All Forum Posts by: Jaysen Medhurst

@Eric Schrader, I'd evaluate it both ways, just to be feel safe. At the end of the day, what matters is how the bank will appraise the property when underwriting the loan. Better to know the answer both ways.

@Vic Vega, I think there are some sub-forums that deal with 1031 exchanges and tax planning . You may get some more complete answers there.

In the meantime, a few things to keep in mind.

• The reno costs will most likely be considered Capital Expenses, which need to be amortized over several years (lots of different time tables depending on what the improvements are).
• I've you've been claiming depreciation, the gov't with expect that to be recaptured at the time of sale. So, using your example above, if you took $10k in depreciation over the years, then the gov't considers the original purchase price to be $50k. Unless of course, you do a 1031 exchange and then NO TAXES! (lots of fine print on this, but it's a great strategy).

@Uma Tuchscherer, not having a W2 can be a killer. You have a few options.

1. Partner up with someone and leverage their mighty W2.
2. Or pull in several people and buy all cash.
3. Hard money might be an option, but they usually like to see a track record first.

Once you get some cashflow established, most banks will consider a portion of that when considering a conventional loan in the future.

good luck

@Logan Turner, I'm not a lawyer, but I don't think you can sell the property to yourself. Selling to your dad may be an option, as long as he's paying for it. If you give him the money and he buys/takes the paper, you're most likely committing mortgage fraud. 

Talk to some local/regional banks and credit unions, see what they're willing to do. In most cases, if the title is in a separate LLC (which you definitely want for asset protection), but you're the guarantor the banks are all good.

Also, you wrote "my LLC." I assume that means you have a preexisting LLC that's used for another business. That's very risky from an asset protection POV. If someone slips on your rental property or otherwise has cause to sue the LLC, they can go after everything in it. Property, business assets, all of it.

@Robert Hudson, I'll take your word for it. I was just trying to point out that there is a lot more to consider when figuring out the load capacity.

@Margie Piercehttps://bct.eco.umass.edu/publications/articles/understanding-loads-and-using-span-tables/

Hi @Obreight Ingram, welcome to BP. I used to live in West Harlem, 136 btwn B'way & Amsterdam.

I don't recommend chasing gentrification (appreciation) while you're first starting out. That's not investing, it's speculation. Sure you can make a lot of money that way, but you can also lose your shirt and you've got a family to think about.

Secondly, Mt. Vernon and Yonkers both have terrible school systems (compared to the rest of Westchester), so they won't draw families the way Rye, Harrison, and other towns will. Typically, gentrification is led by young arty kids looking to do their thing in a cheap place (that's what happened in the SoHo in the 60s-70s and BK now.

Maybe the Bronx is next to gentrify, but who know. That's more likely IMO.

NYC and Westchester are tough for new investors for a bunch of reasons. High prices, low cap rates, high taxes, tenant-friendly rent laws...the list goes on and on. It's also difficult to make a duplex work as a true investment property. Reason being you only have 2 units over which to spread all the fixed costs, like lawn care, snow removal, etc. Plus if 1 unit goes vacant.

Have you considered areas a little further North? Tarrytown and Ossining can be more affordable, plus an easy commute to the city.

Good luck!

Hi @Michael S.. You're on the right track, I think. How much is the paid-off house worth? Can you refi to pay off the HELOC and pull out some cash?

Seems to me you can pull:
~$9k from your recent BRRRR
~$45k from your home (would raise your mortgage to ~$600/month)

That's enough for the DP on another deal, even without a refi on the 1st place.

As long as your rental properties can still cashflow while being smart about all of the expenses, I say pull the equity and get another rental. Get that money working for you.

@Kevin Heiden, that doesn't sound right. Why would they want you to keep 3 units empty while you sit poor and angry in the 4th unit?

FHA does require that the property be owner-occupied.

Keep shopping around to other banks and concentrate on local/regional banks and credit unions.

@Jorge Zea, profit margin is on a sliding scale. @Jason D.'s 20% goal is good, but that may not work on a very inexpensive house or may be too aggressive for a high-end flip. You probably can't get 20% on a $1mm house, but may still be worth is at 12% with the right timeline.

Talk to all your local/regional banks and credit unions to find out their seasoning rules. Don't even bother with big banks. They sell most (all) of their loans to Freddie/Fannie, who ultimately determines the 1-year rule you noted above.

Remember, if you BRRRR you keep all that equity and start getting cash flow (unless the market goes downhill). Best to do an Internal Rate of Return (IRR) analysis and see what the numbers say. There's a ton on BP about IRR.

Hi, @Margie Pierce. 

@Matt Clark is absolutely right. You will definitely need a permit to do this kind of work. Not only for the structural work but the plumbing and electrical. 

8x2 joists are most likely undersized to carry a living space, especially bathroom or kitchen. The other important part is the span of the joists. 8x2s may be fine with 6ft of span, but woefully undersized at a 12ft span.