on the size and scope of the project. But do make sure to build that into you pro forma. 

Mike and Shane, Arch fees typically range from 5-8% of the building  construction cost. It can be more or less depending on the building type and size. 

I agree with Mike. Your sizes are very small. 600 sf is more like a studio apt and not really a one bedroom, let a lone a 2 bedroom. Even 800 sf for a 2 bed a very tight. I just designed very economical 2b/1/b 6-plexs based on a 30x30 (900 sf) footprint for a developer. That was tight to get a comfortable space in. With parking and set backs and the size you mentioned I would be surprised if you could get a 4-plex on it. Can you even have that many units on it per zoning? 

@Mike Wood

Your soft costs are really low. Architecture fees alone are going to $30k+ on a $600k building. That doesnt include all the other professional costs (civil, structural, permit fees, etc). 

@Shane Bracewell

I agree with everyone here. I would not go over a 4-plex for construction. At least if you are just starting out. The up front costs are too high and loans not favorable enough. Would you could do is look at possibly doing two 3-plexs instead or a duplex and a triplex. Talk with the architect you hired and have him try to figure out the best way to get as many units on the lot as possible without going over a 4-plex. You can build in phases and only do a loan for one building at a time. It will keep loans simple and will let you leverage early builds on later builds. The arch firm SHOULD give you this kind of information. If they don't let me know and I will help do a little digging. 

Lead paint and lead pipes are going to be probably your biggest worry.  

Aluminum wiring is another one to look out for. It shouldnt be knob & tube as the house isnt old enough to have that. 

Personally if I where in your shoes I would rent out your current house and find a new one to house hack. Look at a 2-4 unit if possible. This would let you get a cheaper house and build equity into it and at the same time increasing your cash flow even more. The cash flow from your current house will help you with a lot of the repairs. 

The one thing I would NOT do is upgrade your personal residence. With the market today and a correction over due its not a wise choice to spend the extra money to upgrade just for the sake of upgrading. Its one thing if you NEED too. i.e you have 4 kids and a 2 bed house doesnt cut it anymore. And definitely do not upgrade based on your income + the cash flow from the rental. Thats how you quickly put yourself in hot water.

Just ask the seller to provide a copy of the permit. They *should* have a copy for this reason and when they city comes knocking because they lost their copy. 

There are lots of different scenarios that could come into play here. Best thing to do is to go into the city planning department and talk to them. It could be that it got grandfathered in and you're good to go or that it was an illegal conversion and you would have to get a conditional use permit (CUP) which could cost you thousands (or hundreds, every city is different). Or they could make you covert it back to a SFR.

Since you've already made an offer, depending on what the city says, this could help you in negotiations. You can ask them to pay for the CUP or use it as your way out of the deal.