Specialist · Cape Girardeau, MO · Member since 2020 · 43 posts · 9 votes
I didnt know where exactly to post this but here it goes. I'm considering getting a residential loan on a fixer upper property and moving my family into to live and flip. Plan on putting 5% down and spend a total of $100,000 on a house with an arv of $125000. In this case I will be spending $200 less on my monthly mortgage at my residential home and have more room for my family. We did the same thing at our current property. I'd then rent my current home. The only thing is it may cashflow negative $100. If I hold it for 10 years it may cost me about $12000 BUT my house is starting to rapidly appreciate. Since I've owned it it has gone from $112k where I bought it to $150k in two years. So potentially a $190000 sale price in the end. Thoughts?
@Dave R Ludolph I definitely think there's some situations where it makes sense. For example if someone lives in LA or NY and their rent is $3k per month, it may be beneficial to house hack even if they break even or pay a few hundred out of pocket every month. As you mentioned you'll also be able to take advantage of appreciation over the long run, in addition to other benefits that come with owning RE.
@Dave R Ludolph I definitely think there's some situations where it makes sense. For example if someone lives in LA or NY and their rent is $3k per month, it may be beneficial to house hack even if they break even or pay a few hundred out of pocket every month. As you mentioned you'll also be able to take advantage of appreciation over the long run, in addition to other benefits that come with owning RE.
of it from househacking perspective. Just lower my mortgage expenses. I forgot to mention I also have a HELOC on my current property so it would be nice to keep that and then get another line for my new residence.
@Dave R Ludolph although it seems likely, appreciation is not a sure thing, or at least at that rate you've seen the last two years. Just keep that in mind.
Also, your HELOC terms may or may not require you to be an occupant of the property you have it on. If it does, this may affect your ability to move. Or at least what you say to your lenders.
You can't count on appreciation, but most houses are unlikely to come out ahead if you only own them for 2 years due to costs associated with selling.
Look at the bigger picture. The house that you move into will save you money and you would be adding value. Having said that $100K of reno on a house that AFTER renos is only worth $125K is a huge risk. I'd look at the renos you are planning and rethink some of them. Are you moving walls and gutting the place? does it need to be gutted?
@Theresa Harris yeah I figured I could at least hold onto it a couple years because even with how much it has appreciated now I wouldn't really make that much money. The main thing I really want to do is lower my monthly expenses kind like house hacking except I don't have to share a building. Also I didnt mean 100k rehab. I meant 100k all in. My goal is to be 80% all in of ARV. And that would be the highest I'd be willing to go on a property.
@Dave R Ludolph Cashflow... positive cashflow... allows an investor to be nimble in this economic environment (I doubt we've seen the bottom of this crisis yet). Reserves adds a protective moat. You will be leveraged to the hilt to have two properties... both that will have negative cashflow. While it's true your old home may appreciate, this is gamble much like the stock market and I would not consider this a conservative investing move if these are the only "assets" you have (now if you are sitting on $1M with good liquidity... well different story). I encourage you to go into this plan eyes wide open that the housing prices could tumble here as we continue to move through uncharted territory, and come up with a strategy to protect that position...
@Theresa Harris yeah I figured I could at least hold onto it a couple years because even with how much it has appreciated now I wouldn't really make that much money. The main thing I really want to do is lower my monthly expenses kind like house hacking except I don't have to share a building. Also I didnt mean 100k rehab. I meant 100k all in. My goal is to be 80% all in of ARV. And that would be the highest I'd be willing to go on a property.
@Whitney Hutten with what I'm proposing i would lower my expenses by $200 a month therfore be able to have more liquidity. Hohse is worth probably 150k. I owe about 105k. I want to purchase a residential home for about 80k and put in about 20k to make the property worth at least 125k. This is lowering my expenses. Why does that make sense for house hacking but not for my situation?
@Dave R Ludolph Please correct me. But aren't you taking money out of the other home by HELOC to make this happen and it not fully cashflow (rather you have to wait on the appreciation before you break even again)? I agree with lowering your expenses. I just wanted to point out overleveraging another asset to do that is a gamble.
@Whitney Hutten no I do not plan on using my heloc to purchase this property. I have cash to put down and then I would like to put some forced equity into the new property and open up a heloc. Thus having two heloc accounts with more access to cheap capital for other deals. Also. New development. I think I would be able to convert my current residence into a 4 bedroom. In that case I could definitely cashflow positive.