All Forum Posts by: Trent VanHorn

I appreciate the insight as I didn’t know about the non arms length transactions and how the IRS taxes the equity gifted. That’s really lame actually. Sounds like it’s best to inherit it directly if possible. I’ll need to talk to them about it all but this has been really helpful. Seems like there are a few ways to circumvent the tax burden though. We will talk to our CPA and figure out the best route possible. Thanks for the knowledge everyone. :)

@Jaysen Medhurst see I did not know this as I’m new to investing as of this year. I’ll need to look into it much more then. That is great feedback! Thank you l!

My grandma happens to be very old and her health is failing and I recently talked with my parents about buying her house from them after she passes. They agreed and are willing to sell it at a HUGE discount to me when that time comes as they want to help me out but make some money in the process. We are talking 40%-50% off market value. Her house is valued around $300k and I would be able to purchase it anywhere from $150k - $180k. It is fully remodeled. Rented. And in perfect condition. My plan was to put 20% ($30k from my HELOC) on the $150k purchase price, for example, and take a mortgage of $120k. This would give me a property that cash flows $500 per month at the current rent. This is a great deal. But then I thought that I want to pay off my HELOC and get my money back fast so after a seasoning period, if necessary, why not refinance to a $150k mortgage, get my $30k back so my own money is pulled out and pay back my HELOC. Or would it be better to refinance into an even bigger mortgage ($180k) and take more money ($60K) out to apply to the HELOC to pay it down as fast as possible (I have another $50K to pay off as the down payment on a recent 4 plex I bought)? I use $180k because this mortgage would put my cash flow at $200 a month on that house. What would you do in this situation if you were able to buy a remodeled and updated home at half price? I'm thinking it's best to buy it as low as I can, refi into the largest mortgage possible that still keeps my cash flow at $200 per door minimum and pay back my HELOC as fast as possible. Then be able to use this money for more deals. And then I may be able to get a HELOC on my grandmas house at 75% LTV and I would have access to another $45k from that. I appreciate the responses!

I am asking for advice on my current situation as I feel very fortunate and want to make the most of my opportunities.

I just bought my first 4 plex two weeks ago using a HELOC from my primary residence as the down payment. I owe about $50k on this HELOC and have another $50k available to me.

My grandma happens to be very old and her health is failing and I recently talked with my parents about buying her house from them after she passes. They agreed and are willing to sell it at a HUGE discount to me when that time comes as they want to help me out but make some money in the process. We are talking 40%-50% off market value. Her house is valued around $300k and I would be able to purchase it anywhere from $150k - $180k. It is fully remodeled. Rented. And in perfect condition.

My plan was to put 20% ($30k from my HELOC) on the $150k purchase price, for example, and take a mortgage of $120k. This would give me a property that cash flows $500 per month at the current rent. This is a great deal. But then I thought that I want to pay off my HELOC and get my money back fast so after a seasoning period, if necessary, why not refinance to a $150k mortgage, get my $30k back so my own money is pulled out and then just use the cash flow from the 4 plex and the house to pay down the $50k still owed? Or would it be better to refinance into an even bigger mortgage ($180k) and take more money out to apply to the HELOC to pay it down as fast as possible? I use $180k because this mortgage would put my cash flow at $200 a month on that house.

What would you do in this situation if you were able to buy a remodeled and updated home at half price? I'm thinking it's best to buy it as low as I can, refi into the largest mortgage possible that still keeps my cash flow at $200 per door minimum and pay back my HELOC as fast as possible. Then be able to use this money for more deals. And then I may be able to get a HELOC on my grandmas house at 75% LTV and I would have access to another $45k from that. I appreciate the responses!

@Dennis M. lol I know I know. I may give it a go and see how it works and if its too many moving parts then cut it back to just the 4 units. I still have time to decide as the majority of the leases aren't up until summer of 2020. The only way I foresee it working is doing my due diligence and screening all prospective tenants extremely well. I do understand and see how it could easily get out of hand, especially being my first rental and learning as I go. 

@Daniel Haberkost yes there is a parking lot directly behind the 4 plex with 8 designated parking spots so every tenant renting a room would have an off street parking space. 

