All Forum Posts by: Rik Hunter

@Jeff Shumway, right, I wouldn't be able to do a VA refi, and I was also confused about why the lender said it'd have to be a commercial loan. But with USAA being a big bank, the person I spoke with may have no experience with an individual investor. So, I'm not using any business entity for this.

I have a duplex that I originally purchased with a VA loan, and I moved out of my unit to finish rehab and moved into a SFH live-in-and-BRRRR. Like pretty much everything, its value has gone up, and based on comparables, I'm estimating its value at up to$275k in Chattanooga. My current lender has said I'd need to get a commercial loan (I've started to look for other lenders).

First, is this commercial loan correct? If not, what type of loan would I be looking for? The numbers, as I see them:

At a $275,000 value, I used a 75% LTV, so $206,250, and I would hope to find a lender willing to see the remaining 25% as my equity. I currently owe $149,000, so a cash-out of $57,250.

I currently pay $977/mth: $645.05 for principal and ESCROW is $331.57 (taxes and insurance/no PMI).

Using the Bankrate calculator, a new loan at $275k and 3.1% would be $1,165/mth (approximates, of course):

• $918 principal and interest
• $66 Insurance
• $181 property tax

Anything that I'm missing or should be considering here? 

Not growing! Seriously. We have one duplex that we house-hacked and then bought a SFH that we're fixing up. After a year, we're converting one duplex unit to a mid-term rental. As a long-term rental that unit is conservatively cash-flowing $275/mth, with 1 month of vacancy accounted for.

Not including the furnishings, the MTR cashflows $412/mth—with 3 months of vacancy accounted for. 

If I only accounted for 1 month of vacancy in each, cash-flow:

• LTR = $275/mth
• MTR = $687/mth

We're converting a long-term rental to a mid-term rental. It's our first go at this, and I'm being conservative with my numbers, like expecting as much as 3 months vacancy and including that in the cashflow calculation. 

What's greatly reducing my monthly cashflow is spreading the start-up/furnishing costs across 12 months. That is, my cashflow is $42/month after spreading the furnishing costs across the first 12 months (as a result, next year's cashflow will be huge). Any particular reason to use 12 months versus 24, 36, 48, etc.? 

Maybe I'm just trying to make myself feel better about the sudden drop in my property's bank account! 

I really like Brandon's answer. I'll add that I nope "no sublets" is in the lease and that you went over this at signing. In addition, if you self-manage, my trick for keeping an eye on things is to change the air return vent filter monthly. That means me communicating with the tenant to arrange a time to do while they're home. And even if I do when "they aren't", I might catch a change in the furnishings and get suspicious. In this case I have a duplex, and the other tenant would definitely let me know if something fishy is going on, which brings me back to Brandon's comment. I charge near the top of the market and screen for high-quality tenants who I build a good relationship with.

Try this facebook group. Events are posted there. https://www.facebook.com/group...

Being mostly still a rookie, myself, I'd never give the tenant that kind of control. Attention to detail matters, and I've gone through a few handymen and done the work myself (complex plumbing and electrical is beyond my skills).

Get some quotes and find someone to do the work . . . but only with you factoring in the quotes and telling her that her rent will be raised to cover the costs. 

I have a duplex in Chattanooga that had the same situation. Tips were sealing all the external air vents and encapsulating. I also added a sump pump because there was standing water along one foundation wall. We get a lot more rain than Seattle. And I also added a dehumidifier. This set up works great. But, I had to connect the pump and dehumidifier to one unit's electrical panel. 

I got an estimate of $10-12k for that work (not including the subfloor/joist work. I did everything myself for maybe $4-5k.

Beautiful property! Congrats! It sounds like Boone is the closest city, but how many minutes out? Was that distance something you considered, or was the farther out the better for this property?

Sure. It's technically a mid-term. https://www.biggerpockets.com/...