All Forum Posts by: Steve Schulman

What’s up everyone. Looking for advice from those who have utilized credit cards for rehabs. I just closed on a two-family with a 203k loan— the banks money should cover a majority if not all of the first unit rehab and then I'll be moving into the second unit to finish the job with my GC via some sweat equity & hopefully some creative financing.

I have considered the Home Depot's Project Loan and HD credit card (thoughts?) but am leaning towards maxing out a traditional credit card or cards via 0% intro APRs and/or Balance transfers. Although I have done my research, these methods are fairly new to me so I do have some questions. I am torn between getting a Balance Transfer card > racking up my limit on my current CC > then transferring the debt to my second card in intro period OR getting a new CC with 0 % intro APR > use that new CC to pay my GC and fund rehab. For those who have done this which option would you recommend (0% Purchase vs Balance transfers) and how would you advise going about it?

I currently only have one CC and I have read how people use multiple cards but I assume they’ve obtained them over time... Obviously my plan is to aggressively pay down the debt from the rehab, whether it comes from a new 0 % purchase card or a balance transfer card, then after getting the debt down shoot to do get a third balance transfer CC before the intro period expires to avoid any interest on the remaining balance. Repeat the process and obtain more cards as I acquire more property’s/rehab projects. This all sounds good in theory but I do feel like I am missing something... Would you do anything differently?

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My main concern with this is jeopardizing my chances of a refi post renovation and not being able to qualify for another CC (to carry remaining interest load if necessary). I am confident I can get the debt down enough to ease my ratios, but I will be utilizing most if not all of my available credit in the beginning and know that can impact my credit score... I am hoping any effect on my credit can recover within my rehab-to-refi timeframe— this is my first property so I anticipate the additional credit account will mitigate at least some of the damage from the high credit utilization rate. 

My primary goal is to finish the rehab in my unit in 6-12 months, cash-out refi into a conventional so I can utilize forced equity to cover existing debt, and move onto the next property/house-hack. Based off my numbers— @ 80 % LTV I should have 40K in equity to play with so I am hoping to get creative with the rehab, then cash out refi for any outstanding debt and/or use HELOC for the next property.

Let me know your thoughts and thanks in advance.

Steve

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Bayonne.

House-hacking value-add/fixer-upper 2-family in Bayonne, NJ; long term buy & hold strategy.

So I spoke with a few Architects and Lawyers who were familiar with zoning & planning in the area, and concluded it is not worth taking the chance on. Therefore, I decided to back out of the contract. Although, I would have liked to hear the conversion and variance was feasible/promising, it's better to get turned down now rather then on the back end after I stuck my money in an asset that will only leave me in the red. 

@Allan Szlafrok exactly what I did TY. Noted on the 5BR-- I agree it would be a tough sell, it seems once a family grows big enough to accommodate such a layout more times then none they would lean towards buying instead of renting...

@Peter Tverdov in this hot Bayonne market, unfortunately I was unable to negotiate anywhere close to where I needed to be.

@Aaron Schump you are correct sir as it seems to be the case.

@Mala S. I was familiar with seeing a premium in property insurance and taxes however, was not thinking much about rent control which was.

Thanks for the input guys.

What’s up everyone - Part time investor coming out of Bayonne, NJ. First post here as I am fairly new to BP! Looking for some advice and good insight.

I recently put a 2FAM under contract with the sole purpose to convert to a legal 3FAM. The property has two units with 3BR & 2 full baths each on the second and third floor—as well as an owners duplex with 2 BR 1 full bath and a half kitchen on the first floor behind the garage. With the 2BR as its own legal unit, conservatively I can get 1100 from the first level and 2200 and 2300 from the other two 3BR. If I cannot, I would be stuck with a 3BR and a 5BR… This of course is not as enticing since I will be missing out at least 800 per month in extra rent, let alone am unsure how much demand there even is for 5br in my market or what it could truly rent for.

Moving forward, I checked with the city and reviewed the ordinances for the zoning of the property and it is in fact possible to turn into a 3fam dwelling. However, only as long as parking permits. When I checked the city code I found out that I will need a total of 5 spots to legally proceed here. Since the property only has a garage and 1 additional carport, I will have to hire an architect, basically shuffle money around and have him or her draw up a report to see if it’s feasible or not to add these extra spot. Clearly, it isn’t— if anything I may be able to squeeze a 3rd spot in the carport, but I believe that’s unlikely since there are car stacking limits. All in all, I was advised I will have to take the architects write up, hire a lawyer and apply for a code variance with the city. After doing my due diligence, I found out this can take anywhere from 6 months to a year, and cost anywhere from $10,000-15,000 (architect/lawyer expenses, survey, notices, mailing, escrow, application and legal fees, etc.) All of this to potentially get turned down and be stuck as-is with the 2FAM

That said, I based my offer off the 3FAM projected income— if the property can be legally be converted I will see a strong ROI even with the mentioned expenses, but if not I will be putting myself in a hole. I am hoping to get promising feedback so I feel confident rolling the dice and taking a chance with the conversion, but that does not seem to be the case. I was informed by a couple attorneys it is not out of the question but it is a long shot. They have been in front of hearings and as of right now, said it not likely the city will approve this for numerous reasons. One, since there are already numerous apartment complexes being put up in the area, the city is very dense with parking and residents are getting fed up. Two there are numerous applications for variances like this already being requested, and three the fact that it is a newer property doesn't help my case…

Knowing this - I advised my agent our goal right now is to keep the contract open as long as possible without putting ourselves in a position to forfeit earnest money deposit, so we can look further into the variance and confirm if it is in fact likely or not/worth taking the shot, before we back out. Plan B would be to try and negotiate the price down, ask for a seller concession, ask for all appliances, basically everything we can get before we back out, in order to make the investment as a 2FAM worthwhile. Plan C would be to look for some creative financing as this would be a perfect situation to do a Lease Option in if they would consider it...

I am hoping anyone on BP has solid input or any recommendation here. Maybe someone familiar with variances and or someone on the ground-floor in the area? Thank you for taking the time to read this, your input is appreciated.

Steve