All Forum Posts by: Warren Howell

Quick story to get you up to speed. My Wife and I have finally rented our townhome as our first property. We moved into my mother-in-laws walkout basement, not before completely gutting it and adding a kitchen. So we are paying a very small amount for rent now and looking to build our rental portfolio.

Here's the ADU part...

My mother-in-law's home s located in Golden, CO. A very solid market for rentals for both college students and/or professional peeps just wanting to live in Golden. Renting our townhome, we had to give up our garage, which I was unwilling to do. So original plans were to build a garage on the mil's property. But, of course, with our mind set on building a rental portfolio, and the market we live in, it didn't make sense not to add an apartment over the garage to create cash flow for the mil to cover her expenses and travel as she's always wanted to.

So, here we are, moving forward, plans in place, ADU permit acquired, ready to break ground and having trouble getting the Mil financed.

First attempt was to get a Heloc loan, keeping it separate since she has a great rate on her first. But they would only go to 15 year term creating a monthly payment that was too high. We then tried to refi the entire home, taking cash out to cover the build. But the mil is on a fixed budget, retired and does not meet the DTI. My wife tried co-signing, but now the bank wants me as a co-signer too. We don't want to tie up our ability to gets loans since we're trying to build our portfolio.

So, I'm looking for advice on ways to fund this project. After it's built and we have renters in place, it will cashflow enough to pay the entire mortgage plus some.

Also, the home has a tremendous amount of equity and will be even more after the ADU is built, not to mention the newly finished walkout basement. My mil has excellent credit, 800+, with no debt.

Any ideas on how make this happen.

Heloc would be great, but the 15 year term makes the payment too hight.

A 3-1 ARM would work, with co-signer, as we would refi after the second year with solid rental history adding to my mil's income so she would qualify at that time.

Below are some quick numbers for this project

$180k - ADU Budget
$142k - Current mortgage
$942 - Current monthly mortgage
$585k - Current Value of home/property (no including basement refinish or ADU/Garage)

$1800 - market rent on ADU
$500 - current walkout basement rent ($1200 market)
$2200 - mil's fixed budget (PERA retirement

Thoughts?

Warren Howell

Quick story to get you up to speed. My Wife and I have finally rented our townhome as our first property. We moved into my mother-in-laws walkout basement, not before completely gutting it and adding a kitchen. So we are paying a very small amount for rent now and looking to build our rental portfolio.

Here's the ADU part...

My mother-in-law's home s located in Golden, CO. A very solid market for rentals for both college students and/or professional peeps just wanting to live in Golden. Renting our townhome, we had to give up our garage, which I was unwilling to do. So original plans were to build a garage on the mil's property. But, of course, with our mind set on building a rental portfolio, and the market we live in, it didn't make sense not to add an apartment over the garage to create cash flow for the mil to cover her expenses and travel as she's always wanted to.

So, here we are, moving forward, plans in place, ADU permit acquired, ready to break ground and having trouble getting the Mil financed.

First attempt was to get a Heloc loan, keeping it separate since she has a great rate on her first. But they would only go to 15 year term creating a monthly payment that was too high. We then tried to refi the entire home, taking cash out to cover the build. But the mil is on a fixed budget, retired and does not meet the DTI. My wife tried co-signing, but now the bank wants me as a co-signer too. We don't want to tie up our ability to gets loans since we're trying to build our portfolio.

So, I'm looking for advice on ways to fund this project. After it's built and we have renters in place, it will cashflow enough to pay the entire mortgage plus some.

Also, the home has a tremendous amount of equity and will be even more after the ADU is built, not to mention the newly finished walkout basement. My mil has excellent credit, 800+, with no debt.

Any ideas on how make this happen.

Heloc would be great, but the 15 year term makes the payment too hight.

A 3-1 ARM would work, with co-signer, as we would refi after the second year with solid rental history adding to my mil's income so she would qualify at that time.

Below are some quick numbers for this project

$180k - ADU Budget
$142k - Current mortgage
$942 - Current monthly mortgage
$585k - Current Value of home/property (no including basement refinish or ADU/Garage)

$1800 - market rent on ADU
$500 - current walkout basement rent ($1200 market)
$2200 - mil's fixed budget (PERA retirement

Thoughts?

Bernie,

My wife and I would be interested in learning more about this duplex.

My wife and I and considering purchasing a town home right behind us and looking for advice. The current situation: We've lived in these units since New in 2001. The unit behind us was owned by an eldery lady that passed away about 6 years ago leaving it to her Family. The family moved their son in (grandson to the original elderly owner) that has been living there since. This Individual has not had a steady job, can't find work, (we think he's just lazy) and the parents have been fed up with the situation and want to sell the unit. (Grandson will either move back in with the parents, or a possible job in Alaska!!!). Anyways, they came to us first, because my mother-in-law showed interest during a community garage sale while visiting with the parents. So they thought they would offer it to my mother-in-law. (My MIL talks alot, but nothing happens!!) So, we would like to put a solid offer in on this unit in hopes of getting it well below the value. At least 50k. We would rent our place, which we were planning on doing, and moving right across the street into this place, fix it up and eventually sell or rent as a second rental.

My thought is, we would not only save them the agent fees of 6%, the capital gains they would need to pay on this unit would be another powerful way to bring the price down. Since they would have to pay that anyways, they could sell it for less and be a wash.

As I understand, and this is not knowing exactly the situation how they obtained the home, I am guessing it was left to them through the estate. So the value they would pay the capital taxes on would be as of the date of transfer.

Numbers: I estimating the value is worth $390k if they decided to sell. It does need some work, as the grandson is not a clean orderly person. They don't even want us to see it until they have time to clean it up. But living in the same but different layout town home, we know what it might need for rehab. We also know that it was probably worth about $280k when it transferred through the estate.

So based on their income for capital gains, and I'm pretty sure the Father makes 6 figures, and the saving of the agent fees, roughly $23k if sold at $390k. We are thinking of a $340k offer with no inspection needed and no agent.

I would love to hear thoughts on this, anything we might be missing, or advice on making a solid offer.

Thanks in advance,

Warren n Brigette