All Forum Posts by: Erin N.

I can share my own story with you.  in 2012, I was $60k in debt.  I had just switched jobs from being a salaried employee to a commission only salesperson.  

I received my first big commission check which was approx $45k net.  I struggled with whether to pay off most of the debt or do my first real house hack.  I opted for the house hack.  

I was able to get a FHA 203k loan because it had been 7 years since I owned a home. I was able to purchase a $339k 4-plex with $40k in renovation funding for about $13k down payment. The rent on the other 3 units paid my whole mortgage plus my utilities and cable/internet bill. I put about $30k in additional improvements/repairs into the property.

I lived there for about a year and a half and then did another house hack.  This time with conventional renovation financing with 5% down.  I turned that first 4-plex into a vacation rental, and this year I'll net about $65k on that property.  I consider my P&I an expense, so that number is true net cash in my pocket.

In my new place, rent pays mortgage, utilities, etc.  So I'm living rent free and now have an additional $65k annual income stream that I wouldn't have had if I had paid down part of my debt instead of investing in real estate.  

My debt is about $17k now. I'm not super worried about paying it off. The interest rate on my debt is only about 4.5%, and I know I can beat that by a mile with investing. Other positive effects of choosing this path - my credit score jumped from 650 to over 800 and my net worth is close to $1m (totally on paper, at least for now!). Because I look good on paper, I have access to so many options that I never had before. I have a $100k HELOC that I got so I can tap into it to purchase other properties for cash, for example.

In my experience, if you have an idea for making money from your cash or if you have an innate level of entrepreneurial hustle flowing through your veins, you can handily beat the return on debt pay down.  If your idea of investing is more along the lines of just dumping your $4k in a Vanguard index fund, you are probably better off paying off your debt and reducing your monthly payments.

@Matt Devincenzo thanks for that info! I'm so irritated that I even set up the LLC. I did that to meet requirements of a hard money lender that ended up falling through anyway..but it was too late to change the paperwork to meet the closing deadline. Grrr.

@Upen Patel all the mortgage lenders that I spoke to right after I bought the property said their company had 18 month seasoning policies. That's where I got that from. I was thinking of taking the property out of the LLC, but I have no idea what the process is for that. I guess I have some research to do!

@Kelly B. that is exactly what I want to do. I have relationships with 2 local banks, so I can just start there for now. I have >800 credit score and high W2 income, so hopefully they will want to lend to me. I was just worried about the <12 mos seasoning issue and the fact that it's in my LLC.

Thanks @Charlie Fitzgerald! Great suggestions.  For many reasons, I couldn't even go with a traditional hard money lender.  I ended up using a guy my real estate agent knows.  He has been fantastic, but he has a limited niche.  

Hi Sacha,

Thanks for the info.  I really don't want to use another private lender or hard money lender.  Ideally, I want to refi about 70% of the purchase price into a conventional 15-30 year loan.  At minimum, I want to refi the $75,000 I borrowed from the private lender and am paying a very high interest rate for.

I just don't know if the LLC complicates things and if seasoning comes into play if we're dealing with purchase price and not current appraisal value. It's not like I'm saying this property is now worth $300k, and I want to finance 70% of that value. Does that make sense?

One more piece of info - the property is held by my LLC.

Hello all,

I did a BRR on a duplex a few months ago, and am now looking to complete the final R. I inked the deal right before watching the BRRR webinar, and I wish I had seen it first. I only secured 12 month terms from my private lender, so I have to refi within 12 months. What are my options for refi so I can pay off this note before the deadline? I'm concerned about 18 month seasoning requirements, but I also don't know if they would come into play in my situation. Here are my numbers:

$153,914 sale price

$75,000 loan from private lender

$78,914 cash payment for the balance

$30,000 renovations

$1100/mo 12 mo lease for one unit

$2000/mo month-to-month rental on Airbnb for the second unit - 25% vacancy so far

$950/mo private lender payment

$3000 annual property tax

$900 annual insurance

Ideally, I'd like to refi for enough to reimburse myself for the renovations and part of the cash I paid to buy the property.  I'm not really sure where to start.  I appreciate any advice you can give!

Thanks!

