All Forum Posts by: Lawrence Potts

Lawrence Potts has started 8 posts and replied 444 times.

Hi All,

I am an newbie investor out of California and have invested in a couple of SFR properties in Texas. Looking to diversify in other states and considering southern Oregon and Phoenix areas as potential options. Would appreciate feedback from folks who have invested in SFR LTR in those areas or recommendations on other areas. Thank you!

Are those areas you have lived in or visited before. I’m very familiar with Southern Oregon but it’s a tertiary market in comparison to Phoenix, so I’m curious to why these two markets.

0 Votes

Hey @John Wu, congratulations on closing on this fun project! I like the washer and dryer in the dining room closet, that’s a creative one!

As far as walls go….I always talk to a contractor or structural engineer about that one 👍

But it looks like this one should pencil out great long term, a 4 bed house ranch style is easy to comp for a solid ARV. Best of luck! If you need connections to contractors, lenders, etc., in the SO market, let me know!

0 Votes

Quote from @Michael Baum:

Hey @Janea L.. Cool you are kinda close to me up here in WA.

The Oregon coast is a bit tricky when it comes to STRs. There are pockets where it is legal and areas where it is not. Sometimes right next to each other.

@AJ Wong is someone you can ping about it. He has a lot of data on the various areas where it is allowed and banned.

The Oregon Coast is very tricky. Right now, they are anti-STR because they have such a shortage in affordable housing for long term tenants. Some counties are cracking down on new STR’s. Others are simply requiring permitting and registration. Having a tiny home adds another layer of complexity because you need to find land to park the tiny house AND you need to get approval (depending on the county). AJ is a great resource, I’d be more than happy to help out as well. I had clients buy an STR in Brookings and a boutique hotel in Bandon. Both counties are very different despite being so close to each other.

1 Vote

Quote from @Adam Wayne:

Hi everyone,

I've been reading the forums, books, listening to the podcasts, and learning so much! I'm currently closing on my first house and I think I have most of the next steps figured out. Because the market is so hot in my area and properties are selling for so much, I couldn't find anything that will come close to cash flowing. On the other hand, by renting out two bedrooms I will be paying only slightly more than I currently pay for rent in my apartment. I'm a remodeler by trade, so I've already planned to remodel the kitchen, turn the family room into another bedroom, move the laundry to the garage and use the extra space to turn the powder room into a 3/4 bath with a shower so I'll have 2.75 baths and 4 bedrooms total. Once I can rent out a third bedroom, my cost of living will be significantly reduced.

Now, my confusion is coming into play with how I will eventually qualify for my next house hack? I am currently making about 70k a year at my main job, working a second job (which wasn't able to qualify toward my income because I haven't been doing it a full year), and my debt-to-income ratio is maxed out on this home loan. I was debt-free before this mortgage, and now my DTI ratio is at 49.7% to buy this $450k house with 10% down. I don't see how there is any opportunity to acquire another property in a year's time? I see everyone talk about this one year turnover time, but it seems like it's based on the assumption that everyone has a high-earning W2, right?

I am aware that if I continue my second job, I will have that income added to my overall income for consideration in the next loan, but I would basically need to make the same amount of money in my second job as I do in my main W2 to qualify for anything else in my area. I did read in The House Hacking Strategy book that you have to have 2 years of rental income for it to qualify as part of your income as well. So, from what I am gathering, the only way that I will be able to take on the debt of another property would be to continue my second job, and wait 2 years until I can claim all my rental income towards my overall income. Does that sound right? If I have to wait 2 years, then that's what I'll do, but I would really only like to do things sooner! Am I missing something? Hoping that you guys could point me in the right direction. I preordered Pace's book about creative financing, so I understand that that could be an option as well. All input is appreciated. Thank you for your ideas! :)

Lenders vary as far as requirements go depending on the product. But as mentioned, you can technically use 75% of the rental income to offset that mortgage payment. Sometimes they will not accept the rental income though. I'd make sure you have signed leases. Even with that, some lenders may want to see a year of rental income in bank statements. Others just want to see a signed year long lease. Also, some lenders may not accept the rental income because your home isn't technically a multifamily. So it really depends on who you talk to and the institution you are wanting to go with. I would recommend talking with @Grant Schroeder, he has a lot of experience in this space as a former and current house hacker and has helped a lot of my clients get into their first house hacks. Hope that helps!

