All Forum Posts by: Richard Jahnle

@Mark Greenawalt The test that the technicians are required to do is called a lead swipe test. Per the city’s new lead based paint rules, the technician takes a small swipe sample from each bedroom, living room, and dining room in the house, as well as a sample from a windowsill in each of those rooms. In the past I have had a cleaner come to the house and do a full clean of the house prior to the technician coming out. If you do cleaning right before the technician shows up, you’ll very likely pass the test. Repainting the interior walls won’t have any effect on the results of the the swipe test since they don’t swipe the walls. Repainting the interior windowsill might, but it is still just as important to clean as it is to paint. Dust and dirt on the ground or a windowsill can be enough to fail the test. If you have any other questions about the process or want a recommendation of a good lead test technician, send me a message. 

@Web A. - I am not sure. With the Wells Fargo PLOC, I was told that the most important thing they looked at was credit score, although they did also ask me to list my income, expenses, assets, etc. I applied online and was approved almost instantly.

With my credit union, I submitted much more financial information, and it took almost a month for them to approve the credit line and they periodically asked for more of my financial info. They asked if I had other LOCs, so maybe they would have held it against me the more lines I had. I guess the only way to find out is ask. 

You could go back to Wells Fargo now that you have had the credit line open for a year and see if they will raise your limit. 

@Web A. - I agree with @Seth Williams that you might not get what you consider great terms on an (unsecured) personal line of credit, which makes sense because it is unsecured. I would maybe start with the banks/credit unions that you already bank with and see what options they have available. Since you already have banking history with that institution, they may be more likely to extend a credit line to you. Or call around to local credit unions like Seth had mentioned, and consider opening a checking/savings account with them if that is what it takes to establish a line of credit.

I opened up 2 unsecured personal lines of credit in the past year. The first one I opened with Sun Federal Credit Union, who I already have a HELOC with. I requested a $30,000 line of credit, and they ended up giving me a $15,000 unsecured line of credit at prime rate +3.25% (so currently 8%). Then I requested a $25,000 from Wells Fargo, who has been my bank for many years. They gave me the full $25,000 (I guess I could have requested more) unsecured line of credit for prime rate +6.25% (so currently at 11%).

If I was in your shoes - 

I would house hack using a VA loan, whether it is a small multifamily or a 3 or 4 bedroom house where you rent out the rooms. If you get something that needs some fixing up, you have the funds for some rehab work. This way you get experience buying a house, learning how financing a house works, experience rehabbing a house, and experience finding tenants and managing a property. If you enjoy the process, continue investing in real estate. If you don't enjoy the process, at least you now have some equity in a property with tenants helping to pay down your mortgage.

@Cindy Truong - With the property that you mentioned above, there is no pictures of the inside, but the description says that it is a shell with no access to the inside. So you need to determine what it will cost to do a full gut rehab of a property. I would suggest networking with individuals who have experience doing these types of renovations. Walk the properties with them, and see how they estimate the cost of rehab. That way you can at least come up with some sort of ballpark for rehab costs when analyzing potential BRRR properties. Your local REIA meetups may be the best place to meet people with experience renovating homes. Also - check out J Scotts books on Estimating Rehab Costs.

@Cindy Truong - Some other costs that you might want to keep in mind when running numbers for a BRRR on this type of house:

Purchase closing costs - Can be high in Philadelphia because of transfer taxes.

Holding costs - In addition to interest you are paying your hard money lender, before your tenant moves in and starts paying most or all of the utilities, you will need to pay them. This is mostly electric, gas, and water.

Closing costs when you refinance into a long term loan - Refinancing at the end of the BRRR will also result in some fees, and this depends on the type of loan you get.

Good luck with your search and your BRRRR - feel free to reach out with any questions

@Nicholas P. If you do want to stay in your current home, maybe you can access some of that equity through a HELOC. I only had about 20% to 25% equity in my primary residence, but found a credit union that was willing to lend me up to 95% of the value of my primary residence. Most credit unions I talked to only went up to 80% but the 5th or 6th one I talked to was willing to go to 95%. Even if you only have a small amount of equity in your home you may be able to tap into it and use that money for your next investment.

Using a combination of a HELOC and Hard Money (or Private Money) could allow you to BRRR a rental property without having to bring much cash of your own. Good luck with your investing and feel free to reach out if you have any questions.

Thank you @Brian S., @Thomas J., @Thomas S., @Dennis M., @Joe Sniadowski, @Kevin Sobilo, @Jill F., @Brendon Grover, @Mike McCarthy, @Derek Guivehchi, @Eli B., @Oscar Beteta, and David R for all of the advice. 

I weighed what everyone in the forum said for a home that I closed on in March. The house was mostly knob and tube but the kitchen and 1 of the bathrooms had been rewired. Ultimately, I decided to have the house rewired. I got 3 quotes from electricians ranging from $6,800 to $14,500, and went with the lowest quote. So it ended up being $6,800 to rewire the majority of a 1,300 square foot house. 

Going forward, if a seller has not disclosed knob and tube and it ends up being present, I like the idea that many suggested in the forum of getting a quote from an electrician and giving it to the seller in negotiations to see if they will pay for all or most of the rewiring. 

Thanks again for everyone's advice.

@Alejandro Tirso - I would call as many insurance companies as you can. If you call 10 or 15 different insurance companies, you will probably find that the premiums differ depending on the company and how they underwrite the property. If you can find a company offering a lower premium, it may improve the cash flow at least a little. 

You also mentioned that you are doing FHA financing. Keep in mind if you are doing FHA financing the property legally has to be owner occupied.

@Steve Vaughan Philadelphia's transfer tax is a little over 4.2%. The buyer and seller split it 50/50, so it's a little bit more than 2.1% for the buyer. For a $200,000 purchase price that's over $4,000, making it your largest piece of the closing costs.