All Forum Posts by: Steve K.

@Tiffany Miller

Welcome to BP. 

Did you just move from PA? I just saw a post here this morning:

https://www.biggerpockets.com/forums/50/topics/482...

(or, just someone else shares your name)

You should look into going to @James Carlson 's happy hour seminar, wherein he teaches you the Denver airBNB rules.

With a $45k down payment, you could put 20% down on a $225,000 residence....and look for one with airBNB potential "suite" area.

Or, if you can qualify for bigger mortgage payments, put 3.5% down on an FHA loan and look at everything up to a $12k down payment on the ($417,000 maximum loan) property thats about $425,000.

Since it would be your primary residence, it would be allowed in Denver to airBNB a portion of it.

There are some duplexes and even tri and quad-plexes in the modest areas of Denver that would keep you around $400k (they are very competititive.....often sell in first 24 hours to "all cash" buyers).....you could house-hack and live in one unit and rent the others. However, in Denver, you can only short term rent your primary residence. If you went the house-hacking duplex route, you'd be able to rent a room(s) in your unit...but the other tenant would have to be long-term lease (can't by airbnb)

@John Michael Rico , aside from the "rules" discussion, I question your financial analysis here.

How exactly are you planning to make money buying this rental duplex and only receiving half of the market rent? It likely won't rent for enough to pay the mortgage with 3.5% down and the high LTV.

In my mind, you're either renting both halves of the duplex (yes, likely requires 25% down payment for non-owner-occupied), or you're living in one-half and truly house hacking with the low down payment (because you're owner occupied).

@Tiffany Miller , if a stranger offered your grandma $94k as is, and put $60k into it (total $154k) and the ARV is $220k, then the fix/flipper would be buying/rehabbing for about 70% of ARV.....so, yes, your being able to buy it at $60k is a "screaming deal"...if the numbers hold up.

Read up on the BRRRR strategy. Consider financing it (hard money lender if need be), and then when the new appraisal comes in at $220k (or higher), you can get a 75% LTV mortgage (might be after "seasoning" time) as a rental property and take a $165k mortgage. If your costs are only $120k, then you have $45k in your pocket, you've paid off your acquisition and rehab loans (your down payment/equity and some HML), and you have the duplex "free" with none of your own money in it. Does it rent and cash flow at that point....to pay mortgage, expenses, repairs?

Grandma may be propelling you toward financial freedom. You will have made $100k in your first BRRRR investment. You'll be in the Bigger Pockets Hall of Fame on your first deal. (of course, research your remodeling estimates, and all the income/expenses of renting it.) But yes, I strongly urge you to consider saying "yes" to this deal.

An unintended consequence may be from other family members, if you make $100k off Grandma's acquisition. Why didn't you share the profit with Grandma, or why did Grandma give this opportunity to only you, and not your cousins, uncles, etc??? Should you give Grandma a "bonus/share of the profit" when the new appraisal/refi comes in at $100k over your costs????

Good luck.

@Nolan O. ....firstly, congrats...it was a good purchase, if it's value is up almost $31k in a year!

At $950/mo rent, you had 1.23% of purchase price at $77,500.....now you have 0.88% of purchase price (at $108,346 appraisal)....that's shrinking your cash flow to $33/mo.

If the property appreciated 40% since deciding $950 rent, doesn't it deserve to have rent increased? You said yourself it was below market. Your $202/mo net cash flow is 10.1% cash on cash against your $23,902 cash in. (decent for a turnkey, but not stellar for BRRRR with rehab profits). Notice that if you acknowledge your new ARV, you now have $54,748 (cash and equity) in the property. The $202/mo (keeping the old mortgage) feels now like a 4.4% cash on cash return.

I'm a big fan of BRRRR; I'd normally advise you to take your $24k cash out refi and "repeat" with another property. Even though you lose 1% APR on the new loan, if you get a great ROI on the new project, I believe you can put your $24k to work at a much higher return.

If you thought of this in terms of "opportunity cost", would you buy this property for $108,346 today and accept just $950 rent?

You could sell, or raise rent????

Welcome @Account Closed , your initiative to learn more at a young age will serve you well. 

