All Forum Posts by: Tanner Lewis

Quote from @Cameron Goodall:

@Tanner Lewis Realistically I’d just put 5-10% down. I’ve also considered a 203k loan for whichever asset class I’m able to get the numbers to work with, and over the year or two I live in it, I’d continue adding to my savings and building equity so I can use that to put down on another property afterwards. Have you seen success with that? 

My main concern with townhome vs sfh is if there’s more of a “market value” for a town home despite what you put into it. As in, would it sit for sale because it’s now “worth” 350k arv despite the ones around it in the same neighborhood being listed now at 250k, as an extreme example? 

Thanks for your reply! Definitely a consideration when thinking about the reality of refinancing. 

With 5-10% down or an FHA 203k loan, you will still run into the issue of not adding enough equity to do a cash-out. With both of these strategies, I would look at the rehab as a way to bring up market rents so you can cash flow a bit better, and just sit on the property for a while until you can build up enough equity to cash out or sell.

Hey Louis, if you are a newer investor, I suggest working with a realtor, as they can help guide you through the process for your first deal. I sometimes see first-time investors get taken advantage of by wholesalers, and if you are an experienced investor, the probability of that decreases significantly. @River Sava has a pretty big network of realtors across the country; reach out to her if you want to be connected with an investor-friendly agent. I only work with agents who are also investors, as they are looking at a deal the same way that you are 

With DSCR loans, you can technically do either. However, I HIGHLY suggest working with a lawyer to structure proper asset protection. The main structure I see on my deals is a nested structure: an LLC in the state of the property taking out the loan, and that LLC is owned (nested) within a Wyoming LLC. This gives you both in-state protections and the anonymity Wyoming can offer allowing you to protect your assets with outside-in and inside-out liability protection.

Quote from @Cody Rigby:

Hello!

I am a first time real estate investor looking the following property : 

https://www.redfin.com/OR/Forest-Grove/2418-Cedar-Cir-97116/...

its a pretty large duplex in Forest Grove OR,  the trick is though, its on a lot zoned for a 4 plex so I am looking

into house hacking, converting into a triplex, then living in one unit while renting out the remaining two units

The left garage has been converted to living space, with a living room, half bath, a laundry room with a sink and some counters/cupboards and a bedroom, it is a part of what was an existing 3bd unit

If I were to acquire the asset, I would first attempt to convert that space into its own unit 

The line items as I see (be in mind, I am totally new to this) would be to 

>put up dry wall where the door to the rest of the house is,

>add a shower to the half bathroom 

>install a water heater in the adjacent 3bd unit

> install a kitchen in the laundry room, (
stove , oven , sink, counter space)

>add a shower to the half bath 

Assuming I can convert it to a 3plex, I could at-least cash flow on my investment after I leave 

My plan would be to put minimum down payment of 3.5% (FHA loan) that way I can have a decent amount of capital free to do the renovations

The only concern is when I crunch the numbers to get my ROI, I have no idea

how much its going to cost to convert the additional living space to a third unit

Any experienced investors here know how I can estimate this before I try to make an offer?

at first glance does this project look like its worth taking on or should I shoot for something more turn-key as a first time investor?

Thanks,

-Cody

I would work with a GC/architect to determine the cost. I typically suggest getting three quotes so you can determine who is legitimate. With this SOW, you will be able to determine rehab costs. 

J Scott also wrote a book on Estimating Rehab Costs, which could be a useful resource. It is in the BiggerPockets bookstore.

One thing I see as a lender is that any kind of owner-occupied loan with a low down payment will not allow you to build enough equity to refinance out of it, even when you are forcing equity with a rehab. If you use a DSCR or hard money loan, you will not be able to live in the property. How are you planning to finance this deal?

It is a matter of if you want to hire them full time on salary - if so hire as employees, but in 90% of cases, you can just pay them as a business expense with a contractor invoice

Hey Stephania - lending on these is very difficult since they are considered rent-by-the-room and commercial. If you are looking for financing, I would make sure you can qualify based on long-term rent (one lease), and the property is not currently operated as a rent-by-the-room rental. 

I am working on a deal in the area now, and I noticed the appraisal came in lower than expected, and the rents came in a lot lower than expected. Just make sure you buy right and bake in a very conservative underwriting. 

Hey Latonya, I am from Richmond, Virginia, and know the area well. I'd be happy to connect as I am looking to flip in Old Manchester and a couple of other areas. 

The BP books are pretty good, but what worked best for me was listening to the podcast on double speed and learning how investors talk and think. Put in headphones when you are cooking breakfast and listen at double speed, and it is a great way to learn at an accelerated rate.