All Forum Posts by: Patricia Miller

Thanks, very helpful. If I decide to move forward this weekend after a bit more research I will contact you for more information.

I am currently analyzing an opportunity that will likely require that I make a purchase in cash to expedite the sale and beat out the competition. I will need $400K. I will use this to bridge a gap between the purchase of this property and a sale of another property that will yield ~ 200K -- plenty for a refinance with funds to start rehabbing and developing the property. Of course, the sale of that property can't be predicted -- but suffice it to say that the asking price has been confirmed by a recent appraisal from a lender.

Anyway, what will a hard money lender look for and what will cause a lender to reject an application? We currently have 2 mortgages but also a decent salary with long-term employment history. The property to be purchased is on over 1 acre of land with a structure that could become a residence with zoning for several MFRs or SFRs on the land.

And... what is the best way to find the lender??? 

Today I came upon a property that looks so promising, I'm guessing it might be too good to be true. However, I want to explore financing ASAP while also researching the details to see if it is, in fact, a rare find. The structure, a 2000+ sq.ft. building with city gas, sewer, water (although not currently a residence) is sitting on a 1.1 acre lot in an amazing location for $400K. Background: It was previously listed for nearly 2x this amount but sat on the market for an extended period. The price was cut drastically 2 weeks ago (estate sale, apparently) and after an immediate offer that didn't pan out was just re-listed a week ago. It is zoned multifamily. 

It's Friday afternoon at 2:30. I have been made aware that a rehab loan is in the works from another interested party for the property at this time but hasn't been submitted yet. 

I currently own 2 properties (one for sale, one soon to be listed) that would yield ~$240K after sale. They are considered a primary and secondary residence.  

My thought is to seek a private loan/hard-money loan to bridge the gap between a quick cash purchase (assuming details check out) and the sale of my primary residence (to yield ~$200K) -- at which point I would seek a conventional loan to do some light rehabbing of the existing structure (to make it habitable) and then begin the planning and development for the remainder of the lot -- potentially 4 more SFRs or a handful of duplexes (zoning permits this). Is this called cash-out refinancing? Or I could do a HELOC to free up cash??

How do I do this?? Is there a better way to finance this given that someone may be about to beat me to it? 

Yes, of course, due diligence is in order -- how do the numbers look for building on this lot and what sort of returns could be expected given all the costs, etc. That aside, a 2000+ sq ft home on a "normal" size lot in this area would probably cost $350,000 or more. With this property, at more than an acre with multifamily zoning, it almost seems like a no brainer.

My fear is if I don't line up financing ASAP, this deal could be lost.

Yes, weird question. Let me set the stage to explain this question:

1)  One spouse, self-employed, can form a Solo K by moving funds from a 403b from a previous employer. However, this fund is pretty small - big enough for a downpayment (maybe 20% for a small purchase)

2) The other spouse, currently full-time employed, sets up a Self Directed IRA - pulling funds from former employers' 403b accounts, as well. This account might be big enough for a full cash purchase of a smallish property - and is maybe up to 4 x larger than the spouse's Solo K.

The couple would like to build a portfolio of leveraged properties (asking for a friend).

If I understand this correctly, a Solo K can be used to buy/leverage rental property but the SD IRA cannot. However, the SD IRA can be used for things such as a Hard Money Loan.

Could funds from the spouse with the SD IRA be used as a Hard Money Loan (using all the proper documents, contracts, etc.) to the spouse with the Solo K (property LLC in the name of the Solo K spouse)? The Hard Money loan would be used for a cash purchase to close the deal quickly and/or beat out the competition. The intent is to BRRR the property and pay back the loan from the Hard Money lender.

Is this possible?? And, would there be an advantage to this (other than the idea that paying points and interest to the spouse's account would be amazing)? I'm guessing that because the couple file taxes as married/filing jointly, more red flags would pop up in the IRS system than you could shake a stick at.

Seriously, I have no interest in scamming the IRS. I just have a problem with excessive thinking-outside-the-box on top of very limited knowledge about how these things work.

@Thomas S.  Ouch. 

"As income property investors, those with the gold, we benefit from a struggling working class. It's good for our business. We want people living pay check to pay check to keep them out of the home ownership world.

Our bread and butter comes from the economic struggles of others."

