All Forum Posts by: Mike Lauer

@Brian Pulaski that is helpful. The weight given to below-grade is substantially less, and that would hold true whether it's a bedroom or something else. I appreciate the reply and the info. Thanks!

@Marcus Auerbach that makes perfect sense. Thanks!

@Sam Shueh and @Rebecca Knox thank you both for your replies! The properties I'm wondering about already have finished basements that were permitted projects. The question is more about adding an egress window, to make it a "legal" bedroom, and whether that would be considered an extra BR for appraisal purposes. Rebecca, I had heard the same thing about the square footage (and it looks like on MLS they are starting to include the finished basement, but note it separately). There are a lot of homes with finished basements, but none that I've come across with the egress window. Based on what you all are saying, and what @Marcus Auerbach has said, the ROI on adding the egress isn't worth it. Sounds like an appraiser would still call it a 2BR, whether there was a BR in the basement or not. Is that right?

Hello BP,

I'm trying to understand the impact of adding a 3rd bedroom in the basement -- to a 2BR house -- for appraisal purposes. This would be in the context of buy-and-hold, with a cash-out refi after the addition of the egress window and some minor finish improvements. Location is the north shore and north suburbs of Milwaukee County. When determining ARV, do I just run comps for other 3BRs with similar condition, square footage, number of bathrooms, size of garage, etc? Or is there a discount for the 3rd BR being in the basement? How big of a discount?

Any thoughts or insight would be much appreciated!

Thanks
Mike

@Pat Parrillo and @Daniel Hanson you guys are awesome. Thanks so much for engaging and for the thoughtful feedback. This is the kind of stuff I was hoping for. BP is such a great resource -- I want to get the most out of it. 

I wasn't able to go to the rehab tour last night, but will definitely catch you guys at the next Brew City meet-up. Thanks again!

@Rebecca Knox ah ha, makes sense! Thank you. 

I have limited experience with rehabbing so this may be a bit philosophical, but for what it's worth....

How driven is your friend to enter this business? Is this a real, well thought-out dream with goals attached, or a phase that will pass? Is he a close friend? Because I think that for someone who is absolutely committed to becoming a real estate investor, and who has really educated him/herself, it would be a be very upsetting for a friend to just throw cold water. Maybe it would make sense to outline the risks, but also offer to help him mitigate those risks if he's really passionate about doing this. Start with the concern about the GC issue, which is a huge risk on a first flip. Ask him his methods for analyzing deals, how much serious rehab he's willing to take on, etc. If he doesn't get the GC problem, and he's got no concept of how to mitigate risk by doing a solid analysis, he might be inspired but not educated. If his answers are good, then he has probably done some self education but needs a coach or mentor. Maybe you could help him? Could you offer to help him analyze potential deals? It's quick and painless to pour cold water on a bad deal. And you're actually helping him find the right deal. As you analyze deals together, he'll learn the difference between a good deal and a bad deal. He'll learn patience. He'll see a lot of houses. He'll meet some GCs and he'll learn about estimating rehabs and he'll figure out by himself whether being a GC is the right fit for him and his goals. He'll spend hours late at night reading the BP forums. He'll probably change his perspective several times during his education, and be able to make up his own mind about his level of commitment, hunger for education, and whether his current plan is the right one. Maybe he takes the plunge, maybe he waits and develops a less risky strategy. Maybe he decides this isn't for him and moves on. Either way, it was an educated, careful decision and you helped him get there. That's the kind of friend I'd want in my corner.

Wow, nicely done. As someone about to do my first flip, this is very motivating and inspiring. Thanks for sharing.

@Michael Henry thank you! Good to be here. 

@Daniel Hanson that all makes sense and is helpful, thank you. I didn't know there was a BP meet up in MKE. Do you know when/where the next one is happening?

@Chris Bruni that's great, I will reach out to you. Tosa is definitely in my universe of areas to search. Really appreciate it, thanks!