All Forum Posts by: Will Feetham

It's been a while Kenny, but I just followed your recommendation for a CPA and wanted to say thank you! 

@Aaron Oetting

That's good insight, thank you! Have you used pricing tools like Airdna?

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $260,000
Cash invested: $120,000
Sale price: $560,000

This was a long term residence, which I eventually "flipped" by doing a complete renovation.

Lessons learned? Challenges?

The biggest challenges were changing my thinking to see my long-time home as an investment rather than a place my family grew up. Once I was able to move past those connections, I struggled with finding good contractors. I'm incredibly grateful for all the opportunities for learning and growth this property gave me.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

The selling agent was Ashley Boughner, and I will continue to recommend her to anyone looking to buy or sell. She is so wonderful to work with, and absolutely got us the best possible result.

Update, as long as you can leave the cash you purchased with in the property until you refi in a year, you don't need to season the property at all. This is from my loan officer:

__________________________

Neither conventional nor the 203(k) require any seasoning for a reno refi. The 203(k) will require the use of a second complete as is appraisal (the calc is different for a k than it is for a traditional refi in the first 12 months).

In neither case can the borrower recoup cash that was spent to purchase the property with cash.

For the 203(k) refi, the property must be owner occupied during the application process, it cannot be vacant. Since the borrower is living there, that does not appear to be an issue.

Thank you Wayne! 

I'll look into arms length transactions to see if this concept is feasible, I appreciate that information! 

On the occupancy, that was the information given to me by a loan originator I spoke to. I was specifically asking about the cycle time and when I could repeat the process. I'll follow up to see if I misunderstood! 

Hi Bigger Pockets! 

I am actively looking for property in the Cincinnati area and as a lifelong Oregonian I have to say I love it here. My plan is to use a 203k or HomeStyle renovation loan to take "depreciated" duplex, triplex or quadplexes and bring them back to current standards for rentals. After the required year, I plan refi out of the reno loan and repeat the process. 

I'm finding that with the market as hot as it is, I may need to buy with cash to get a good property for this BRRRR approach. Unfortunately, there is a 6 to 12 month waiting period after purchase before I can use a renovation refinance loan. So, my question is: can I, or a friend, use an LLC to complete a cash purchase on a home, and then have the LLC sell the property to me using a reno loan? The benefit here is I can close rapidly for the initial seller and get them their cash in days or weeks, then take the time required to get estimates, permits etc so I can personally close the reno loan.

There is of course the risk that the LLC will make a poor purchasing decision and pay too much, but aside from that, are there negative tax implications for this? There should be no capital gains for the LLC because the buy and sell price are the same, unless that is somehow prohibited. Would you anticipate any issue from the bank side? If the LLC is operated by myself, or if required by a friend, would that be a problem? If I invested in the LLC or loaned money to the LLC which enabled it to buy property, including the one I end up buying back, would that be a problem?

Of course, the answer is "talk to a tax attorney" which I will certainly do, but I'd love to know the general shape of things before entering that conversation. Is this a great idea or am I ringing alarm bells? Thank you all very much for all the information you share, it's greatly appreciated! 

To add my own value here, I learned something interesting I'll share: most renovation loans require owner occupancy for 12 months as part of the contract. Because renovation can take up to 6 months, I was expecting that you'd have an 18 month cycle to find, buy and renovate properties. However, for the purposes of the occupancy clause, occupancy begins the day the loan closes. So even if it takes 6 months to finish the renovation and move in, you can start the paperwork on the next renovation loan on the 366th day after your previous loan closed. I hope that helps someone! 

-Will Feetham

Thank you Paul! The 203k is for the property in Cincinnati, I'm funding the conversion of my remaining Oregon property from the proceeds of the first sale. I may bring that capital back out with a refi or HELOC if I need it in the future. I'd really like to do a larger remodel on the place and also remodel the ADU that's behind the primary house I'm turning to a STR. Unfortunately it's not possible right now because there is a Section 8 tenant that I don't want to evict. I'd love to renovate and let her stay there but I need to investigate the exact rules surrounding that and the Cincinnati project has my attention first.

I'm really curious to see how the 203k strategy works in a super hot market- my goal is to come up with 1000 leads and run them through the funnel then reevaluate if I'm not getting traction

Update: My first property in Oregon is sold, I'm converting my second Oregon property into a short term rental, I am preapproved for the 203k loan and I have tickets to spend 2 weeks in Cincinnati scouting neighborhoods and meeting contractors next month. 

@Will Feetham

What needs to be done, not what needs to be fine 😅

@CRAIG BILLINGS

I'm looking to start down this path too, so these suggestions are coming from a novice. Based on what I've seen so far:

Ask your 203k consultant to give you an estimate- they should be able to give a figure that's close. This will also detail exactly what needs to be fine and give you something for the contractors to work against in their own cost estimation process.

You may be able to get a reference for a good contractor from your loan officer- if they've done many 203k loans they will have dealt with different people and may know one who did quality, punctual work.

Best of luck to you, I'd love to know how it goes!