Carpenter looking to go rogue

Madison, Wisconsin
Mortgage Brokers & Lenders
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Carpenter looking to go rogue

Bryan Zdroik
Member since 2022 · 3 posts · 0 votes

I'm a carpenter who's looking to branch off into the flip/real-estate game, but am not sure exactly what route would be the best for me to take. My wife and I bought a house over 2 years ago and I'm nearly done with all the renovations (hopefully by mid to late summer). Our goal is to refinance (tons of sweat equity) our house and use that money to buy our next home and then rent or sell our current house for yet another place. But I have 2 hold-ups 1) we're about to have a baby (end of August) and 2) I'm working full time as a carpenter and am definitely not as productive on our house when I get done with work. I still have redo our siding, do a bathroom remodel and put in a new, but small, front entry deck. Since I get my insurance from my wife and I don't make much money anyway, especially when you take inflation into account, starting my own business seems more and more like a possibility.  I figured I could use the new flip as a way of showcasing my work (via YouTube/Instagram) as well as give me the flexibility to take on the jobs I want, instead of feeling pressured to take every job I can. But if I did this I'd have a real difficult time getting a bank loan since I'll be throwing my W2 to the curb. Does anyone know a way to still make this work? I forgot to mention I'm about to re-up my contractors certificate. There's so much more I could share regarding this, but this at least gets the ball rolling. Hope all are well and sorry for how rambly this is, clearly I got lots on my mind. Thanks!

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Dwayne Poster
Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
4y

I had worked with several builders for years, and during those good years, every trade had their own spec home on the go. Your problem is your 'I'll do it myself' approach. Establish your relationship with the other trades and put them to work, while helping them on their projects. 

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  • Brad Jacobson
    Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes
    4y

    Hey Bryan,

    Congrats on the success and I hope the next steps prove successful as well!

    First, if you are going to refi your current house, make it a rental, and purchase a new home to live in, definitely do that while you're still on a W2 salary because you're right in thinking that banks will make it much more difficult when you become self-employed at first.   I'd do that immediately.  Hopefully the spike in interest rates doesn't hurt too bad.

    Second, when you're purchasing fix & flips, you're not really going to ever need bank financing unless you plan to hold them long term.  You're best bet is to buy these flips with hard money and only hold them for three to six months or so.  Make sure you're networking with the right lenders and folks who will help you find deals!

    Good luck!

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  • Bryan Zdroik
    OP
    Member since 2022 · 3 posts · 0 votes
    4y
    Hey Brad,
    Thanks for getting back to me! Unfortunately that's what I thought would be the case. With my current workload I doubt I'll be able to finish up the house before our baby arrives, but I'll definitely give it my all until then. With contractors being in such high demand and my pay not matching inflation, I felt now would be a perfect time to pivot my career. I was wrong with the term flip, I'm looking into a turn key with lots of sweat equity potential (garage, adu, etc); that way I could have it rented prior to our family moving in. I'll still look into hard money, so thank you for all that as well. Just wish there was a way to bypass the banks haha, but who isn't!? Thanks again.
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  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    4y

    @Bryan Zdroik one idea to get things going for you might be to partner with someone with capital but no experience. As a carpenter you bring the knowledge and connections with other tradespeople to the table. There are a lot of investors out there looking to dive in to flipping that lack on the construction side of things. You could get a flip going with a money partner consecutively to your existing projects, while still working your W2 for now. I’m not saying you’d be doing all the work on the flip, just managing it for your money partner who would be complete hands-off, and splitting the profits. Someone with your background and hands-on experience has a lot of value in this game.

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  • Dwayne Poster
    Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
    4y

    I had worked with several builders for years, and during those good years, every trade had their own spec home on the go. Your problem is your 'I'll do it myself' approach. Establish your relationship with the other trades and put them to work, while helping them on their projects. 

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    4y

    Right if you ditch your job then have your joint DTI or debt to income looked at prior to see if you still qualify with just your wife's income and if not then just know what you're doing by ditching your W2 (giving up your ability to obtain conventional debt capital).

    Will you have other options ? Sure you could get non QM (qualified mortgage) or DSCR (debt service coverage ratio) loans or cashflow loans (all the same thing under different monikers. These options are 1.50-2.50% higher in rate than conventional options when it comes to apples to apples.

    If you're willing to give up the conventional loan options just know your options when you do leave the W2 as that will allow you to plan accordingly.

    The other option is to operate your separate business while you're working the W2 job till your self employment has two full years and is already established. If you leave your W2 at this point you WONT be with out abilty to access the lower cost and lower rates of conventional financing since your SE or self employment income will already be seasoned for 2 full years+. Will you have to work your butt off building both? Heck Ya!

    Let me know if that helps or if you had other routes or questions on how to navigate these decisions.
     

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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    4y

    As a contractor, you're in a great position to rehab live in flips every few years and able to sell them tax free because they are your primary residence.

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  • Bryan Zdroik
    OP
    Member since 2022 · 3 posts · 0 votes
    4y

    Thank you all so much for the replies, this really helps open up some doors I haven't investigated yet. I really appreciate it

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  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Bryan Zdroik- if the  plan is to refinance the  present home  soon  in order to pull out  cash / equity - you  might consider doing this asap ( depending on the  condition of the  property )  for the  following reasons   1) if you have a  full time  kob  -  you might be able to  qualify 2)  rates are likely increasing for the near future ....  once you start your own business - traditional  financing  will be  hard  to obtain until you  have  2 yrs  plus of  tax returns  for most lenders to use for  qualifying  

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  • Cobie Anderson
    Contractor · Milwaukee, WI · Member since 2021 · 2 posts · 0 votes
    4y
    Quote from @Steve K.:

    @Bryan Zdroik one idea to get things going for you might be to partner with someone with capital but no experience. As a carpenter you bring the knowledge and connections with other tradespeople to the table. There are a lot of investors out there looking to dive in to flipping that lack on the construction side of things. You could get a flip going with a money partner consecutively to your existing projects, while still working your W2 for now. I’m not saying you’d be doing all the work on the flip, just managing it for your money partner who would be complete hands-off, and splitting the profits. Someone with your background and hands-on experience has a lot of value in this game.


    Is there a good way to find investors intereted in these types of projects? 

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  • Donald HajdariPro Member
    Contractor · florida, Chicago · Member since 2021 · 14 posts · 2 votes
    4y

    Also remember that we are assuming that you start your business and you are immediately making a profit on with it. Once you leave the W2 world you will have to pay taxes every year instead of receiving. I just got my 2nd property and i was in a similar position as you. Definitely can NOT do everything yourself or else it will take forever. Best advice I can give you is get as many properties with a conventional loan as you can. I got my 1st building with 20% down and I did everything myself and it took me about a year(added a garage, new siding on the porch, new deck, and i dug the basement down to make another unit in the building, which is almost done) but on the 2nd building I used hard money and its been 9 weeks and it will be done and ready to rent next week. One thing i learned is Don't try to save money by doing it yourself because it will always cost you more in the long run. im going to start looking for the next property and i will just hire some subs to finish my basement as it is not worth my time anymore.

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