All Forum Posts by: Powell Slinkard

Hello All,

I wanted to post this "idea" of mine and gather everyones feedback. The neighborhood in which my aunt lives has decent size land plots, my aunts house is approximately 4000 sq. ft. In addition to this she has what I consider a very large detached garage which I would estimate at 1000+ sq. ft. including the main floor and upstairs.  My "idea" is to convert this garage into a secondary home and rent it out. Now I know this is a feasible project but what I am primarily searching for is feedback on is how to finance this construction project. My thoughts on financing this is for my aunt to take out a home equity line of credit(or cash out refinance) to fund this project. At first thought some of you may see this as very risky but let me provide some more details. I would guess my aunts house is approximately worth $300k and she only owes about $70k to pay off the mortgage in full. My aunt is not very financially savy and therefore doesnt have much as far as saving/retirement/401k goes. And when I say she doesn't have much I mean it. But what she does have is 3 very hardworking sons with stable, well-paying jobs that would support her in the event that she had to stop working. What sparked this "idea" of mine was trying to figure out how to alleviate her financial commitments aka her mortgage. I know that the garage can be converted into at least a two bed/ two bath and generate at least $1200 in rental income in her neighborhood. The rental income would  then cover her mortgage payment and free that money up for her to put away for her retirement. To provide some more background details to shape your opinions let me say that I think my aunt would have to stop working before she could finish paying off the house, therefore her sons are going to have to start paying all the bills sooner than later. Again thinking ahead I figure why not take out the equity in the house to fund the project now and start generating rental income, versus waiting until my aunt passes away in X amount of years and her 3 sons  have to decide how to split up the house. Thank you all for reading this post, and any feedback would be appreciated. I know I didnt provide all the details and there are always variables, but hopefully the information I provided is enough for perople to respond with yes this is a logical, feasible idea. Or respond with no you are crazy and this is why.. 

Hello Everyone,

A couple questions/clarifications. So from what I have gathered most people use a variety of means to fund down payments on new investment properties. I personally am planning on using the equity built up in my two paid off properties to fund my next down payments. My main question is when using the 50% rule to evaluate homes, don't you have to account for the home equity loan monthly payment(in my case) in the expenses for determining whether the property will produce a positive cash flow for the month? I feel like all the examples Ive seen only subtract the mortgage payment but dont talk about paying back the down payment?

I understand if you have saved cash you can fund the down payment that way. But if not what do other sources do people use to fund the down payment? and how do you calculate it into your expenses when evaluating a home?

Thank you,

-Powell

Thank you all for your responses. The more I research the more I think I will go with idea 2. My next step is going to be talking to a very good friend of mine who is an expert in mortgages, loans, home equity, and building wealth through real estate. A lot of the business stuff is still new to me as I am a biomedical sciences masters student. I believe my friend will be a great mentor and extremely valuable to my real estate investing team.

Do you guys have any other suggestions as to another key step to take in my REI journey? Im still new to exactly what all the services a real estate agent can do for me and what all property management companies will do. Any suggestions on real estate agents or property management companies in the Denver area that I can talk to and get information from?

Thank you!!

Hello All,

I am new to REI but am looking to get started at a young age. To try and keep the message short I will provide readers with a brief background. I currently own two properties completely( no mortgage or loans) valued around $230k combined. I am looking to buy my next investment property but unsure on how to go about it. I have done a few months of basic research but still have mixed ideas.

Idea 1: get home equity loans say for $160k, and buy a duplex for $160k or less. This way I wont have to apply for a mortgage and will just have to pay back the HEL overtime hopefully at a low interest rate. Of course I will do my research and buy a property that produces positive cash flow. Combing my new homes rent income with my other two properties income, I will pay back my HEL hopefully under 5 years time. Now using my newly established equity in all three properties, I will repeat the process but buy a triplex or fourplex. Use the exact same method and in the future hope to buy an apartment complex.

Idea 2: Pull out the same amount HEL (aprrox. $160k) and put sizable down payments on two duplexes(or 3 or 4) and get traditional mortgages to cover the rest of the homes cost. From my understanding depending on the numbers that leveraging your money this way results in a larger return-on-investment versus paying all "cash".

Idea 3: save up my income from my current 2 properties and go the the traditional route of putting 20%-30% down on a duplex and getting a mortgage on the property.

Like I said I am very new to this but really want to start. If anyone would like to chime in and share any pros or cons on any of my three ideas or if they want to share any success stories using idea 1 or 2 would be awesome! I really appreciate any feedback anyone has to offer and am completely open to suggestions or links for me to read and do more research on. I live in the Colorado, Denver area.

Thanks!!