Above, is a reference to learning and getting calibrated to know a good real estate acquisition when you see it! A great deal is to be able to acquire and rehab a property for about 60% of the After Repaired Value (ARV).... (either to fix/flip or fix/hold).....leading to a nice (40% gross margin) once completed. Of course there are financing, closing costs, taxes, insurance and utilities during your hold period that reduce this to your 'net profit' something less Some would say 70% of ARV is a great deal. In tough markets, flippers are competitively bidding properties up to where you have to buy it at 85% of ARV.

So, either with parents' help in the next 4 years, or on your own at 18+ years old, get motivated, get educated to know a good deal, and take advantage of nice profit potential in REI.

I've been pointing new investors to consider the BRRRR method of fix/hold rentals. Helps you grow wealth at fastest pace if you can find a market where it works. Read about "house-hacking" your first property, too.

Among your other reading of  real estate and personal finance books, and these forums (and BP podcasts), get inspired by some real life successes here on BP:

Did you see what

@Joshua D. , @William Collins and @Austin Fruechting did in 5, 2.5 years and 7 years, respectively, buy using the BRRRR method on acquiring rental properties?

(Austin was recently featured on BP podcast #239)

https://www.biggerpockets.com/renewsblog/biggerpoc...

https://www.biggerpockets.com/forums/223/topics/459415-500k-net-worth-in-5-years-im-30-today?page=1

https://www.biggerpockets.com/forums/48/topics/429980-officially-financially-free-at-32----exciting-day

https://www.biggerpockets.com/forums/223/topics/445367-full-time-employee-multiple-brrrr-side-hustle-2875-to-goal

or @Abraham Anderson did here as an 18-yr old new investor:

https://www.biggerpockets.com/forums/223/topics/47...

Good luck

@Errol St Marthe , @Robert Freeborn , did either of you know there's a sub-set of these forums, especially for MHP?

https://www.biggerpockets.com/forums/30-mobile-homes-mobile-home-park-investing

, it indeed is a challenge to try and do a BRRRR on a quadplex. I was able to finance mine with all 4 units vacant for 4 months of major rehab. Then I got the tenants in and (after seasoning) did the cashout refi.

If you're aiming to househack and live in one, rent 3, it's a challenge depending upon your financing ability. If you inherit 3 tenants, you can rehab the one you occupy (I believe you need to be occupying it within 60 days of closing. Perhaps you could rehab one at a time, as the tenants turn over. If you're aiming for the BRRRR method, you could have all 4 rehabbed in a year(?) and then refi??

Denver has gotten very competitive lately. I was beat out last month on a quad that received 25 cash offers in the first 24 hours.....no one was allowed to even tour the inside before submitting bids! Not likely the Seller will give you 40 days needed for FHA financing contingencies when they have cash offers. It may take a cash/Hard Money Lender to get it.

@Zachary Blanchette ,

....don't wait for a "mentor"....many on BP, less equipped than you, are diving in and succeeding. You already have #1 under your belt.....go get #2 !!!!

I prefer the BRRRR method. Maybe with little down payment, you should consider househacking a duplex/triplex/quadplex (5% down, if owner occupied).

You remind me of real life success stories here on BP. Did you see what

@Joshua D. , @William Collins and @Austin Fruechting did in 5, 2.5 years and 7 years, respectively, buy using the BRRRR method? Austin was featured recently on BP podcast #239:

https://www.biggerpockets.com/renewsblog/biggerpoc...

https://www.biggerpockets.com/forums/223/topics/459415-500k-net-worth-in-5-years-im-30-today?page=1

https://www.biggerpockets.com/forums/48/topics/429980-officially-financially-free-at-32----exciting-day

https://www.biggerpockets.com/forums/223/topics/445367-full-time-employee-multiple-brrrr-side-hustle-2875-to-goal

or @Abraham Anderson did here:

https://www.biggerpockets.com/forums/223/topics/47...

good luck

Understood; thanks both of you.....good idea: . @Deren Huang or @Peter T.

I just cashed out refi my latest BRRRR with 4.25% APR, fixed 30 yrs. @Deren Huang or @Peter Tverdov, other than the flexibility to draw/deposti/draw at will, why do you like the HELOC instead of the 30yr fixed? Am I missing something?

thanks