1 Vote

Seattle, Washington

Quote from @Courtney Mccrear:

Hey how’s it going everyone? Could someone please give me some advice?

So I'm trying to scale up and acquire more doors, I have 2 rentals I've acquired through tax deeds already but I'm currently stuck trying to get to 3. I'm ran into a hiccup in my current primary home! I used my Va loan to acquire this home with hopes to BRRR after this year, I refinanced and started on the rehab but got ahold of a bad contractor (all my fault) and he beat me out of 35k. I have about 50k in equity but I can't tap into it because of my dti ratio on my credit is too high. The downstairs is basically unfinished because of the contractor, but at this point I don't mind selling my primary or doing a lease option. I would like to sell my primary home and acquire a multifamily to house hack.

Any suggestions?

Selling might be your best option then. If you decide to sell, that opens up your VA to purchase a 1-4 unit and start your house hack. You may find difficulty selling with an unfinished downstairs. It may not be considered financeable; that diminishes your buying pull to investors or cash buyers willing to take on a project. But I understand where you are coming from. We sold our first home to get into a 4plex. We had about $40k in equity but $10,500 was tied up as a 2nd lien from a down payment assistance grant and we couldn't refinance our equity because there wasn't enough and couldn't get a HELOC because the 2nd lien position was taken. So selling was our best option.

If you've lived there for 2 of the most recent 5 years, you can defer on your capital gain taxes you'd experience (again, speak with your tax and legal advisors). If you're able to finish the downstairs on your own, that'll be the best way to maximize your profit and then use that to purchase your house hack! That's what we did. Best of luck! Hope that helps. Not a bad strategy at all :)

What would it look like if you took your time and finished the downstairs and then sold once the rehab was completed?

1 Vote

Atlanta, Georgia

Quote from @Courtney Mccrear:

Hey how’s it going everyone? Could someone please give me some advice?

Any suggestions?

You cannot 1031 a home that you are occupying. Please check with your tax and legal professional.

If you decide to sell, that opens up your VA to purchase a 1-4 unit and start your house hack. You may find difficulty selling with an unfinished downstairs. It may not be considered financeable; that diminishes your buying pull to investors or cash buyers willing to take on a project. But I understand where you are coming from. We sold our first home to get into a 4plex. We had about $40k in equity but $10,500 was tied up as a 2nd lien from a down payment assistance grant and we couldn't refinance our equity because there wasn't enough and couldn't get a HELOC because the 2nd lien position was taken. So selling was our best option.

2 Votes

Atlanta, Georgia

Quote from @David Grado:

I would like to have professional marketing materials for my first and subsequent house hacks although I wont be incorporated. Is this legal? I would have a "business" name and logo.

Forming an LLC is not that difficult. It shouldn't be seen as a big deal, but somehow it is or it's acknowledged as a big step. Super easy to do. Different in each state, but you'll just pay an annual fee with the business registry of your state and most likely your county/city and then you have an LLC. Doesn't mean you are legally protected, but you have an LLC. Either way, you can send marketing material out as a sole proprietor or incorporated. Just be clear about your intentions and don't screw anyone over. Basic business practices. This is a smart idea to try if you're not finding what you need on the open market! Go find it off-market. Good work! Let us know if you want us to review your material or if you find a deal through your marketing. Best of luck and happy hunting!

