All Forum Posts by: John Andrews

Hello all, 

I'm looking for advice from people in similar situations... I keep kicking this back and forth... I guess the root of this question deals with measuring ROI on your primary residence (living there long term 15+ years) and how to deal with the consideration of holding costs...and how they apply to a primary residence.

So our first "deal" in 2014 was the purchase of our primary residence in Boca Raton, FL. A 2/2 about 1350 sq ft, no pool, 8500 sq ft lot. Nice floor plan...My wife and I looked at a bunch of houses previous to this one, and had made a few offers, only to get beat out by cash buyers....in hindsight, thankfully. 

We found the house through a family member, who knew the owner. After some negotiating, we got it under contract at $240k, and celebrated on the contract signing date, because I knew we just made money....

We negotiated another $2500 off the contract price to help replace the electric panel and closed at 237,500 with 3.5% down, FHA...

In the next year we put about $30k into the house including the following improvements

10mm laminate flooring throughout

complete remodel of master bath

partial remodel of guest bath

new panel

new AC

new paint inside and out

minor roof repair

couple new windows

some new appliances

new driveway

new front landscaping

I know it's important to have an exact figure...in that 30k I'm rolling some furnishings and fixtures into it..

I forgot to mention we also have a large yard, and no immediate neighbors behind us..great lot in this neighborhood. 

The next year 2015 we refinanced out of FHA loan into a conventional loan taking no cash out, at a better rate. Eliminated PMI and reduced our payment by almost $500.

The house today, conservatively I think we can get about $400k out of it..

We have a growing family...we both see another baby in our future in the next 2-3 years and we're going to need more space. And ideally, a pool. 

This lot provides space for an addition to the home. We could also fill in the patio...and turn the house into a 3/3 with split bedrooms, a master suite on one side, kids rooms on the other...and open up the floor plan. 

Between doing this, re roofing (roof has probably 8 years of life left) and adding a pool, I think we could get it all done between 100-120k. 

After this addition/rehab, depending on the sq footage, in the current market the house would be valued somewhere in the range of 500k conservatively...probably more honestly..

In other words we'd still have equity to weather a market downturn and make a nice tax free profit when it comes to selling the home.

If this is done, we can stay long term 15-20 years if we wish...and have our home exactly as we want it.  

If we don't do something, we'll run out of comfortable space in the next 3 years. 

If we do move, our interest rate will be much higher than our rate on this house..and we'll have to put the same 75k-100k down to qualify for something in the class of home we live in now, with the space we want. 

So....what advice would you all give? How do you calculate your ROI in a technical long term "live in flip" primary residence?

What "holding costs" do you consider in a situation like this? 

This renovation could come from cash, or a HELOC (amortized over 10 years). I'd likely choose the HELOC because $120k can go a long way investing and flipping other properties.

This is such a tough one for me... I believe it does make sense long term... the property will cash flow like a champ if we do the addition, and keep it forever..it would even cash flow now if we simply moved out and bought another place..but not as well as a 3 bedroom and I'd rather not be the one putting a new roof on it and adding a pool unless I'm living in it. 

Your opinions on how to consider ROI, IRR, how to spread out the CAPex, etc etc would be much appreciated.

Thanks for reading! 

Great job so far and best of luck! Those numbers sound perfect to me too!!

What is you cash flow target per door? I know you said you already have a small portfolio of SFRs

Hello members! 

To preface my questions below, some important info...

My wife and I are thinking of kids in the next 1-3 years.I'm currently considering whether or not to hold onto my current property until we're busting at the seams for space, or cash out now (with lots of equity) and roll into a larger house that we can potentially live in for 20-30 years. We always consider homes that are fixer uppers...but a larger home requires a larger investment, and I'm concerned with what major swings we might see in the market in the short and longer term. 

I've been trying to get in the ear of everyone I know regarding the current real estate market (Southeast FL specifically) and get opinions on how strong it really is...and where it's going. I know that no one has a magic 8ball... but there seems to be a lot of difference in opinion on the subject. I can't seem to find any reliable news source online that I'm comfortable trusting to influence my current buy/sell decision. I feel like most media outlets (besides bigger pockets) have some kind of agenda to help line their own pockets. 

