All Forum Posts by: Zach White

I'm looking to capitalize on a unique situation I'm in. I will be losing my employment soon and plan to remodel the duplex that I house hack. My wife has a stable job and our expenses are low so that I don't necessarily need to rush back to find a job. After my remodel, if I got my contractors license, I was considering approaching other investors in my area (Delaware County, PA) with the idea of exchanging my labor for equity in the deal or even giving them the option to pay later within a certain amount of time after the remodel was complete which would give them time to either refinance or sell the property. I thought that would save the investor having to pay out of pocket for the labor or borrow additional money. 

As investors, would you find it valuable for a contractor to offer that option?

I am interested in buying a 2500 sq/ft foreclosed home and turning in into a quadplex with a 203k construction loan. I read on the HUD website that the lender would probably get someone to oversee the gerneral contractor. Overall, it seems like the lender is going to have more control over the rehab process than I would, which sounds far less risky than it would be for me to oversee it myself. It seems like it would be a big risk for a bank to loan a bunch of money for a rehab and then trust the homeowner to manage it. I'm curious if anyone has any experience with the process. How much would I be involved in the rehab process? I would really appreciate some insight.

@Michael Osborne

Hi Michael,

That’s an interesting idea. Keep in mind that there are a lot of other expenses associated with properties besides the mortgage. Besides taxes, and insurance, most of the people I take advice from recommend budgeting 5-10% for maintenance, capital expenditures, and property management, even if you’re going to manage yourself. So that would be at least an additional $110 per month you should be setting aside which may leave you more like $400 in the hole for now and leave you cash-flowing only $450 later. There are probably properties around you that would cash flow $400 from the beginning with traditional financing so why not take that route?

Hi Nick,

Welcome to Bigger Pockets. I'm fairly new too; I began researching all those topics about a year ago. When I started I had a lot of questions that I just wanted straight answers to but it doesn't seem to work that way. Different things work for different people and real estate markets vary greatly so you'll probably need to just start exploring and narrow your focus as you gain understanding. BP podcasts are a great place to start. Every week they interview successful real estate investors involved in many types of investing and they share tips, tricks, and stories. I work at a job where I can wear headphones so I listen to those all the time. Many of the books on this site are also available on audible so you can learn in the car or wherever you can or I guess you could just read them. Good luck!

Hi Allan,

I used to believe that paying off all debt was the way to go. But after just learning the basics about building wealth I learned there is little financial upside to paying off your debt compared to investing the money into more assets as long as the assets you invest in provide a larger cash on cash return than the interest on your debt. So if the mortgages on your two properties averages 5.5% interest, and you used your money to acquire more rental properties that gave you an 11% cash on cash return, the second option would be twice as effective at building wealth. I think the main appeal to paying off debt is the peace of mind it offers, which might be worth it. It depends on what you want. Brandon Turner's book on Rental Property Investing goes into paying all cash vs using leverage in detail. 

@Andrew Lentz

House hacking is a great way to get started no matter your situation. My wife and I house hack and it allows us to save over half of our income whereas we might only be able to save a couple hundred dollars a month otherwise.

But before to dive in, definitely listen to some podcasts and check out the books published by Bigger Pockets so you know the obvious pitfalls and how to analyze potential properties for cash flow after maintenance and cap x.

So if you're willing to take the time to learn the basics, house hacking can certainly set you up for financial success and give you a taste of REI so you have a little experience if you choose to peruse it further in the future.

Hi Juan,

I know the FHA program has something called a 203k construction loan. You would only need to put 3.5% down and they would fund the property and renovation costs. They talk about those a lot on the BP podcast.

Thanks for your input guys.

So my goal is to replace our household income with cash flow from rental properties so that I can commit my time to starting an industrial sculpture/ home decor brand and patenting some ideas which will take a ton of hours to get moving. I would like the freedom to be able to dedicate my time to the things I enjoy without sacrificing time with my family. So to answer your questions:

I am willing to work hard (I do have a full time job but would be willing to spend 2-3 hours after work and Saturdays doing whatever I had to do) and I enjoy learning about real estate but my goal is to get to a point where I don't have to put a lot of time into management related tasks. I'm hoping to get to that point within 5 years. But I guess I would prefer not to manage and spend more time trying to grow my portfolio now if I could find properties that cash flowed despite management costs. Even though I'm handy and I could do it myself, I feel like I'd be able to get farther faster if I committed the small amount of spare time I have to learning and business related tasks that would be much harder to outsource. Is that a good strategy? What are your suggestions.

As far as risk tolerance I'm definitely more conservative but I feel like I could make thing less risky by learning as much as I can about them so I'm open to any ideas or suggestions. 

I like Collingdale also, but I'm concerned about future property values as there is an increasing crime rate in the area and they are putting in a half-way house right on Clifton Ave near the courthouse. I just don't want to lose money in the long run due to property depreciation.

I would like to buy small multi family properties and am looking for an experienced investors perspective on the class of neighborhood I should be focusing on. I live in Delaware County PA (bordering Philadelphia). It seems that class C and D properties are cheaper and offer better cash flow but management costs are higher and there is not much appreciation. But class A and B properties are easier to manage and appreciate more but the cash flow isn’t as much.

I feel like I should stay in the B-C zone to avoid extremes and look for good deals but I’m new and I’m sure there are plenty of factors I’m not considering. Which class of neighborhood is wisest to invest in for multi family?