All Forum Posts by: Zach Shahan

@Kerry Baird I like that idea. So my thought process from here: Go find another sfh or duplex and tell new lender it will be "owner occupied". That way I can get by with putting less of a down payment. Do you (or anyone else following this thread) know if anyone checks that I am actually "living" there? I'm hoping to stay where I am at, just wanting to get another property under my belt.

Your bio is impressive. Sounds like you don't mind moving!

I will look into HELOC as opposed to refinancing. Also, @Kerry Baird I like that idea, but what if after a year I buy a new house that is now "owner occupied" while the old one still doesn't have at least 20% equity. Won't the lender/bank require me to make up the difference and get the first home to 20% equity before I declare a new home as my "owner occupied" home?

@Tyler Lingle I have already looked into this route... Since I have not lived at the residence for over 2 years, I would still have to pay capital gains (short term) tax.

Hello all,

I currently own, live in, and rent out spare bedrooms in a single family house. Owned the property for 1.5 years. My plan is to buy 1-2 more SFH's in the area. What are the best ways to approach this? I have multiple (jumbled) ideas below:

- Wait until I have owned property for 2 years, sell it and use 1031 to reinvest gains into additional properties.

- Refinance / cash-out refinance to pull equity out of current home, in order to leverage cash for new deals.

- Keep current house and partner with private lender to help buy an additional property

All of the above scenarios are assuming I need to put 20% down because I can't get a loan without putting that much down for an "investment property". I understand I could always find a PML (or similar) to loan me the money with different terms.

Any and all advice is appreciated! Currently 24 yrs old and want to have 10 doors by age 30!

Zach

@Chris Mason  I lied. Still not sure this is adding up to me. If you can spare a few minutes it would be much appreciated! Using the example in the reply ($200k * 75% - $100k - $4k = $46k) and I would have a new loan of $150k. That $46k "profit" is still part of the $150k loan, correct? Wouldn't that have to be paid back at some point? What am I missing here?

@Darius Ogloza and @Chris Mason - thank you! Those explanations made sense. So the LTV combined with 75-80% ARV is basically taking out a new loan/mortgage on the property. The "refinance" part of BRRRR just allows you to pull out your rehab costs/some profit quickly to help snowball into more deals. At the end of the day, you will still have a loan/mortgage payment on the property, even if you originally funded 100% of cost with a private money lender.

Thanks all for your help and speedy responses! It makes sense to me now and my question is answered. Until next time!

@Tesho Akindele - I appreciate the quick response! Using the above numbers, won't I have a $160k loan then to pay back? I'm having trouble wrapping my head around getting a loan for something I already own (thanks to the private lender).

The $160k (80% of ARV) isn't "free and clear" money? Or is it? What happens to the other 20% of ARV?

Hello,

Still trying to wrap my head around the refinancing part of BRRRR. I'm reading the book currently and taking notes as a go, but have already developed a few questions:

1) Ex: I find a private money lender to buy property (say $100k), I invest an additional $20k into rehab, ARV is $200k. When we go to "refinance" we are given 80% of ARV ($160k), then do we have a loan/mortgage on the remaining $40K? Would our loan/mortgage payment be pretty low assuming the loan amount is now only $40k?

1a) Assuming we are given the 80% of ARV, once we pay back private lender, we are free to invest the remaining amount on another property and repeat the process (hence BRRRR)?

I have been familiar with this process for a few years, but just now pulling the trigger and diving in. In the past, I was under the impression you needed to put 20-25% down on investment properties. At that rate I could only average 1 per year (I currently own one door). The subject of private lenders is relatively new to me, but I can already see the great benefit it provides and how it can open up many doors (yes, real estate pun intended)!

Thanks in advance on any feedback,

Zach (Structural Engineer In-Training in Indiana)    

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $189,500
Cash invested: $10,000

I currently reside at this location and rent out other 2 bedrooms to produce my cash flow. Essentially "house hacking" my own residence.

What made you interested in investing in this type of deal?

Needed a place to live, could easily find roommates that help produce greater monthly cash flow.

How did you find this deal and how did you negotiate it?

It was a FSBO, I ended up indirectly knowing the owner. Got a better deal on it than I normally would in the current sellers market.

How did you finance this deal?

Traditional lending, 10% down.

How did you add value to the deal?

Renovated kitchen, flooring, and master bath

What was the outcome?

Property is cashflowing over $500 month.

Goal: buy a fixer upper, flip, sell for profit (ideally).

Question: better to do this through an LLC or personal name? Pros and cons of each. I am leaning towards personal name, that way can claim "primary residence" and get away with only putting 3-5% down vs. using an LLC (cya purposes) but would have to put 25% down.

Anyone have experience with either?

Zach

@Craig Curelop that is very true. Goal is to build wealth quickly, just wasn't sure if it would make sense to have a house with no payments after 5 years (and have it roughly cash flowing 1000/mo) or have 5 properties (cash flowing roughly 200/mo/ea).  

Could you elaborate more on "reducing my taxable income" by buying/owning more properties?