Not wanting my past to dictate where I go, just where I start…

Rehabbing & House Flipping
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Not wanting my past to dictate where I go, just where I start…

Benjamin Bruce
Member since 2021 · 4 posts · 1 vote

Driving Directions….your GPS is going to ask you where you are at; and where you want to go.

Let's set both straight in short order in order to get to my question. I'm 37 years old, been in the ministry all my life (since college) living in a parsonage. I'm still a minister, but currently now rent but with financial baggage. Until a few months ago I had no clue about money, I have no assets or equity, not even a savings, just the status-quo living from paycheck to paycheck. I do have a few thousand on a credit card due to be paid off in about 60 days at my current pace. I currently rent a house for $1200. I have 3 kids, married 15 years, and at 2 years into working at a corporation- I WOKE up 2 months ago when I realized my raise at my job just covered inflation (I know…I'm not even counting Bidenflation). I’ve thought about it, prayed about it, watched a slew of YouTuber’s and am determined I want to structure the rest of my life in REI with a focus on buy & hold multi-family. I’ve been listening to a podcast a day/ taking notes, and reading 2 books a week. I have read almost all of Brandon Turners books, Rich dad poor dad, the millionaire next door, the one thing, good to great, your next 5 moves, the 4 hour work week, the richest man in Babylon, and about 40 other books on my shelf are in the lineup. I live in a budget now, actually save, started a side hustle, and sold my TV so I can timeblock my evenings to devote to just learning.

The catch….my family really wants to be settled in our own house first before they get behind me and we focus on this new course (we know it's for the long-term). Were tired of small housing, limitations of renting, and long to be independent and free. However, we don't have any money, and I know that an FHA loan does not grant you too often the opportunity to buy undervalue and force equity; not to mention my family really wants to be in a rural area with at least 2 acres which brings the selection down and the price up.

TO MY FIRST FORUM QUESTION…

Trying to think with a creative finance mind, and say HOW not I cant; Is this below scenario or something close a good creative financing strategy?

1. Have my wife get a hard money loan on a distressed property.
2. Fix it up with remaining HML funds
3. Sell me the property to me in my name using a conventional loan based off the ARV.
4. Walk away with little money out of pocket (like an FHA down pay)

5. Instead of having an FHA loan, we have a low out pocket investment with forced equity, and a better rate


Understanding #’s are key I know, my primary concern is the REALITY and LEGALITY of this structure?

IE: A property were looking at as of yesterday…

Double-wide mobile home w 1,000 sq, ft pull barn 3 acres

$75,000 sale price

$25,000 repair costs

$150,000 ARV

$100,000 new financing w conventional loan

It’s good to be here and hope to join the family of the BP community,

BJ Bruce

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  • Account Closed
    Handyman · MN · Member since 2020 · 92 posts · 46 votes
    4y

    I am not fully experienced in real estate enough to give you anymore then just an opinion here. 

    Lack of assets, equity and just recovering from a paycheck to paycheck habit is concerning to jump into a hard lender.

    Distressed properties are already someone else's headache. Mobile homes are a completely separate added string of problems. Is 100k ARV the price of just the mobile home, or the 3 acres with a barn and a mobile home?

    What does your sale potential look like? If it is truly a great investment why is it still for sale?

    I hope it doesn't sound like I'm trying to talk you out of this. learning to budget is huge, and opens up opportunities like this. My lack of trust is in a financial institution that would back this loan without considering all the pitfalls and potentials you are about to find. 

    Best of luck! Mobile homes are a great option to keep expenses low while preparing for the next move. Identify and prepare for the headaches before they happen.

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  • Benjamin Bruce
    OP
    Member since 2021 · 4 posts · 1 vote
    4y

    Nate,

    Thanks for your time and any input will be valued. You had a few Q’s- Lets tackle them:

    1) The $100k ARV is actually total investment, the ARV would be $150k, based on comps in the area.

    2) This does include the barn and 3 acres

    3) I don’t necessarily say it was a great deal, as I am just learning the #’s; but conjunction I want to learn how to structure financing as well.

