All Forum Posts by: Raj Gandhi

Modernize the garage, reducing by one garage stall if necessary.  Then, charge separately for the garage space.  $200 / 200 sq ft.  / mo. (or whatever self storage goes for in your area)  If your tenants don't want to pay that much then open it up on craigslist.

An asset bringing in $600/mo is worth about $60k.  That is, if rehab of the garage costs less than $60k then this is probably a viable plan.  Extrapolating... could you tear down and replace the garage with 8 stalls (4 tandem spaces) for $80k?  Check your local building codes, of course.

Welcome to BP Max.  

First, I hate Palatine.  I had a bad experience there in 1996, but I'm not one to hold a grudge. ;)

I'm actually somewhat to BP myself.  I don't know why I took the effort to read your entire thread.  I do see some aspects of myself in your story.  Also, my kids were annoying me.  Your story is also different than many of the new joiners who have the same dreams and questions.

Your thread is 4 pages long, so far, with lots of advice from other users but I'm not sure it is the kind of advice for which you're asking.  If I were to give you similar advice, it would be to start working as a contractor.  If you have no skills then do demolition or be a mover.  Also, work seasonally at Best Buy or the Apple store.

I loved games and video games: chess, Quake, Unreal Tournament, StarCraft, Diablo, Civilization, etc.    Chess is specifically beneficial to decision making skills by eliminating worthless choices.  StarCraft and Civ are beneficial because they teach management of resources and strengthening one's own economy before doing direct battle; they also teach entering battles is best with overwhelming force.  Quake, UT and, to a lesser degree, Diablo, teach that between battles you need to re-equip.  I still play certain games (at age 43), occasionally to excess.  It tickles a part of my brain that is similar to investing in that it is competitive and resource driven.

Good luck with your endeavors.  Like another poster said, keep a good blog.

Hi Bob, welcome to the site.  

My wife's cousin is a real estate agent in your area and her husband is a good contractor.  Let me know if you want their contact info.

@Matt Taschner what about doing a casual lunch the week after Thanksgiving?  I'm working in the North metro so Roseville works well for me.

@Padma Mody I refinanced personally using my own name.

I would have preferred to use an LLC but, like you said, you can't get a loan for a new business that has no income.

So... I'm 43 and am just short of $1M in gross rental real estate (buy & hold).  Loans are more than half that amount.  To get here, it took me 15 years at a corporate job saving and living life.  Then it took another 4 years of luck, buying foreclosures, rehab and rent.

The *best* (and unrealistic) way to hit $1M, starting from $10k is probably to wholesale or complete speculation.  Find an area of possible future growth (school, hospital, etc.), pay the land owner $5k for the option to buy the property at a price fixed now at some time in the future.  If you guess right then you win the lottery.

My dad lives in the SW corner of VA. @Account Closed  If you're near and interested in a challenge, PM me and we can talk (not a solicitation).

I'd vote for the variable rate HELOC. I also agree somewhat with the other commuters about it being a short-term source of capital. @William Dampier  @Joe Villeneuve However, I'd say that short-term is <1 year.  You could conceivably enter some kind of flip situation using the HELOC and then cash-out refi to repay the HELOC after 6 months.  I use my $100k HELOC as a big emergency fund and transient source for down payments.  That is, sometimes I max it out but only for a matter of weeks.  Most of the time, the balance is <$20k.

As what @Bill Gulley said, HELOC terms can change quickly. One time I had a $90k HELOC get cut down to $10k because housing values crashed.

Love the general deal... I agree that the extra FHA fee and PMI are awful.

• 401k loan?
• Ask seller to take 2nd mortgage for $25K?
• Get the tenants to pre-pay $24k for 2.5 years?
• Work at Best Buy during the holidays?
• Loan from family?
• Pay the seller $5k for an option (usable towards purchase price) of right of first refusal on the property in 6 months (when you've got another $45k) at a price determined now

Some combination of the above? If not, calculate what it is going to cost you to pull the trigger on this deal now instead of waiting. I'm thinking it would be $4k FHA + $6k PMI = $10k over two years. That's a pretty big drain on a $25k investment.

@Padma Mody asked this question offline but maybe the story is good enough to broadcast on the greater forum.

When I began searching for rentals, I was looking at 3-4BR properties within my school district because I think the schools draw families to my area. I used MLS and a REA because I was President of the Soccer Club and knew an agent with a great personality.

All the potential subject properties were bank owned Twin Homes (half a duplex).  After a failed offer or two, I made an offer on a 4BR, 2 full baths, 2 garage, 1900 sq ft. unit.  The original offer was conventional financing.  The appraisal came back ineligible for loan because of a safety issue (lawn more threw a rock and put a hole in a window). The bank wouldn't allow anyone in the place to fix the "safety issue."

At that time, my budge was based on my personal savings and 401k loan (to myself).   I changed the offer to  $70k all cash and secured a $30k working loan from a family member.

I did much of the demo work and replaced the garage door opener.  That took me six weeks and it became apparent that I should hire the rest.  A general contractor replaced half the windows, part of an exterior wall & siding, the kitchen, all flooring, part of one bathroom, significant plumbing, significant electrical.  Everything interior and exterior was painted including the ceiling.  The furnace didn't pass inspection so I had that and a water softener installed.  All-in $120k (purchase, rehab, utilities, taxes and interest).

I got the unit rented and ~6 months after original purchase, started the refinance process (that's the min time to conventionally refi).  I met the appraiser there and had with me two pages of rehab expenses.  The interaction was intentionally conversational and I gradually all the improvements.  Eventually, he asked to see the two pages of rehab expenses I had and what I thought the property was worth.  Final result was an appraisal of $155k.  The loan was for about $120k (almost same as all-in cost).

Ultimately, it took about 9 months to acquire, rehab, rent and refi the property.  Now, I own a $1500/mo rental with $600/mo cash-flow and got back all the original capital so I could replicate the process.  In four years, that property has had three tenants but only 2 weeks of vacancy.  I've replaced the microwave, upgraded washer and dryer, replaced the last two original windows and added a deck.  The rent has been steady for three years.  Next year I'll try to raise the rent $50.

Look at your previous mortgage details (or ask the servicer), it probably doesn't allow assumption of the mortgage.

As a first choice, I'd suggest working with your lender to do a short-sale.

The last option would be Deed in Lieu of Foreclosure.  That would damage your credit but not as much as foreclosure.

Worst than last (because it doesn't answer the question you asked) would be to get a roommate ($400/mo) and another job for you and partner.  Put on some blinders and maybe you could have $20k saved in six months.