@Daniel Haberkost this was the thread.

https://www.biggerpockets.com/forums/52/topics/446328-6-beds-duplex-renting-out-by-the-rooms

They were talking about having more than 4 unrelated people under one roof but I would assume that means a single address. With a 4 plex it wouldn’t be weird to have two unrelated roommates in a unit. Also they mentioned running a housing business like a hotel out of a residential property but having leases that are month to month should cover that. I’m not looking to house people weekly.

This is a 4 plex on the east side of the springs right off of Petersen road and Galley. Right by Petersen afb.

This idea came to me because I'm buying this as a househack on and FHA loan and if I was going to rent the other room in the unit I'm living in why not rent everything by the room and expand my cash flow? Thanks for the input!

@Sherif Lyons that’s a good idea to have almost like a household chore list or list of responsibilities. I didn’t think of that but having that in place prior to a dispute is very smart!

Hey everyone,

I'm pretty new to BP and REI in general but I am set to close on a 4 plex in December and am super excited as it's my first investment property. Each unit is 2/1. Currently the rents are anywhere from $75 to $150 under market and my plan was to do minor rehab and updates as the leases end and then bring rents up to market cost.

Just brainstorming here and asking for advice, has anyone ever had experience renting rooms in a 4 plex for a combined rent that is more than the market rent of an entire unit? Say I can get $950 for a 2/1 unit or charge $600 per room and make $1200 a month. Obviously there are pros and cons to this and I tried doing a search and found a few posts talking about this but there wasn’t a lot. Also I would need to check and make sure that is in fact legal where I live (Colorado Springs) as the other thread I found said that could be illegal.

Pros I see as more cash flow. Another thought is if someone had a roommate they weren’t familiar with it may incline them to be more tidy and take better care of the rental as someone else is living there too. I could do month to month leases so if there are issues between roommates I could get one to leave and replaced with hopefully someone who is a better fit. There may be a few other pros here so feel free to add as I know I’m not thinking of everything.

Cons are managing 8 different leases vs 4. Roommate fights and people not getting along. Tenants figuring out utilities for themselves and if one doesn’t pay up I’ll basically have to be the mediator between parties. It may also be harder to find tenants, and quality tenants at that. Now that I think about it I would probably have to furnish the place as well with at least the bare minimum a bed/couch/dresser etc. Right? Also they would need to coordinate cleaning otherwise there may be issues if one person is always leaving a mess and the other person is having to constantly clean up. And I’m sure the list goes on for the cons so feel free to add to this as well.

Listing it out it seems that it may be too much of a hassle to rent by the room and I should just be happy with my positive cash flow by bringing the unit rents to market value. But if I were to get people who got along and worked well together the extra income does seem nice. Especially if it inclines people to be more clean and take care of the place better (maybe this is just wishful thinking on my part?)

Thanks for taking the time to read this and I look forward to the responses.

Thanks for the welcome @Mark Leavitt @Jeremy Norman @Roni E.. I did end up attending the last Colorado Springs investors meeting at third space coffee and plan to keep going to those! 

I’ve also been running numbers on almost ever deal I see just to get the practice and experience. That’s why I’m Leaning towards the multi family because those seem to be the only deals where the numbers have possibly to work.  

Hi all! My name is Trent, 28 y.o. and I currently live in Colorado Springs and looking to get into real estate because of the opportunities it provides. I've been reading all the books I can get my hands on for the past month or two and absorbing all the podcasts as well. I was born and raised here, went to school in Fort Collins for a Mechanical Engineering degree, and found a job back in the springs working for Lockheed Martin. Ideally I would love to buy rentals for cash flow and get out of the rat race by the time I'm 45 or at least have the option to do that.

Now onto my current plan... I currently have a primary home valued around $310k with an outstanding mortgage of $173k. I wasn't quite sure how to best tap this equity but I believe the best way to do this is by getting a HELOC. I was going to use this as a down payment on a 4 plex or other multi family and rent it out for the cash flow and appreciation. Is this the better route to go vs a home loan or even a cash out refinance? Seems like its pretty common around here to use a HELOC as a down payment. My financial advisor suggested a cash out refi but only because he errs on the side of caution as he lost his real estate lending business back in 2008 and likes the lower risk of a fixed interest rate. Granted with a HELOC I can tap into more equity but comes with more risk of the variable rate. I would love to hear opinions or just general beginner advice! Thank guys! Looking forward to learning from everyone