0 Votes

Atlanta, Georgia

Quote from @Douglas Johnson:

Hi all, I am a resident of Salt Lake City and I am going through major listing sites trying to analyze deals while I save up and increase my earning potential in order to invest in real estate in a few years. In my research I am focusing on house hacks for multifamily properties. The best listing I came across was a 4-plex for 985k with a cap rate of 5%, IRR of 10% after 20 years, and a cashflow of -1.7k a month assuming an FHA loan with 3.5% down @ 6.5% interest and rents of 1350/month. This is including the rent from the 4th unit even though I would be living there so in actuality the situation would be even worse.

I keep hearing stories on the podcast of people living in house hacks that are cashflow neutral or even positives with insane cap rates and IRR. Do people just invest in properties like this with the hope of rapid appreciation?

If anyone could chime in and let me know if this deal is good or not or give any personal anecdotes about any investments they have made with large negative cash flow I would greatly appreciate it.

For additional context I am looking at 413 E Herbert Ave. Salt Lake City, UT 84111 and using the rental property calculator on calculator.net

That property is pending when I checked it! So someone thought it was a good deal.

Typically, you'll run your numbers on a house hack as if you are renting all units as a nonowner occupied property. Sometimes it still will not cash flow. However, your savings rate is what is the biggest incentive (outside of the tax incentives, principal paydown, etc.). If you can decrease your housing expense from $1,350/month RENT to $700 net mortgage payment, that's equivalent to $650 in cashflow. It's really depending on your goals and what you want it to do for you. Sometimes even if you cannot cashflow after buying and if you were not living in one of the units, it may make sense to house hack it anyways if it means you can decrease your living expenses significantly. Sometimes multifamily homes that have vacancy are valuable on the market (for future house hackers!).

I hope that helps. In an ideal world, yes, you will cashflow while living there and it will appreciate 15% every year. But that's not common, but what sells on podcasts, right? It might help to just focus on base hits that slowly get you closer to your goals and sets you up for the big home run hit. I bought a single family residence and did a live in flip. It was a base hit, wasn't amazing, but had enough equity to sell it to buy my first house hack. Best of luck!

0 Votes

Salt Lake City, Utah

Quote from @Davey McLaughlin:

Hello BP, I've been looking to buy my first rental property (small multi) within the next three months and have been looking to house hack while renting by the room. I wanted to reach out and ask everyone for there experiences with this strategy. If theres any TO DO's or Not TO DO's i'd love to hear them. Also would love to know if theres a strategy to find tenents of similarity such as college students. Thanks!

1. Get leases for each tenant and treat them as you would for a house you were not living in. Background checks, call references, etc.
2. Communicate expectations of house rules and common space usage. Guests, parking, refrigerator space, etc.
3. Locks on all doors!
4. I like using Apartments.com to handle rent. Free and easy to use.
5. Work with a lender that knows what you're trying to accomplish and also invests in real estate.

2 Votes

Minneapolis, Minnesota

Quote from @Gregory Boulet:

Hello,

I have a detached room on my property that I rent out on Airbnb and Furnished Finder. I want to add a bathroom so it can be an ADU. Do I still need to apply for an ADU permit even though the room is already built, and I bought it that way? If so, who would I contact in this state? I'm in the Olympia area.

Thanks,

Greg B.

Yes. Call the city building and planning department. They can send you the right direction. But 100% get a permit. Because some day you'll want to sell, whether it's next year or 27.5 years later. And selling a property with an unpermitted ADU is an absolute PAIN. Do yourself a favor and help your future self out and do it, no matter how inconvenient it is. Hope that helps!

1 Vote

Tacoma, Washington

← 1 2 3 4 5 6 7 8 … →

All Forum Posts by: Lawrence Potts

Lawrence Potts has started 8 posts and replied 444 times.

Post: Southern Oregon vs Phoenix

Post: 1977 Country Style Renovations and Floor Plan

Post: Tiny Homes rental properties

Post: Closing on my first house hack - trying to understand how I will qualify for the next

Post: House hack suggestion/advice

Post: Suggestions to house hack

Post: Marketing Materials Without being Incorporated

Post: House Hacking with large negative cashflow, can it make sense?

Post: Rent By the Room

Post: ADU Washington State