So how does everyone feel in this election year, and moving forward? 

What do you think the effects of a Hillary win will have on the market in the next 1-5 years?

What do you think the effects of a Trump win will have on the market in the next 1-5 years?

What happens to our real estate market in the next 1-5 years if the Syrian/Russian conflict escalates? 

What happens in that same time frame if Dodd-Frank goes away? 

There's a fine line between making a sound investment and buying a money pit. I'm a young guy with plenty of time left to recover from a mistake..but I don't want to make a big one. 

I also have the cost of financing in the back of my head (money's cheap right now!) and a larger property might be less attainable for us if mortgage rates jump say 2-3% over the next 5 years.

Everyone's expert unbiased opinion (not political opinions please...not trying to open that can of worms) is greatly appreciated! 

I've been told that when paying myself a distribution I should take out withholding and add it into my 941 payment. Is this not correct?

Also if you are flipping...loaded question...how much does it really take to start and do it right? I'm guessing each property type comes with different challenges..

Thanks for the advice everyone. Would definitely wait the 2 years...it's right around the corner.. Are any of you actively flipping properties around this area? If we did pull some cash out we were going to consider using it for a few things...if anyone has an opinion on the value that may be added to the home for each I'd love to hear it! Also may just do a rate/term and get a heloc when we officially decide what to do with this mess lol Impact Windows 3rd bedroom addition Pool I'm willing to bet that there's a fine line between investing the right amount in a small house and over-investing in it right? I love the house and neighborhood..personally I'd rather have a bigger boat than a bigger house...

Hello all, 

I'll be on this site much more often now...I have questions for all of you, lol. No seriously though...I need help. 

I'd love to start getting into flipping properties but have a lot to learn. 

I'm actually trying to make a major decision on my primary residence right now...we bought it so good that we are very much considering selling within the first 2 years (Now) but don't know what to do. 

So the house was bought in the mid to low 200s and we've done some pretty significant improvements....We're waiting on an appraisal to come back for our refinance..but we're hoping that it'll appraise for between $350-$375k..

So would I be a fool to not take the money and run if we could sell and cash out 100k+?

We like the house, but know we'll grow out of it when we have kids. But I also don't want to get stuck in a rental for a few years if the market doesn't experience a downturn within the next couple years that allows us to buy at a reasonable level again... and in this time we should expect that interest rates will be on the rise too right? 

Such a tough decision.

My attorney has told me that the probate is a non issue. Their attorney is a friend of theirs. The seller (to me) seemed unclear as to how much of a non issue the probate was. 

I'm thinking of putting in a call to my attorney again today for a more clear explanation of the probate (non) issue. This might ease the seller's mind and influence him to let it go sooner rather than later. 

He is also a cabinet guy so I think i'll be offering him the opportunity to finish some work on the house too...he did build out the kitchen himself, used to work for my father in law, and does good work. I think that may be a good kicker the more I think about it. 

@Aaron Wyssmann thanks for the advice. I have been in and out of a bunch of places that I love, and have learned to keep my emotions in check. 

This actually isn't a flip or rental property...We're planning on living in it. It would be our first home. 

Either way..the numbers do work. 

I've finally gotten in touch with my attorney and got the offer (contract) put together. 

My conversation with the seller didn't go so amazing yesterday though. He is a bit all over the place, and I'm not sure he's making 100% of the decision to sell at a certain price. He and his brother inherited the place...

Has anyone ever dealt with a situation like this? I'm comfortable offering his mentioned asking price if needed...He wants 240, and I offered 232,5 based on the bathrooms needing to be finished, the a/c unit needing replaced, refrigerator, flooring in 2nd BR among other little things. 

I might just need to wait a day and see if he calls...unless someone has some advice on influencing a fsbo on making a quicker decision...is there anything other than money that might sweeten the deal? 

Thanks for the response Wayne!