All Forum Posts by: Clark Kirkpatrick

The 203k loan sounds good for what you're doing there. It requires extra paperwork and you won't be able to do the work yourself, because that loan requires you to work with a contractor who is qualified to work with the 203k program. These are the main downsides of that loan.

If you can find a way to BRRRR the property, then you could do work yourself (if you want to do that to help save money) or at least you can work with any contractor you want.

It might be easiest to find a property that needs work, but is inhabitable. This is what I did on a house hack that I did, where I did most of the rehab myself. It needed quite a lot, but when my wife and I bought it, it still qualified for conventional financing. This makes things much easier, and if it's your first project, you might not want to take on something that needs a ton of work.

I believe it mostly depends on the lender. I have one who will consider rental income immediately, but I've heard of others who won't consider it at all for some amount of time - as long as 2 years! That seems nuts to me, but it's probably worth calling around to a few lenders to see if you can find one who will consider it immediately so you know you can move forward with that strategy.

The "monthly cashflow" number is a good one to focus on. That'll tell you if you're making or losing money each month, and how much.

I'm interested in this as well. I'm not so keen on an adjustable rate commercial loan right now if I can avoid it, for the same reasons @Patrick Reisinger said.

Hey Chad, I'm facing this question with a couple of properties right now myself. My thought is that I look at the cashflow of the property if I rent it, the likely profit on a flip, my long-term goals and my current cash situation.

So if you're going to make $1k/year cashflow from renting it, or you can make $20k now by flipping it, it's probably worth flipping it because 20 years of cashflow now is obviously better. But the numbers could also go the other way.

My long-term goals are mostly related to passive cashflow, not active flipping, so I'm biased toward rentals because of this. Doesn't mean I'll never flip, only that I prefer to buy and hold.

If my current cash situation is really tight and I need the money now, then that'll tip me toward a flip. If I'm doing alright and will be fine without that, and the cashflow numbers on the rental look good, then that'll tip me away from a flip.

I pay my EMD with MLS listings after I've submitted my offer, the seller has accepted it, and we have a fully executed (signed) agreement of sale.

Use the BP calculators, under the "tools" tab at the top of this page.

Another refi pro is that you won't pay a boatload of taxes, which you will if you sell.

With your family in the house for way below market rent, you're obviously not treating it like a business. If you were treating it like a business, there's a lot more in it for you long-term if you keep it and refi it. But if you're going to keep renting it for a lot less than it's worth, you're making it into a bad investment. Better to sell a bad investment than keep one. Best to make it into a good investment, though. Probably easier just to not rent to family in the first place, since now I'm sure getting them out would be a very contentious issue.

You'll want to get an estimated rehab budget, purchase price and rent amount for each one. Go to rentometer.com for the rent amount, bring a contractor with you to see each property to get a rehab estimate. Then use the BP calculators (at the top of this page, under the "tools" tab) to run some numbers. Hopefully the results of using the calculator will help bring some clarity to your decision!

You might also be able to eliminate one of them just by walking through with your contractor - for example, if you find out that one of them has foundation issues or a lot of asbestos or something like that.

You have to live in one of the units to use this type of loan. It's an owner-occupied loan only, so you would have to make it your primary residence - for at least a year, I believe. 

But if it's a multi unit, you could make the other one/s your office, or rent them out, or whatever you like. You just have to live in one of them.

No more than 4 units with this loan, though. Anything more is considered a commercial property, and will require a commercial loan.