All Forum Posts by: Bonnie Low

Yes, we were able to get a HELOC shortly after the start of the whole COVID thing. We only have 1 local bank that is doing them but the terms were really good and the process was simple. All the big banks I called first gave me the same answer you got but one finally referred me to this small local bank I had honestly forgotten all about and they were more than happy to do a HELOC with us. Good luck!

Several years ago, we were able to make a purchase that qualified as a "second home" as opposed to an investment property and, in that case, only had to put 10% down. It was only our 2nd mortgage (which yours would also be) so it qualified as a second home whereas someone who already has multiple mortgages probably wouldn't be able to do that. The down side of that is that with only 10% down, you have to carry PMI and that can eat away at your cash flow. But it's worth looking into if the cash flow still would make sense. Note: we also had family in the area we bought this property in and it had duplex potential so we could rent out one unit and keep the other for our private use. That's why the lender was able to justify it as a second home. Just something to explore...good luck!

@Jason Gettler - I should have mentioned that we're not doing new construction on this one. It's already a detached garage that has water, power and sewer on site. This is more of a cosmetic conversion to an ADU. We also do a lot of the work ourselves. For us, the power of this deal is in the additional cash flow it will generate. Our initial BRRRR will not include the finished ADU so we won't be pulling that $ back out until we eventually sell or do a refi again later down the road.

The ADU you built sounds like it cash flows well, but it doesn't sound like a BRRRR if I'm understanding it correctly because he sunk more into the build than the comps are putting the value at. So there's nothing he can pull back out. That is, unless he's got a lot of equity in the main house on that property??

@TeriFeeneyStyers we actually have already had someone from the building dept out there to look at the site. We would never proceed without that important step. Fortunately, everyone in the City building department has been just amazing to work with (and I know what a rarity that is!) so they've been more than happy to help. This town has seen some really rough times and the City is putting a lot of effort into revitalizing it. They are really appreciative of investors who are turning around eyesores and dangerous properties. That's one of the reasons we like this particular niche so much.

@DanHeuschele you're correct that we have an advantage that it's already an existing structure at the back of a large lot so there's a lot to work with. Even though it's technically a detached garage, at one point they installed a bathroom so not only do we have a slab and shell to work with, it's already got water and sewer to the building. So yes, our all in cost to develop it is much lower than it would be to build from scratch. Frankly, we were really surprised at how much rent it could generate, but our market is really, really tight, so there's that going for us, too. I'll be sure to provide an update on how it pencils out. You can also follow our fb page if you can find it (I'm not sure BP lets us advertise it here.)

@SteveMorris you presume a lot. Are you insinuating that if someone is selling to a wholesaler the wholesaler (and the end buyer) are ripping the seller off? I'm sure that happens sometimes. And sometimes, the sellers are getting what the house is actually worth. We have not built a business model on ripping people off and neither has anyone else I know who works with a wholesaler. 

Hi, Madison. Congratulations to you for already being way ahead of the curve! Just the fact that you're aware of the power of real estate and beginning to take action puts you way ahead of most people. Here are the things I would do had I started in my 20's and knew what I know now:

1) Find a place to house hack. You have to live somewhere so you might as well find someone to help pay your mortgage. It sounds like you have a good job, so you should be able to qualify for a loan. The sooner you buy your first property, the sooner you start building equity, experience and most importantly, confidence.

2) Ask yourself what you're willing to sacrifice. Can you live for a while without a nice car and car payment? Are you willing to do a rent-by-the-room scenario and take the least desirable room for yourself to boost your cash flow? Can you find cheap entertainment like reading books from the library, taking hikes, journaling, bike riding instead of trips, expensive restaurants and events (presuming we ever get back to normal after COVID)? 

3) If you're going to have W2 income, get involved in something that is related to real estate investing. Whether that's banking, real estate, lending, property management, contracting, etc. There's so much to learn and the closer you are to it, the more support you have from mentors. It even makes sense to do a little bit of each early in your career - don't be afraid to move around and get as much exposure as you can that will help you with your investing.

4) Do you want to be in your current market or is there somewhere else you'd like to invest in? If so, are you in a position to relocate? When you have a mortgage, family and career it's harder to do than when you're younger, single and just starting out in your career.

5) Be really honest with yourself about how much you're willing to put away each month to create your investment funds. Ideally, have some of your paycheck deposited into an account you don't access until you're ready to invest with it. Don't link it to your personal banking - it's just far too tempting unless you're really, really disciplined!

And lastly, find mentors, but also TRUST YOURSELF. Not everyone has great advice. Or even good advice. Some people can't help themselves from sharing their negativity. Learn from their mistakes, but don't let it get you down. You have to become a discerning consumer of information because there's a lot of bad information out there. I'm sure you'll do well!

@LuisSerrano congrats for taking your first action! And based on many of the snarky comments here, kudos to you for having the fortitude to put your questions out there. I just wanted to say, not everyone dislikes wholesalers. We've actually built some good relationships that way and are happy to pay them a fee to do the leg work to find our next property so we can focus on whatever we're working on at the time. The wholesalers we've worked with are genuinely good people just trying to get started. I'm constantly impressed with the amount of time they spend with the sellers - I know I wouldn't have the time or the patience. So if you do it well, you can definitely be providing a service for all parties. Investing out of state in any format (wholesaling, BRRRR, flips, turnkey) has its challenges. But you know what else is true? You can find someone who is doing all of those things successfully despite those challenges. Maybe even because of those challenges because so many people aren't willing to take on those challenges. As for the property you're looking for a buyer for, have you reached out to the local REI group? Almost every town or region has one these days, even a virtual meet up is great when you're looking to make connections. It's a great place to meet people who can become part of your network, find some boots on the grounds, and you will likely find potential investors there who are interested in off market deals. It will also help you learn more about the area. As some comments mentioned, there can be a lot of nuance in any given market and you need people who know the area. Most of the time, people are really willing to help each other out. Good luck to you!

We own a SFH that cash flows about $150/mo after all expenses. We're currently converting a detached garage on the property to an ADU. It's less than 700 sq ft but a 2/1 works nicely there. According to our PM, we should be able to conservatively get $900/mo in rent in our market. The rent from the ADU becomes a huge boost to our cash flow from this parcel for a relatively small price tag (about $20K for the ADU renovations). Obviously the numbers wouldn't work this well if we had to build from scratch because our expenses would go up, but we wouldn't get any more in rent. We're really liking the niche and we're on the lookout for similar properties. I'd love to hear from other investors about your experiences (good and bad) working with ADUs. What are you looking for? Things you wish you'd known? Tips? How to make the most of the space? Is it important to divide the space so each tenant has some sense of privacy and outdoor space? Etc. Thanks in advance!

@NinaGranberry - have you considered becoming a Hard Money lender yourself? I don't know how much $ you have to work with, but it definitely offers you a higher yield potential than even the highest of "high yield" savings accounts. There are specific requirements you have to meet to be able to be a hard money lender, but there is no shortage of people looking to borrow money, even at hard money rates. For example, we regularly work with a HML to finance purchases of properties that will not qualify for conventional financing. Our niche is extremely dilapidated properties. We have an excellent relationship with our HML. We pay approx 10-11%, interest only for the life of the loan which is usually 12 months max, though we always try to be in a position to refi the property after 6 months (easier said than done lately). Because of our relationship, we 're able to close in 7-10 days, which makes us almost as competitive as cash buyers and that's very important in our market. A couple of REIs like us could keep your money growing swiftly. Best of luck to you!