All Forum Posts by: Pierce Fonville

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@Andrew B. In certain cities around me it is only considered multifamily if 2 full kitchens are included. The definitions vary from place to place.

Anyway, anyone have any financing tips?

@Brad Cottrell It is a good idea if you can pull it off. There are a lot of moving pieces though. The big thing for me so far has been figuring out a strategy that is functional in all cities. This is one that works in my area. If it is detached then it marks off a few cities who have regulations about what kind of tenant is in the extra unit. Mostly it is a problem with short term rentals, so just check out their policies. The other thing is that, if you aren't careful, adding a kitchen with certain appliances can qualify your home as multifamily and there aren't a lot of multifamily zoned areas where I am. 

@Dion McNeeley Thanks for the pointer. That may be a problem that I can't plan around too well unless you have a recommendation for me.

We all know what the BRRRR strategy and house hacking are. Now, watch closely as I do a 360 twist combo and buy/live for free in DFW Texas where duplexes are in short supply and high demand.

*I am looking for guidance primarily in the financing portion of this strategy, but if you would like to proof it for other items to be aware of, be my guest.

The idea is to buy a single family house near Fort Worth with a 2 car garage, convert the garage into a living space including a kitchen and bathroom and remove the attic space to be replaced with a loft. I am relatively fresh out of college where I am used to splitting a 400sq/ft space with another person, so this will be an upgrade for me :) 

Buy, rehab, rent, reside

The plan would be to live in the garage conversion and rent the rest of the house. I have called many cities around me and have not run into a situation where this would be a problem. The tenants would basically be renting rooms from me, but I would prefer to rent to only 1 family or person. I have not found any rules preventing that within a mortgage situation. I would almost be living for free. 

The appraisal should note the added living space and the quality of it as an added benefit of the property. This will help when it comes to owning this for free or close to free.

Now, here is where it gets a bit more complicated. In order to buy a hard money deal and refinance into a long term conventional loan, it is technically a cash-out refinance. This takes 6 months of seasoning and usually requires leaving 25% equity in the home. 

My options are:

Buy on hard money, leave 25% in, and hopefully generate ~20% via forced appreciation

FHA 203k Loan, wait 6 months and then cash out refinance (Unknown whether or not this type of renovation would be approved)

Renovation loan or 203k and no refi, just pay PMI and tons of interest and accept the higher living expenses due to a higher payment

I would love to hear from someone with more knowledge and experience than me.

I am in DFW. I understand. I believe it is possible to manage a property without having a brokers license if you own a percentage of the property. Does anyone have an idea of how much you would need to own to be able to manage a property without being a broker? 

@Jim Shonts I would be interested in talking about that. I even recall seeing your company on my Google search. If you are able to broker both real estate transactions and property management, I would love to hear what you have to offer.

After being issued an inactive real estate license in Texas, I am looking for a broker. I found several that I liked and was about to sign on with one but casually asked about their property management. After all, I had been comparing apples to oranges. All of these firms had mentioned property management in their fees and other literature but once I asked they all baulked. So now I am wondering if I will be able to practice property management as a new agent. Any guidance from those with more experience? I am looking to make a move quickly. 

With all the hoops one must jump through to get their license, I am finally to the point where I need to select a broker. However, with deals happening at the same time, I don't have time to sit down with 10 different brokers to see what they have to offer. I bet I can get 10 different opinions here though! So let me know who your favourite DFW/Texas broker is and why! 

 I have not purchased the property, but I put in a competitive offer recently on a SF home I was planning on buying with hard money and refinancing out of. I just didn't expect the complications to be with the long-term financing. I would like to solve this problem though so I can solidify a strategy that allows me to buy a primary residence without much money down so I can rent to my friends while I live there. It will be a single family home most likely.

Gotcha. So BRRRR is not the right term since it is not going to be a rental. Essentially, I would like to but out of my short term financing with enough equity to eliminate the need to put a lot of money down. If it turns out that I end up having to put down 25% as a down payment that won't be the end of the world but I just need the equity built from doing the renovation to apply to the loan rather than a purchase price+repairs.

Sub-note: is there a word for the "Equity built from renovations"? It seems like there isn't a good way of explaining this to lenders. I had to write it out on paper last loan meeting I had... Like, somehow we could not get past the point that a 100k house with 25k of renovations was not going to appraise for 125k but for more than 125k... I am not sure where the breakdown in communication was but I think I was frying their brain. I thought they would understand what an "investment" is but I almost found myself having to explain it haha. Anyway, I have only spoken to 3 conventional lenders and the 2 that I spoke with about this strategy had the same reaction.