    4) Is still for sale because it’s only been on the market 2 days.

    5) agreed, learning to budget and building some capital are things I need to prove to myself; but wish to have a decent stay between my wife and I by the middle of the year. we’re older, we’re not playing, time is not on my side. I’m not 21 with no kids and can house-hack.


    6) I’m not a fan of mobile homes, my wife grew up in one! I just really want to a) buy right and force equity b) be in the country away from the city to raise my kids according to my values c) be free in my own home. Literally today my heater broke down and my landlord berated me because he thought I tampered with it before calling him. These scenarios are not my primary motivation…I want control and equity… but they help fuel to be in my own home.

    -Bruce

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    @Benjamin Bruce I would recommend a starter house using FHA low down payment for your primary residence. That may mean living in the city in a smaller house. Live there 2-3 years, then move to your house in the country. Rent out the small house in the city.

    I applaud your motivation, but I see a couple potential flaws in your plan. First of all, why are you having your wife get a hard money loan and selling the property to you? Is this an attempt to get around refinancing terms on conventional loans? I fear this could raise red flags. The second concern I have is buying a mobile home. If the mobile home is not on a foundation and meeting certain requirements, it could be hard to get a loan on it. Generally speaking, mobile homes are not great investments. I am a little skeptical that $25K will increase the value by $75K. My friend purchased a brand new mobile home for his lake home. It was 4 bedroom, 2 bath and delivered cost was $116K.

    You may need to reset your families expectations. After years of renting and not properly managing your money, you will need to sacrifice to get on a better path. You may even want to consider Dave Ramsey Financial Peace University. This is taught at churches around the country, so I am assuming you are familiar. Although I am not in sync with everything Dave teaches, but he has three core principals you should follow:

    1. Use the debt snowball to rid yourself of consumer debt.

    2. Use his budgeting and expense tracking system to get spending under control.

    3. Establish an emergency fund.

    You may already be implementing some or all of this. 

    Congratulations and taking action to change your future!

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    #1 - How certain are you of the $25k repair costs? Where did you get that number? If you're off, the whole deal is screwed.....

    #2 - Try to get a real home instead of a mobile home...if you at all can.

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  • Benjamin Bruce
    OP
    Member since 2021 · 4 posts · 1 vote
    4y

    @Joe Splitrock I did not post to receive validation for sure; so thanks for the critique. As for my scenario:

    1) This MH  was not something I was ready to jump on and sold on, especially being a mobile home. I’m just trying to learn by analyzing; and my wife and I saw it yesterday. And thanks to multiple responses I now know to stay away from mobile homes. This is obviously something I have not learned yet 😬.

    2) as for the Financing structure, I wasn't trying to avoid refinancing fees etc as much as trying to avoid the time factor of the seasoning between refinancing. A HML is not something I'm married to either, just trying to learn the possibilities of creative financing to put as little money down into a deal-and why not start that concept with my house. I don't want to put little money down because I have none (I want to save until I have whats "right") but because it is the path to the fastest REI growth (Brrrr, OPM, etc) and so I want to start thinking with that mindset.

    3) Lastly, thank you for the very real & personable advice on money. Many due not like to hear that, but I recall that being touched on very early in Brandon Turners/Josh Dorkins book. I have read Dave Ramseys TMM; and started snowballing my debt last year; and am almost finished eliminating over $15k in CC’s. Then Im going to take that same monthly payment Ive been handing over to debt and save it, included in that savings being last of the 3 you mentioned…the emergency fund.

    Again, thanks for your kind input.

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  • Account Closed
    Handyman · MN · Member since 2020 · 92 posts · 46 votes
    4y

    15k is some serious progress! What's one more year?

    There's some apps out there - Hipcamp(com) 3 acres could make a few rental camp spots, give the kids some learning experience mowing grass and building value. $20-30 a night just to let random townies sleep in your yard with their own stuff. Plus the storage income from the pole barn, and get some experience managing property for income. Not that I've fantasized about owning land at all...

    Even if you don't do this deal, there are plenty of other ways to play.

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