All Forum Posts by: Thomas B.

I have had several contractors come out to give quotes for a complete, down to the studs, rehab. New windows, insulate, drywall, paint interior and exterior, flooring, bath & kitchen. The 1st quote came in at $113K. Awaiting second quote to come in. It seems outrageous but I can still cashflow once all 3 units are rented. 

With a construction loan, isn't the amount approved by the bank contingent on the after-repair value (ARV)? They offered 80% LTV @ 8.12% with 15-year term. The man at the bank said it would be a cash-out since I have a HELOC on my primary residence that funded the purchase outright. Would the bank require the Heloc be paid off 1st or can I pay it down with the remaining balance after the rehab is complete?

I'm working with Navy Army Community Credit Union to refinance this deal. Their loan officer actually sat me down and laid out all the options available. Either way we go, it is considered a "cash-out" since I have the existing HELOC that will need paid off. A construction loan will cover the remaining cost to complete the renovation on all 3 units. I believe the living square footage is under-quoted, so I made sure to have that noted for their appraisal. The bank is willing to offer 80% ARV with a 20-year term.

I kept my mouth shut about renting it out as 3 separate units. No need to complicate things. He did ask how much I planned to rent it out for though, so I was compelled to give him the going rate for a 3-bedroom house, which is about half of what I project with a 2/1, 1/1, and efficiency. 

Currently, I am awaiting estimates from the bank's list of approved General Contractors. It is taking longer than I'd like due to the holiday season. 

Are there any strategies that I should look into to get the maximum cash-back from this cash-out construction loan?

@Andrew Postell Do you have to have an LLC or can this be done with a Sole Proprietorship with a separate business account as well? Can this strategy be used after the property has already been purchased?

I bought my 1st investment property in my name back in May, using all cash offer from a HELOC on my primary residence, and financed the renovation with a 401K Loan. Now that I am trying to refinance, all the lenders want to treat it as a cash-out loan with terms inferior to their conventional rate & term refinance. The 6-month seasoning is a non-issue since that time is almost up for me now.

Quote from @Steve Vaughan:

I'd just ask a residential  lender like a local bank and see if they can pretend it's a single.   

This might be one of those quiet cash-flowing deals like I've had in the past.  Self-funded,  no city or housing authority involvement.  Requires  sacrifice early but pays for decades after.  

 That's what I was assuming. In the eyes of the bank, and city zoning, it is a single family. Keeping my mouth shut about the rest since it is none of their business. I think I'll roll the dice and see where I get with my local branch.  

When I refinanced my primary residence a few years back, I busted my hump spit-polishing my house, thinking they were sending out an appraiser to squint at every blemish. No one ever came. I assume they just looked at the comps, square footage on record, etc. to come up with an appraisal number. 

I'm most likely over analyzing things yet again! 

Quote from @Matthew Crivelli:

@Thomas B.

It really depends on what shape the second and third units are in. Is there no electricity going to these units until the rewire is complete? If that's the case it will be difficult to refi with a 30 year loan. If the second & third units are livable, you should be able to get it done. 

I might be able to patch in the old wiring in the attached Garage (1/1) and have it rentable; however, the detached garage efficiency has mold damage and most of the wiring had been removed or hacked into. Total gut-job... uninhabitable... but it is a detached garage. Does it really need to be a livable space to refinance? I know I could get more money with a larger livable square footage, but I just want to pay off the 401K loan ($50K) and the rest can pay down the HELOC, freeing it up to finish the other 2 units.

Quote from @Stephanie P.:

There is no such thing as "technically zoned."  It's either a legal 2 unit or a legal 3 unit or a legal 1-4 unit dwelling.  If it's legal, but not conforming to the current zoning regulations, then you'll need a rebuild letter from the governmental entity that governs zoning.

Once you get the zoning nailed down, get a hard money loan and get the whole thing finished so you can get a DSCR loan (you're right, before they get more expensive). If the other two units are habitable, then rent them out and move on.

I tried to rezone it so I could install separate electrical and water meters but zoning refused. They told me that the attached garage 1/1 is a master suite, and the detached garage efficiency is an In-Law suite... all seemingly legal. There are hundreds of older houses around here that have in-law quarters yet are still zoned single family residential.  

As long as all the units are on a single electric and water meter, the city is fine with it (so far). I plan to rent out the units through Section-8 and they gave the green light too... as long as it was a single meter.  

Who should I check with before opening yet another can of worms? 

I bought my 1st Investment Property back in June using $99K cash offer from a HELOC. I knew going in that it needed extensive repairs including new roof and foundation work and probably a rewire. I figured a $50k 401K Loan should cover the renovation.

The property is technically zoned as a 2/1 SFH built in 1948. It has a 1 car attached garage that was previously converted to a 1/1 apartment and a detached 2 car garage that has a small efficiency apartment in the rear. The roof has been replaced and the foundation repaired. The rewire is costing far more than projected. I will only be able to rewire the main 2/1 and have enough left over to finish it up, leaving the other 2 units to be renovated at a later date.

Will I run into any problems trying to refinance with only the main unit renovated?

The online home value estimators peg the property value at $155-165K. Looking for a fixed 30yr mortgage, before rates go any higher. The 2/1 will be rented for $1230, but once the other 2 units are renovated, they'll rent for $1080 and $930 respectively. 

It has been a while since anyone has posted here. Is the monthly Meet-Up still happening?

1st Tuesday of the month @ 18:00. Mesquite St. Pizza & Comedy Club. 

I'm going to have to mark it on my calendar. Guess I just missed the one this month! Looking to pick the collective brains of the group about refinancing, HM, and how to get a decent GC or have experience as your own GC.  

I have decided to go with Chris Ruffo at CSR Electrical to handle the project. So far, they have been right on top of communications; email, phone, and text! Chris answered all my questions, gave me a few pointers to help bring the bill down a little by removing the old wiring myself, and he was willing to break down the project into separate phases for the other two units. The overall bill for a complete rewire is still very high @ $24K (barring the unforeseen); however, I am narrowing the scope to just finish the 2/1 unit and get it rented. 

Once the 2/1 is rented, it should cover the debt service and I can refinance, to free up my HELOC and 401K loan to finish out the other 2 units with enough left over to snap up another property or two, this time using hard money instead of going it alone!

Do any of you see a problem refinancing with just the 2/1 complete? 

Note: This IS technically a 2/1 with an attached 1 car garage and a detached 2 car garage in the rear. The attached 1 car has been converted to living space but not yet renovated. The unit in the detached garage is a complete gut-job. I have several online home-value tools coming in around $150-165K, although I am not sure if they are counting it as a 3/1 or not. 

Quote from @Vanessa Ursery:

Primary Electrical Solutions

Try them.  

Thanks, Vanessa. 

That's who gave me the "ball-park" $30K guestimate. He did say it was just a guess and I don't think they got as far as actually calculating how much wire they'd need or doing load-demand calculations, so that number might be way of base... hopefully.