All Forum Posts by: Ryan Howell

Why not start with a house hack?  I have yet to see a better and safer way to get started that can have the most impact on getting out of the rat race.  Buy a duplex or SF and rent by the room.  Take advantage of owner occupant loans, eliminate your mortgage expense and free up your budget to scale your investments faster. 

We use vinyl plank in all of ours.  I've seen wear before, but not on what I'm installing (not yet anyway...going on 5 years).  In my experience it was on the lower end of quality where I've seen noticeable wear.  We like it because it is more scratch proof and water proof compared to laminate and hardwood.  Tenants can be very harsh on hardwood and laminate....moving furniture, pets claws and spills are generally not handled as well as they are with homeowners.

Yes, there is a seasoning period with most lenders.  6 months is common.  You can probably take out a % of the purchase price, but not the new value...before the seasoning period the lend on the lesser of loan to value and loan to cost.

@Brian Shand - my first thought is to consider where you think the market will be when you hit the 2 year mark of ownership?  At that point, you'll be able to avoid capital gains and save I'm guessing around $30k in taxes.  Unless you think the market will dip by that much, I'd probably at least wait until then to sell.

If you think the market is going to drop, then I might cash out, but since it sounds like you're going to reinvest in that market, then you need to look at it from an opportunity cost perspective....can you find a better deal or scale faster by selling?  If you're going to struggle to find a deal that's equivalent to what you have now, I might keep it.  If you have a house in the best area of town that is going to be a solid long term appreciation play and tough to beat, I'd tend to hold onto it.  

Be aware your cash flow is not the rent minus the mortgage.  I don't know your taxes and insurance costs in your area, but by the time you budget repairs, maintenance, capex, vacancy, etc I suspect you're close to breaking even in the long run especially if you add in property management.

House hacking is best way to invest in your stage of life to minimize risk.  I would want to be sure if I sold, I could find an equivalent or better way to house hack...maybe get a larger property with more roommates, etc that helps you grow your cash flow and assets faster.

I would say to stop treating it as an "either/or" decision.  They are not mutually exclusive.  They are also not the only two considerations to be aware of.  The biggest metric to track is net worth on your balance sheet as this will help you start to "snowball" your investments, make you more attractive as you begin to scale your investments and ultimately the determination of your wealth which has the most impact on your lifestyle and impact you can have in your life.  I think this is not talked about nearly enough on the forums.

Cash flow is great.  It can help you quit your job.  It can serve as a hedge against risk in your portfolio and allow you to achieve financial freedom quickly.  There is a downside....some people get so focused on cash flow and never consider net worth or appreciation.  For example, buying cash flowing rentals at retail value in a market that doesn't appreciate will not grow your net worth significantly.

Appreciation is amazing and directly grows your net worth and significantly if you use leverage appropriately.  This is where wealth is built....however, like we saw in 2008, buying and assuming something will appreciate can be dangerous.  

I've always looked at as a balance.  

 - I want enough cash flow to ensure I can always pay the mortgage and hold this property long term to see the appreciation of the market over time.

 - I want to buy in a market I believe will continue to appreciate and grow in the long term and is a desirable place to live (this is why I love being in and around the Asheville market)

 - I buy only good deals, meaning I can improve the property and increase the value significantly once I do repairs to the property and increase the rents, etc...This gives me a "jump" in my net worth every time I buy a good deal.

That said, there is a different answer for everyone, but make a decision that's best for you, just be sure to understand the tradeoffs of going after one and not the other and know they aren't mutually exclusive.

I'd recommend listening to the BP Podcast episode 595....but don't let the info there scare you into analysis paralysis. The answer is highly dependent on your net worth. If you're just starting out, and you're able to get conventional financing, I would get an umbrella policy for additional coverage and be less concerned about the LLC. Ultimately, talk to your insurance agent, lender, CPA and attorney. You'll get different answers from different perspectives but then you can decide the pros and cons and make the best decision.

@Tom Palmieri - As everyone has stated, it is very tough right now.  Prices are also all over the place for surveys too.  Right now, we call 20+ companies to get quotes and timing for each survey we need.  Basically, when we are in a rush, we work to be a fill-in when there is a cancellation.  That seems to be the only way to get something done quickly.

@Brenden M. - I've not done this personally, but have clients who have and I've ran this by some of my lender friends who have also agreed that it is plausible so something you can consider: You need to create a long term lease from you or your business as the "owner" to your STR management business. Essentially, you can create a long term lease for the average STR rent to your STR business who sublets as a vacation rental and then that long term lease income can be counted same as it would be if you had an actual LT tenant. Key is to be upfront with your lender and honest, but I have seen underwriters allow this to get around the DTI issue.

@Mark Dawson - You make your money when you buy, so if you really did overpay, you'll likely have a hard time getting above water on it, especially if it is your first property.  

I'd recommend you find some seasoned investors in your area from a local REIA, etc to give you advice.

Ultimately, it matters what the ARV is when you're done as Chris said. If it is a good deal with upside, then some local investors will likely help you out with a hard money loan, etc to get the rehab finished.

Whether or not to flip or hold and rent depends on your goals.  If you need cash, then I would flip and roll the capital into another deal.

I agree with @Nathan Gesner and @Albert Velasquez.  I think a fair interest rate would be based on your risk as a borrower.  If you're not lendable because of a job change, you should be getting a better interest rate than if you have low credit, etc.  Either way, I would not pay hard money with no ability to refinance out of it.  You could get underwater very quickly here.  I would say anything over 7-8% would be a no-go.

From a negotiation standpoint, determine what they care about.  It could be price, interest rate, monthly payment, etc.  It sounds like price more than anything.  If that's the case, I'd ask for 0% or 3% to start.  If you're not sure what they care about, make 3 offers:  Their price and your interest rate, your price and their interest rate, OR some other combination (same payment, lower price/rate).  Giving choices always lets them feel that they're in control and helps you keep rapport.