All Forum Posts by: Steve K.

@Craig Masters , perhaps you'd find it useful to read this similar discussion:

https://www.biggerpockets.com/forums/48/topics/464...

Wow, congrats! A 27 yr old with almost $465k in cash and equity.

Since you seem to like BRRRR (as I do).....why not try thinking of your current primary residence as your first BRRRR?

"I have $85k loan on a $300k property (LTV 28% ); time to cash-out refi". I think of it as as you have $135k capital invested, and $80k of "rehab profit and/or market appreciation".

What if you took a new 80% LTV owner occupied loan on it ($240K), and take cash out of $155k. You would then have a $300k rental property with none of your original capital in it, in fact, you pocket $20k more than the $135k you put in. The remaining $60k appreciation is the 20% down in the loan. Once the refi is over, think about taking your $155k cash and your other $240k cash and buy more BRRRR.

I assume your current home is a viable rental worthy of being in your portfolio (your monthly net cashflow as a rental will be lower, with the higher mortgage payment.....but you have zero capital invested. Cash on cash return is infinite.)

You seem to be really financially sound with $240k in the bank and $215k equity ....why do you think you have poor credit worthiness?

Welcome to BP, @Zach Bagby 

I saw a Denver meetup announced here (I haven't' personally been to one)

https://www.biggerpockets.com/forums/521/topics/46...

I like your idea of "house hacking" in a duplex or quad.....very smart for a young couple (wish I had heard that 30 yrs ago).

In fact, if you notice a post (in that meetup notice link above) from @Billie Miller , have a look at her blog website....I just discovered her blog about her house hacking a Denver duplex.....I think you'll find it helpful.

Denver is a challenging market today. It's hard to find a deal that doesn't get 25 offers in the first 24 hours and the "all cash, quick closing, no inspections/contingencies" contract at higher than asking price wins.

Best wishes in your search.

@Rich Weese , nice list and all valid points. I used to have an 8% mortgage and if average mutual fund returns were also 8%, I was sold that I wanted to pay down my mortgage first.....it sounded more secure....and it didn't cost that much.

I've rethunk it!

In light of all the possible risks (your list), I don't want my precious capital paying down my 2.625% APR mortgage, when I can make 10-20% acquiring a rental. Thus, the reward is worth the risk to me.

If REI's are able to move every 2+ years in your primary residence, more people should consider the non-taxable gain....as you say "make a killing". To me, that house has to appreciate to have a gain worth protecting. I think your list of A to D is missing the "profit on renovating", which is exciting to me and part of the BRRRR strategy. Why don't you have an "E"? How can you make moving every 2 years worth it (a killing) if there isn't 30% fixer upper profit to extract tax-efficiently in "E"?

There are other threads active now debating if/when there could be another "crash"....The 2007 recession was mostly about fraudulent mortgage practices (i.e. The Big Short)....I don't think a forthcoming "crash/correction" is as imminent as some feel. I'm looking at 30-yr charts of housing indexes, coinciding with my experience over my adult life....I like the odds of REI better than the stock market.

good luck

@Phil T.

I learned BRRRR method of acquiring rentals 18 months ago; wish I'd learned it 30 years ago. An ideal rental (not achievable in all markets) can achieve 10% to 20% ROI. If you're comfortable with leverage/debt, it grows your wealth faster than paying off the 4.3% mortgage. Get inspired by some recent successes:

Here on BP: , and did in 5, 2.5 years and 7 years, respectively, buy using

For buy and hold rentals, there is a continuum of perspectives. I know of one widow in Denver who put her life savings into a $225k rental duplex...paid cash, no loan/leverage. Has just one property and is thrilled that it cash flows and there is no mortgage payment. Thrilled that it has doubled in value in 7-8 years (Denver appreciation has been great) and she's averse to debt. She is truly a real estate investor....but on the conservative (not comfortable with debt) end of the continuum.

Others could have taken that same precious capital and invested it in 4 similar properties, with 25% down payments and 75% loans/leverage, and controlled $900k in property that doubled to $1.8M by now. They'd be wealthier, because they used 75% leverage. Admittedly, if a nationwide recession hit, and property values and/or rent dipped 15 or 20%, this person is subject to loosing 15-20% of $900k in properties, rather than the widow's 20% of $225k.

Then, if you use the BRRRRR method, the cash-out refinancing, once you have enough equity (usually through remodeling the property, but sometimes through market appreciation) allows you to ideally grow a portfolio of rentals with 100% financing....and zero of your precious equity left in the property.....I know of a BRRRR investor that turned $80k cash into 30 rental properties worth about $8million ($5million in loans, $3million in his equity) in 5 years....granted, he bought at the bottom of the 2006-08 recession and benefited....but much of it was the buy at a discount and remodel profit.

Then decide if the risk/reward is right for you.

You can say "look what I did with low leverage" (slower)....or "look what I did with maximum leverage" (faster). Good luck!