I'd like to hear others weigh in on whether being involved in REI is necessarily just about profiting off the struggles of others? As a newbie, maybe I need a serious reality check before getting too far into this... And, no, I do not see REI as humanitarian or charity work, but am I clueless thinking it could be at least a neutral activity regarding the welfare of others??

(Apologies for digressing from the OP)

Meanwhile, stock market is looking a little insane right now. Who predicted that???

Thank you for the feedback @Bill S. and @Scott Trench. Encouragement, advice always welcomed! 

As with others in Denver, I am glad for this discussion, thank you @Marc Allen for opening it up.

I hear from many of you that you are working with great numbers in Denver, but in every case, it appears, purchases were pre-2015. 2016 is yet another story. One of my questions is -- when the purchases were made 2012-2014, did the numbers look solid (1% give-or-take), or did it seem like a gamble back then, as well?

I have had my eye on investing in Denver since last March with the aim of relocating here from the east coast (sorry, natives...). To me, being in Colorado/Denver is reason enough to try to make the investing work, despite the current challenges. The population and jobs picture also provide an interesting draw from an investment standpoint.  

With an initial investing goal of buy and hold to build a small portfolio over 3-5 years for supplementing eventual retirement with cash flow, now I'm not so sure that is a realistic goal for starting here in Denver in 2016. As a newbie with limited skill it is difficult to find that good deal quickly and a little unsettling to purchase at less than 1%, not knowing exactly how that will play out. I also carry a healthy fear of negative cash flow this close to retirement. Younger folks have more time to recover and gamble with an expectation of eventual positive cash flow. However, as Scott Trench has pointed out, some monthly costs for rental property calculations should be the same in Denver as, say, the midwest, and, therefore, makes the 1% rule overly conservative for Denver. Instead, it makes more sense to work with a spreadsheet that uses Denver-specific percentages for monthly costs to guide decisions regarding purchasing rental property. I would love to get a sense of what those percentages might be for the Denver area from a variety of folks with a several-year track record of their rental property expenses. Then, these can be plugged into the BP calculators (as adjusted percentages) for analysis. 

Still, even with all this in mind, converting to a strategy of house hacking with a 1 year goal for re-sale (also providing a place to live) might be a more realistic approach here in Denver for the short term while waiting to see if a down cycle might make buy and hold investing a little easier to pull off in a year or two?? I'd be interested to hear from anyone who has made 2016 purchases for buy and hold that are either neutral or in positive cash flow, recognizing that CapEx expenses could be lurking in the shadows to change that picture.

Having landed in Denver (finally) last week and living, temporarily, in my first purchase (condo in Arvada) to make some improvements before renting/selling -- I'm seeing that rental at a stretch would be .07% (maybe $1500 rent for a $213,000 purchase). I landed this condo after three previous failed attempts to buy, and, yes, impatience allowed me to ignore the numbers to just get started. Now, it seems the $213,000 I paid is fine for an owner occupant but not such a great idea for rental investment. I'm considering bailing -- and selling in spring where, who knows, I could possibly see a sale price for $240,000 with a few upgrades? Forget ROI, I'm looking for break-even (all expenses considered) and thinking I should start over and be a little more careful before diving in with the next purchase. I had initially hoped to do that before the end of 2016 -- but time is running short for finding that great deal. Meanwhile, prices keep going up faster than rents... @Mike Stephens

@Scott Trench @Mike Stephens @Bob Collins @John Negomir

@Scott Trench Lots to think about - thank you for taking the time to weigh in. 

@Michael Purcell Can you please post a link?

@Crystal Wilson I just recently installed Pergo Outlast in a small walk-through closet - I think it is a new product by Pergo. Purchased from Home Depot at $2.79/sq ft. I cannot attest to its longevity but it is advertised as waterproof (although extra steps are needed at the perimeter if installed in bathroom/kitchen where water could be a problem). It looks absolutely gorgeous (I got the Java Scraped Oak) and it has a residential and commercial warranty. Fairly easy to install but special saw blades needed and a $10 tool for edges. Also, must install on a relatively level floor (3/16" tolerance over 4 ft, I believe). Consider the effects of color  - dark will darken the room even though it looks classy and, if it gets nicks, the scratches will show the nicks more than a light color (same thing for cabinets). 

Anyone else use the Pergo Outlast?