All Forum Posts by: Ryan Howell

My advice:

1.  Realize it will not be easy, but it is worth it in the long term.

2.  Get stability and cash reserves first.  Make sure you have your personal finances under control, a stable job. This will make getting into the investing (even if you are doing "no money down") much more doable and success will be more attainable.  

3.  Stop paying for education and .  The only money you need to spend, in my opinion is on books.  BP has ~300 hours of podcasts of great information.  Submerge yourself into it until you know what you want to do.  Read as many books as you can.  

4.  Determine your "why" - Do you want passive income, a job, etc?  If you want passive income, I would start by house hacking a small multifamily property once you are able.  This is a great step to learn and start growing your portfolio.  If you want a job, consider wholesaling (perhaps the hardest of all), flipping, being an agent, etc.  For any of those, you definitely need to find someone in your area successfully doing that job and figure out how to add value to what they are doing and you will start learning from them.

Good Luck!

@Jacob Eddy - good job finding a deal around Asheville, that in itself isn't easy.  

If you have the money and some contigency, I would go about it just as you described because it is likely your best option for interest rate.  Another option would be private money or hard money, but I don't see any advantages to your situation.  

I would look at the rehab loan.  I'm not sure on the rates, but maybe it would save you some of the costs with the refinance, if you don't have to pay costs twice (initial closing, and refinance for title insurance, closing costs, fees, etc).  My guess is you would still come out cheaper with paying the rehab out of pocket.

On my first purchase I fell for this tactic.  It works out great for the realtor and seller in most cases.  Once you put down earnest money, pay a appraiser and inspector, then you have skin in the game and are more likely to pay over your initial desired purchase price.  I realized this after I got under contract.  When the seller wouldn't budge, I told the realtor they would have to cut commissions to get me to my desired price or walk away...they both cut 1% and we finished the deal.  At the end of the day, stay firm to your number and don't let emotion steer you to a bad investment.

So from further discussion with some other investors, they explained that an in-law suite generally has a door between units so that you do not have to go outside to get into the other unit.  This seemed to be consistent with what I’ve seen so far.

I agree with @Ben Leybovich.  I can't speak from personal experience with a 1031, but I know others that get so caught up in being able to say they did a 1031 and so worried about the tax implication that they end up making a bad deal and the bad deal hurts more than paying taxes on the gains.  

I have similar goals. I'm using the BRRRR method to buy with cash, rehab, refinance and repeat. I have 3 duplexes in 6 months and still have a lot of my capital back for more deals. The part I like is the security of having 30 year fixed rate loans at ~5%. At some point, that will get more difficult, but I say take advantage of it while you can. Look at a fourplex or smaller that needs work where you can force appreciation and get your capital back. If it is 4 or less units you can easily get 70%+ LTV with 30 yr fixed loans for at least the first 4 loans. I like the idea of having one of my biggest "expenses" i.e. my debt service fixed for the full loan period, especially with risk of interest rates being on the rise.

Thanks everyone.  Just to clarify.  My duplex is okay per zoning and was originally built with 2 units and is metered seperate for both electrical and water.  I already own the property and I'm doing a cash out refi.  My question was more about if other houses that are generally referenced as  houses with an "in law" apartment would count as comps or not, as they tend to go much higher in price than the typical "duplex".

@Thomas S. - Help me understand what you mean by legal rental?  Are you referring to zoning?  As far as I'm aware I can rent an in-law suite very similar to a unit in a duplex, assuming there isn't a zoning restriction.  I've also seen some with seperate meters already available.  

As far as prices, you are correct, the prices are driven by home buyers but that doesn't mean it's not a valid comp for me, correct? If I were to buy SFR, it would be comp'd based on home buyers not investors as well. In my understanding that is true for anything less than 5 units. Obviously, there are less home buyers buying fourplexes rather than SFR or duplexes, but I'm not sure why the bank cares as long as it counts as a comparable unit.

I'm not trying to sound contradictory, I just still haven't fully understood the distinction yet.  

@Peter M. - Thanks for the advice.  I will look at contacting them.  I was also hoping to get some agents or appraisers on here that could help clarify as well.

@JR Rivas I would not be afraid of SFR. There are pros and cons of every asset class. I would weight the pros and cons and determine what best helps you reach your goals and manage risk.

Pros:

-30 year fixed rate mortgage available if <4 units - lowers your risk and helps you predict/manage cash flow when rates are on the rise.  

-Lower cost - means lower risk on your first deal when you are getting started and still learning

-Potential lower vacancy rate depending on property because there is higher likelihood of long term tenants that want privacy, etc that only SFR offers.

-Potentially lower monthly expenses - no "shared" or common areas - tenants can maintain the yard, pay their own utilities, etc

-Exit strategies - you can sell to anyone, not just another investor.  This can lower risk if you need to sell OR help with forced appreciation if you are doing any rehab.

Cons:

-Less economies of scale - i.e. one roof per tenant vs. an apartment where the roof is shared, no full time maintenance or PM that you could get with very large deals, etc.

-sensitivity to vacancy - as you stated when a tenant leaves, your have 100% vacancy

- sensitivity to comps - valuation based on other houses, not cap rate.  Potential for more market fluctuation (could be pro or con)

I'm sure there are many I've missed.  

I have an interesting situation. I own 3 duplexes. All of which I have been doing the BRRRR strategy. 2 are now refinanced and I'm about to start on #3.

The first 2 duplexes all have 2/1 units.  #3 had a 3/2 and a 2/1.  All are brick ranch style houses.  One issue we see in our area are very few comps for duplexes.  I'm familiar with all of them.  They are all 2/1 or 2/2 units and all sold around $200k.  Not suprising that both of my appraisals came in between $195k-200k.

As I'm trying to estimate the appraisal value for duplex #3, I've noticed a few brick ranch houses that have sold for much higher ~$289k.  Many are 3/2's with an "in-law" suite.  I'm trying to understand if these are valid comps and what distinguishes a "duplex" from a house with an in-law suite?  It seems my appraisal value could vary drastically depending on how it is classified? Any suggestions for maximizing my appraisal value for my cash out refi?