@Jim Goebel , did you see this thread about spousal involvement?

https://www.biggerpockets.com/forums/522/topics/464525-investa-brothel-the-odyssey

, is nominating his wife for REI partner of the year...

@Dale Radcliff , welcome to BP and good luck on your career decisions.

It's ironic that you feel unequipped to consider real estate investing. Read the BP forums long enough and you see many amateurs with no construction/rehab experience and no deal analysis/negotiations/transaction experience, but after a few months of reading forums, books, listening to PODcasts, they are ready to invest....but rely heavily on their realtor and contractor and other team members.

You'd have a natural advantage, if you can tour/inspect a property and devise a rehab budget, and be able to execute that rehab.

So....I see a natural transition from a contractor that works for others, to a contractor that works for others and does 1 fix/flip or fix/hold himself a year....to a contractor that works only for himself and has 2 remodels per month going.

Separately, many of the cities/markets discussed here on BP, search the threads and see how often someone is asking for a referral of a quality contractor....you could be in high demand, working for investors....even if you chose not to invest. It's hard to find a contractor that does what they say they're going to do, on time, etc.

Read some of the success stories. Get inspired by young people that replace their current income in 5 or 7 years. Look for the change in philosophy that this type of thinking (I'll hustle on the side, to use real estate investing to accomplish my financial goals, until I can do it full time and/or "retire" early)

@Omar Shahid , I'm trying to acquire a couple rentals per year; I'm comfortable with more debt/leverage.

If you were thinking like some of the successful rental investors on BP that are using the BRRRRR method, you'd be saying:

"wow, I have $240k/$460k is a 52% LTV on this rental; time to do a cash-out refinance". If your goal is to acquire more cash-flow producing rentals with your precious equity/capital, then you can extract $105k with a 75% LTV new mortgage (or keep the mortgage you have and look into a HELOC.)

Use that as a 25% down payment on another ~$400k rental. You don't have to sell to get access to your capital.

Aside from the refi angle, are you happy with the rent to purchase price ratio? Can you beat your current cash on cash return with a different property? (Many on BP are going to the midwest to get gross rent that is 2% of purchase price....ie. being able to buy a house that rents for $2650/month for only $133k (not your $460k)...if you want to read about out-of-state investing, and see if it's for you.

best of luck to you.

@Jose Duque , ...it's generational and an ingrained point of view in their world-view; you are merely adopting a new untried world-view.

I re-read "Rich Dad, Poor Dad" and newly read "4-hr Work Week" last month on vacation. Between the two, I'm guessing you align with the new concept that you don't want to work 40 years, living as high of standard of living as you can with each raise/promotion, save a little, and get to retire at age 65.

Parents dream that their kids will live a better life than them. Likely, your mom sees it as a concession that you're not getting a high enough lifestyle, despite your job. It's mostly exaggerated by your house-hack strategy. She'd likely object less if you rehabbed it as a rental, and lived in the nicest home you could afford elsewhere.

There is a difference in buying an ugly house for an investment, vs. living in an ugly house because you're living beneath the standard of living your mom hoped for you. Would it help to show before/after photos of what BP investors are doing to the ugly home? I saw this set of before/after from @Lee Fahy (worth reading for the humor alone).

https://www.biggerpockets.com/forums/522/topics/46...

If you're needing a concise narrative of why you're goals are to invest in RE, check out @Billie Miller , read a couple of her blog posts on that weblink below her address:

https://www.biggerpockets.com/forums/12/topics/464...

...to show your folks what can be done.

Best wishes.

@Quinton Slay , I agree w/ @Billie Miller , look into the house hack of a duplex, tri or quad in STL for the next year.

You seem to be focused on using one financing source. Read more about house hacking here on BP.....folks nationwide are able to qualify for the FHA insured, 3.5% minimum downpayment, as long as you're owner occupied. There are many banks that do this, (not just your one source of (private? money?).

Because in your STL market, you can rent a unit(s) for about 1.5 to 2.0% of the purchase price, the tenants are paying 1.3 to 1.8 times the monthly cost if they had owned it themselves on a 30yr mortgage. This is how the other 1, 2, or 3 tenants make the cost of your unit "free" over the next year, as you're gaining experience and equity with them making monthly payments. (granted, living with your parents might be "free" too).

Did you read Billie's blog on her website (link at the bottom of her post above). She show's her own financial results of a duplex house-hack in Denver. Now, I believe, she's moved and rents the duplex for a nice cash flow "BRRRR" style. You could repeat that in the next 12 months.....then you own it, and move to RI.

Good Luck

@Lee Fahy , 40 years ago, they used to say "if a couple can hang wallpaper together, without a murder, the marriage will survive. Your wife would have a lot in common with mine (mine is a keeper too; not sharing contact info!)

PS: it would have been funny if this thread was titled "how I met your mother" [sorry, couldn't resist :) ]