Everyone has offered me so many great suggestions! Coastal Living is a great one for sure. I've got a search going on the MLS for million dollar homes that pop up in my area for sale so I can tour them. Also to @Lynn Currie's point, a million dollar home in my area may not have to be as awesome as it has to be in a suburb or somewhere farther from the beach or in a different zip code.  I was a little surprised to see the state of some of the houses that have sold in the last year around here for upper 6 and lower 7 figures.  Some of them needed complete rehab!  Most of those were ocean view, though.  But a few were roughly as far from the ocean as I am and in a similar neighborhood.

I really can't thank everyone enough.  You guys are the best.  I will be reaching out to @Hattie Dizmond for some design perspective for sure and @Karen Margrave.  I may even post at least the floorplan on here for suggestions.

One thing I cannot change that is going to be something I need to overcome is the ceiling height.  This is a ranch style home with a low roof, and I have 8' ceilings.  I can't do vaulted ceilings and such (maybe a little bit in the kitchen/dining/living area).  Because of everything being all on one level, one of the strengths (at least I think it's a strength) is that the owner's retreat/master suite really has its own wing of the house while the other bedrooms are completely on the other side. There's a bar/family/entertaining room, kitchen/dining room and living room separating the two bedroom wings of the house.  I know that layout doesn't appeal to everyone, but it would certainly appeal to a family with older kids where the parents really want their own private space.  Probably wouldn't work so well with people who have small children who want to keep a close eye on them at night.

I'll try to get the layout sketched out and uploaded in the next few days.  Thanks again everyone for such thoughtful feedback!

Thank you everyone for input!  @Hattie Dizmond your list is very comprehensive, and I knew it took some time to put together. Thanks so much for that! I'm leaning more toward tile (travertine?) instead of wood just because that's almost all I see here. I've set up a MLS search for homes within 4 neighborhoods close by that sell for $750k-$1.25m. I figure that is going to be good for getting a feel for what sells well here.

One area I'm particularly nervous about is the master suite/owner's retreat area.  There is really not a proper master closet to speak of - a wall of 3 24" deep closets with bifold doors.  I almost want to split the 300 sqft master bath into a closet/bath so I don't have to take from the bedroom space for the closet.  Any thoughts on floorplans for master suites? I've found a few online, and it seems to be the current trend to flow from the bedroom through the closet to the bathroom or vice versa.  I'm very open to suggestion.  When it comes down to it, I really have a 750 sqft open square to work with between the bedroom and bathroom (the wall in between them is really no biggie).  I know the master suite is going to be critical to getting top dollar.  

As for sharing the address, as I had stated it's my current home.  I don't feel comfortable sharing that on a public forum.

Thanks again everyone!  You're the best :)

I bought a foreclosure in a million dollar neighborhood.  I live there and rent out the guest apartments and part of the main house.  In the next few months, we're going to start the process of renovating the place so we can sell it for top dollar.  I've always been a rather frugal person, and all of our renovations so far have been BRRRs.  My point being that I'm sort of a fish out of water when it comes to high end finishes and what people who buy million dollar homes look for.  I'm in Northeast Florida in a beach community if that helps.  

For anyone whose niche is flipping higher end properties like this, what do buyers look for?  What are absolute must haves?  To give you some basics, the main house has 4 bedrooms with a really nice sized master suite (1000sqft) - has its own florida room overlooking the pool and its own office.  Main house is 4000sqft.  Guest house is 900sqft and has 2 one bedroom apartments.  Total land is about 1.25 acres.  One mile from the ocean.  

Thanks!

@JD Martin that's where I'm just a tad confused.  The wording of my lease is that the tenant cannot take possession without all up front monies being paid, and it lays out what payments are due when - security deposit, first/last month rent, pet deposit, etc.  The lease is still binding even though he never took possession.  I think I just need to write up a simple early termination agreement, and hopefully I can get him to sign it and agree to liquidated damages in the amount of the security deposit.  I think I still have to send him notice that I'm claiming damages against the deposit.  I'm not sure, though.

@Jen Faulkner that would be wonderful if you could share that with me!  

@Account Closed yes, that is true. I'm ok with early termination though.  I'll be able to find a renter for Aug 1.