All Forum Posts by: Jon Ostojic

Hello everyone. Thanks for taking the time. I've been doing a live-in-flip in Seattle for the last 2.5 years. Two realtor friends have told me my house is now $700k give or take, with about $300k equity. We've considered selling once we completely finished in the next 3-6 months and doing it again. 

I go to open houses all the time  and yesterday I went to one because it was a unique house/property. I was blown away by both the property and the house. For those interested:

https://www.redfin.com/WA/Seattle/10333-Ravenna-Av...

I've never seen such a place and I know it's unique. It has a separate entrance to a rental unit already (high on our want list), and the property is a sanctuary with stream. The house is in really good shape. I looked through the whole 30 page inspection report. It's in WAY better shape that our current house was.

The problem is I'm not ready. At best I was estimating 3 months to list mine. I'm wondering if it's in the realm of possibility to buy this place BEFORE we sell ours. Even if the loan isn't ideal, we could presumably refinance in a few months after we sell our house.

As a brief rundown I'm currently "house rich and cash pour" as I heard someone say recently. I own 2 cash flowing rentals on the west coast (one in BC Canada) with a total of $250k equity and my primary residence with about $250k-300k equity.  Not living month to month, but I don't have more than about $15k liquid at the moment. I could easily come up with around $30k more liquidity within a month or so.

Are there any non-obvious financing options that I'm missing to buy this house now before I sell mine?

My understanding is that it’s still possible to assume FHA loans, though I’m not sure of the specifics. I believe to assume you ave to qualify still and put 3.5% of the balance of the loan against it plus a fee. It’s on my list to research.

Originally posted by @Account Closed:

@Rupesh Singh $600k could get you a solid 4plex in a Seattle suburb like Everett, Tacoma or Kent. You could net around $1,000/mo cash flow and have a lot of potential for appreciation. That being said, you would have to put $150k down on a $600k fourplex.

 Grant, if you see any solid 4plexs from Everett down to Tacoma for $600k, please let me know. I haven't seem much for less than $750k.

I'll second the hot market sentiment. I'm exploring rental options in my local market, Seattle. It's hard to cash flow with 25% down. When you're talking about a half million dollar investment that borderline cash flows, it's discouraging. Now I'm starting to think that buying several units with solid cash flow in a hopefully upcoming market is starting to sound better than any potential appreciation I'll get here in Seattle.

Hello all. I have a SFH rental property (in Eastern WA) I'm considering selling in order to invest in a multifamily property (in Western WA). The market value is about $300k and the balance on the loan is $165k. It's an FHA loan at 3.75% originated in 2009. We paid down an extra $18k to eliminate PMI a few years ago.

The tenants have been there for 2 years and may be interested in buying. So we might get lucky and do a FSBO and save come commission/fees. I'm wanting to invest in a multifamily property somewhere in Western WA and the market moves quickly, so offers with sale contingencies are tricky. I have a few questions.

1. Since 3.75% isn't possible anymore, and as I understand it the FHA loan is assumable, would it make sense to try to sell to our tenants and transfer that way? Let's say there were interested in that. They'd only assume the original loan, and I'm assuming would need a second loan to cover the difference. Is that a problem for them to finance that way? They'd just approach their lender and look for a second mortgage?

2. If I wanted to do a 1031 with the scenario listed above, would that affect anything about doing the 1031? I don't think it would but I'm still researching the ins and outs of a 1031.

Thanks!

Originally posted by @Brian Garrett:

Just to clarify some misinformation a 4plex is not valued by cap rate.

A 4plex is still considered a residential property and valued by comps.

Only 5+ unit MFR buildings are considered commercial properties.

At that point they would be valued based on the cap rate.

Brian, you mean in terms of loans, property taxes and such? That's one reason I'm interested in a 4plex, to get 20% owner-occupied financing instead of 25% down investment financing. 

In terms of actual market value though in a hot market like Seattle, is a 4plex more like a SFH or more like muli-unit commercial buildings when it comes to appreciation, increased value from rehab, and valuation based on cap rate?

My idea since I got out of college and bought my first rental was to hold. I have for about 10 years. But right now I'm evaluating if it's possible to leverage the existing equity to enable flipping for a few years full time (and quit my job). If that is profitable enough, I may then use the generated capital to get back to holding or BRRR.

If you have $500k in capital or leverage then you might look at getting a line of credit on your current properties and using that money with a hard money loan to purchase your next flip or hold and go from there.

