All Forum Posts by: Michael Haas

@Jesse Watson you can definitely pull any equity you create above 20% out of that deal - the "Rental" part of the BRRRR strategy isn't something the banks need for the loan, although having the rental income may improve your Debt-to-Income ratio and allow you to qualify for larger and more bank loans in the future.

Remember, refinancing will usually cost you a couple thousand dollars in fees, so you want to pull out a large enough stack of cash to justify those costs. Your interest rate will also drop a bit if you chose to leave more than 20% in the property.

Here's a real life example from one of Jess Haas and my recent deals, broken down with the different rates depending on how much equity you leave in the property. In this example our credit score is 740, we bought the property with cash (private money lender), and the property appraised for $675,000 after renovations.

80% Loan to value: loan $540,000

30 Year Fixed Rate: 4.375%; Rate Costs: 0.442 ($2,386); Principal and Interest Payment: $2,696

75% Loan to value: loan $506,250

30 Year Fixed Rate: 4.05%; Rate Costs: 0.29 ($1,468); Principal and Interest Payment: $2,431

70% Loan to value: loan $472,500

30 Year Fixed Rate: 3.85%; Rate Costs: 0; Principal and Interest Payment: $2,215

Hope that helps! Feel free to reach out to Jess or I anytime if you'd like to grab a coffee and chat more.

@Mario Mach - you're 100% right, if you have great credit, good W-2 income, and just a little bit of savings buying a house hack is a financial no-brainer. We started with this strategy in 2013 and have 6 properties in King County / Seattle now.

Like Gray said, yes a higher purchase price won't change your down payment much but if you're only putting 3.5% down its unlikely that your lender will give you a very high pre-approval amount. Your first step should be to get this pre-approval - you might qualify for a $800k purchase price or a $400k purchase price, we really can't say until you share your financial info with a lender. Click on my profile and send me a message if you want the contact info for two good ones I use on my investment purchases.

Washington State Housing Finance Commission Down Payment Assistance (a mouthful I know, WSHFCDPA for short) is another option if you're having trouble swinging the 3.5% or more. To summarize, WSHFC is a non-profit dedicated to helping every Washingtonian own their own home, and this program allows us to take out a loan with 3% down, then get 4% down payment assistance so the cash required to close is super-minimal (as little as $6,000 in some cases, depends on the purchase price of the property though).

This strategy works really well when you can combine it with house hacking. One reason this works so well is that owner-occupant financing (when you live in the house) has lower interest rates than investor/landlord financing, so you get the best of both worlds if you rent part of your primary residence out – rental income, tax deductions, and low interest rates on your home loan. You need to attend a homebuyer’s class taught by a WSHFC trained Realitor and Lender, I’m trained and am teaching a few of these early this year. Let me know if you’re interested in the classes and I'll ping you when the date of the next one is set.

Cheers and good luck! Message me anytime if you'd like to grab a coffee and talk house-hacking, it's changed @Jess Haas & my life for the better!

Price point is reasonable. If you're doing a 20% down owner-occupant loan I'd expect you to be cash flow nuetral as a single unit rental, and with two units rented seperately (your MIL/ADU scenario) you should be seeing positive cash flow. The East-Side is definitely not a crazy-high cash flow area though, so you'll need to set your expectations a bit lower than South Seattle, and a ton lower than the investors on this site form Georgia, Ohio, Texas, etc.

Just a heads up - Bellevue and a few other east-side cities started cracking down hard on un-permited MIL's and ADU's last year, I know a few investors that have gotten busted. Make sure any additional dwelling units are permitted unless you're getting a significant discount/deal on it.

Where are you moving to Seattle from?

I'm an investor and agent, not a wholesaler, but I've been pleased with how the Bellevue office of Chicago title treats investors. They definitely know and are willing to do contract assignments with assignment fees. Have you tried there? 

@CJ M. or you could find a conference somewhere you’d like to travel to anyway, then save ~30% on your travel costs after tax deductions. We’re hoping to do more of this in 2020 now that our investments are generating some more significant taxable gains. 

@Christopher Cole - just curious, what neighborhood is your property in? I assumed we were still too early to be starting eminent domain in Youngstown/West Seattle so is it one of the other spurs?

@Thom Richardson I think SFH rentals is a great and straightforward way to get started! Most of our rentals are in Seattle, but a couple close friends of ours own multiple Single Family rentals around University of Puget Sound in Tacoma, and these are some of the best performing properties in their portfolio. I went to school there and am a big fan of the neighborhood - lots of nice houses mixed with older housing stock waiting for a value add remodel, good transit and with light-rail on the way will likely become more popular as folks get priced out of Seattle.

@John Barrett is right - unless you want to pay 6x what you should, you should just hire your subs for this. Sounds like very easy project:

1. Find a good painter - he can also scrape the popcorn since he'll have your rooms taped off anyway, assuming it's not asbestos. 

2. Go to a carpet store, like Carpet Liquidators in Sodo, and purchase new carpet using one of their in house installers if you're going carpet, or go online and find a hardwood floor installer if you're switching to hardwood. My recommendation in a Northwest Rental is always hardwood, carpet gets wrecked out here quick.

Good luck! Feel free to message me if you have more detailed questions or need other recommendations. 

Looks Sharp!

@Justin Bautista - some Seattle investors are offloading / 1031-ing their rentals within the city limits because of our regulations and current city council - this election cycle was an opportunity to swing back to a moderate center, but with Kshama Sawant winning another term we as Landlords in Seattle will keep being cast as the bad guys. We're still holding our 5 Seattle rentals, but are looking more aggressively in Renton and other outlying areas to diversify our risk. 

The only neighborhood where I see a large number of adjacent rentals on the market is Youngstown, West Seattle, and that's likely because the above ground lightrail opening in 2031 is set to cut straight through that neighborhood and decimate their property values. Since that's 10 years away, a lot of investors are of loading now in the hopes that someone will buy either 1. not knowing what is coming or 2. not caring as that construction won't begin for a few years. 

Make sure you've got a good Seattle Realtor that knows investment properties- if you don't know what you're doing its easy to fall into one of those bad buys. Cheers and good luck, and feel free to reach out if you're interested in grabbing a coffee sometime!