All Forum Posts by: Roc Pilon

Whats up BPers. 

I rarely post on here but figured this would be a good one for anyone thinking that house hacking is too slow or may view starting with one deal as not "enough". I bought my first investment property when I was 19 and the deal Im referencing here I bought when I was 22.

I bought this duplex with an owner occupied loan (about 20k down) and put about 15k into the property upon acquiring it. I rented it fairly quickly and had a roommate in it paying $500/mo on my side.

Purchase: 270k 

Income Side 1: $1250/mo

Roommate income: $500/mo

Payment $:1900

Out of pocket $300-500/mo for remaining mortgage/utilities/expenses. 

I've owned the property for 40 months and in that time the market has absolutely gone insane. I sold the property for $560k and netted $250k after taxes/fees/etc.. not factoring in the rent savings.

Key Lessons:

Make the sacrifices: I remember scrubbing the floors on a friday night so I could get a tenant in there while all my friends went out and partied thinking one day this will be worth it. The units when I bought the property were a mess.

Run the numbers: I bought the property with the intention to hold it forever and cash flow it. I didnt plan on this kind of appreciation. 

Start: Too many people are pinching pennies and are being to paralyzed by fear or doubt. Just start.

This is similar to what is going on in the Boise Idaho market as well. Duplexes I bought for 150k 5 years ago are going for 400-500k.

Here's what you need to understand, what doesn't cash flow for you doesnt mean it wont cash flow for someone else. If you have someone who sold a lot of real estate in one of these cities with moronic governments running it, they will be 1031ing their money into your market. Which is very common to see in Austin, your market is similar to mine. 

Now, they dont care about overpaying or the concerns you have. They are buying with cash, trying to avoid capital gains taxes and want to store their money. Unfortunately, this is out of your control, you need to look for gaps in your market. A property with a lot you could develop, or a shop you can turn into a unit. You need to create your deals now because of market competiton.

@Prash Aksh PMI depends on how much you put down on the property and will only generally occur when you're doing an FHA or 5% down loan. You can look at MACU for financing and putting 10-15% down depending on your credit.

Taxes are increasing but its what you can expect in a market growing as fast as it is in Meridian and Boise. 

One thing to note is the new build prices on MF units specifically 4 plexs is forcing valuations up in a market that doesnt necessarily have the rents to support them. For instance most duplexs are going for 300+ and 4 plexs are now 500-600+. Unless you have an overarching strategy to increase the rents you will want to be careful to ensure your rents can support your purchase price.

What a useful and enlightening contribution.

Thanks Lee

Ive asked a few people + this forum. Consensus, is dont tell the city. 

But when I go to get refinanced in 6-12 months I will walk through it with the appraiser to ensure the 5/2 is accounted for at market value. One of my mentors had the same thing happen to him and everyone here saying dont talk to the city is correct from what Ive heard.

@Account Closed this is what im thinking. 

For context this house is 114 years old - When I look at the value of the property that was quoted by the appraiser in the "cost approach to value"

The site is $110k

The dwelling that was included was $153k

The 546sqft of basement was valued at $55k at $100/sq ft (in reality its more like a minimum of $150)... But thats the portion that was omitted most likely because it just hasnt been updated with the city. To my knowledge the egress windows are to code and in this area everything would be grandfathered in, they want more density in the area so I cant imagine them rejecting improvements that have already been made but I will look into this.

Total appraised value: ~$318k

Total ommitted $55k

Total depreciated? 86k

Indicated Value by cost approach: $236k

The appraiser depreciated the physical asset by 86k... to hit the number that the property was being sold for on the appraisal lol - seriously, the paint is worn on the exterior - sure. But 86k is an insane amount to depreciate considering the property is rent ready as it stands right now. I rented it for $1900/mo the day after I closed. 

Cash flow: $250/mo after all expenses.

@Jeff C. Ill do some digging and jump back on this thread once Ive asked around about it.

@Russell Brazil Yes, to be honest a $800-1200/yr increase does nothing to my cash flow or income and id rather have access to the 100k in potential equity to scale the portfolio. Ill dm you the listing on Zillow so you can look at it for context.

Zillow is registering 3 property types on the same lot - 2 units a 2/1 for 212k and a 3/1 for 218k... and a single family house (same house) as a 5/2 for 235k.

Normally, Id agree with you but I think the realtor listing the property didnt list it correctly and unless you walk through it you would never realize its a 5/2 hence the cities info being out of date.

The market wouldn't be able to value the property accurately if its never been listed/recorded correctly. Thats my point, not the other way around.

On the surface thats all that matters during the transaction. But not over the long term, if the value is actually 300k+ which I believe it is. I want to force that with the city so that I can pull the equity out of the property and access the capital. 

If the info is inn-accurate, not recorded, or not up to date and the appraiser is working off of that then there is potential for increased value in the property.

This would make sense. The basement does have egress windows in the rooms but it looks as though it was included in the non liveable square footage. Im wondering if they were put in and never recorded/permitted. 

I agree with you, its as though the appraiser just changed everything to fit exactly what was being sold instead of what actually existed for the seller. Im not complaining its actually a good thing, but I am curious as to go about recording the actual property characteristics to increase the property value.