The problem with BRRR at the moment is that in order to buy a multiplex in the area I need all of my equity and can't afford to leave 20% equity in my properties. The options I'm currently considering will likely require ALL of my equity. That may change in a year or two if my properties continue to appreciate at current rates.

I actually like my job for the most part. And it pays the bills. But I'm a slave to it with little flexibility in schedule, time off, etc. And while I'm a saver I'll never save enough to reach my goals. I've generated more equity on the side than I have at my job. I want to continue rehabbing to generate equity. 

But after 2 years of a full time job and basically all of my spare time rehabbing  my primary residence (while having a baby to boot), I'm proud of the result and know I can do it. So I'm hoping to figure out how to quit my job and focus on real estate, while still hopefully make at least as much as I did at my job. Even if the payouts are large and infrequent that's fine if I can start with enough to live off of. There is much more potential there, and more risk of course. The tipping point for me has been realizing that I have enough in equity to liquidate and live off savings for a few years while I try rehabbing full time. Now I'm researching how to do that.

Buying multifamily such as a 4plex usually results in a hold.

If I could figure out how to not move from my current house (like have an investor buy and rent from the investor), I'd be very open to flipping some SFRs. The 4plex angle would give me the option of living in one of the units and hopefully adding value to and appreciating on a higher starting value, while having a few tenants pay half of the  mortgage.

Thanks for the input Isaac

Thanks for the very useful input Brian. What you're saying aligns with much of what I've been thinking, which is encouraging. I've already been leaning away from King county in my research and am looking at South Snohomish county. My primary residence is  in NE Seattle. The equity breakdown is roughly $250k in my primary, and $125k in each rental property. If possible, I'd love to not move at all while doing this, but I think I need all of the equity out of my primary to support myself and quit my job.

I'm really trying to not live in a perpetual construction zone, especially not with my toddler, which closes a lot of doors. One idea I had was to see if it's possible to sell to an investor, who'd immediately be looking for a renter, and just rent the house for a year or two after we sell it. I'm not sure how I'd go about pursuing that though. The other is living in one of the multi-units and moving as necessary. 

Most of what you said for estimating the post rehab value is what I figured, as far as the cap rate essentially dictating the value. So if I can get a realistic post rehab rent figure, I should be able to get a reasonably accurate cap rate and overall value. But what about appreciation--assuming the market doesn't tank in the next year or two

It's the appreciation part I'm less sure of. Would a 4plex more or less appreciate at the same rate as a SFH?

Also, when you said Renovating a rental, unless it is high end, is a different beast than renovating your own home. What exactly do you mean? If it's potentially a high end rental in a high end area then it's more like upgrading a SFH? Over improving is a good point and consideration. Is it simply more or less dictated by the location you think?

Thanks again for the input.

I'm considering transitioning to full time flipping/investing, starting with about $500k of capital in Seattle. I'm looking for feedback and input as to possible approaches. As a quick background I'm a mechanical engineer, grew up in construction (dad is a contractor). I'm always building things for fun and consider myself a craftsman whether it's restoring a car, woodworking, etc. I currently own my primary residence and two rentals and am considering liquidating for starting capital. I really would love to do this full time and be in control of my time and destiny. 

I bought my Seattle home (for $350k) as a near tear-down two years ago and spent the last 2 years worth of evenings and weekends doing a total renovation: new electrical, HVAC, windows, paint, refinished floors, landscaping, full fence, automated gate, and finished out the basement. The kitchen and bathrooms were down to the studs. I did all of the work with a shout out to my dad, who provided lots of help. The house is worth about $700k now. We put in about $65k of materials.

Here is a before and after of my kitchen for example, which I did for $13k (all appliances and even the cabinets were off of Craigslist, the concrete countertops I made myself):

I'm trying to figure out for sanity's sake how to not live in a construction zone with my wife and toddler. 

One approach I've thought about is buying a 4plex that needs cosmetic rehab and then moving into a unit while fixing another up. Then moving from unit to unit and rehabbing while always renting out at least 2 of the units. If I took a year or two to do this full time, I'd want no less than $150k in savings to live off of. That leaves me about $350k for a down payment and rehab costs. If it's cosmetic I believe a $25k per unit budget is something I could really stretch. That would leave $250k for a downpayment and closing costs, which sadly is hard in the Seattle area. The other thing I'm not sure how to estimate of is what I could sell it all for in a year or two. I feel like I could get a good post rehab estimate on a SFH, but not sure about a 4plex.

Thoughts? Opinions? Am I crazy?