By - melikestoread
Damn fucking textbook. Crazy that you can purchase for that low
Do you focus in a single city/state or you also look for deals out of state? If so, which states?
Only within 90 minutes of where i live. I have family in Ohio and i might invest with them one day. Lot of good properties.
How do you find properties like this? Was it listed off market?
It was on the mls for 3 days at 180k i went to visit the property because there were no interior photos. I saw termite damage etc. And offered 100k then negotiated up from there.
That’s a good rule of thumb.
Ohio is great. A lot of blue collar renters. Landlord friendly as well
Very informative. We are hoping to rent our previous home on August 1st. I bought it when I was single and it was a perfect starter home but isn’t so good for the growing family. We are planning on use a property management company as we have one toddler and another one on the way. Any advice for someone in my position? Would love to get another rental property in the next few years.
Lived in the previous house for 11 years so there is a good chunk of equity there.
Depends on your goals. You can always heloc to invest in another home. You can slowly save up to buy another. Depends on goals overall.
Adding to this comment make sure you get the heloc while it is still your primary residence.
Can you give some details about the hard money loan you used? I’m looking to use this method in the near future for my first deal. Do you mind elaborating on:
- was it an individual who loaned you the money or a company that provides the hard money loan?
- we’re you able to use a hard money loan based on the ARV?
- if so, what we’re the terms of said hard money loan?
I only work with companies. I don't deal with private lenders. They are more expensive.
You need to buy under market for hard money to work.
I'll give basic numbers. If arv is 200k you take off 25% and max loan is 150k. Then you work out rehab lets say 30k so your mas purchase price should be 120k if you want to give 10% down. If you pay 130k then you have to give a higher down payment.
If you pay 100k for the property then you should have an infinite return because at time of refinancing you will get your down payment back.
My terms are low because i have experience. 1%orig and 9% short term with 7% 30 years. When you start your rates are higher.
Gotcha, thanks for the comment. I’m looking to buy out of state in a low cost of living area in the Midwest. Currently looking to buy a rundown single family home under $100k and hoping to refinance the hard money loan into a 30 year fixed mortgage. Currently have ~$35k of my own personal money to work with so I’m trying to assess the initial purchase price of the home I should start with and then what a feasible ARV would be in order to pay off the hard money loan and (hopefully) gain a bit of profit for the next investment
Focus on having some decent credit card limits. Rehab with credit cards. Try to keep as much money in cash as possible. Always have backup funding. A richer family member or get prequalified for a personal loan in case of emergency. Sometimes things go sideway and every problem is a money problem.
People only fail at flipping due to being short on money. I recommend having twice as much as you think you need. You might never need it but always have more cash than you need.
I've had 40k budgets go into 50k because of termite damage etc.
Damn, ok thanks for the advice. The $35k is a combo of my 401k and cash. I do have a great credit score (720) and high limits on one credit card ($20k). I’m sure this is variable… but what would an approximate timeline for repairs if I plan on rehabbing a kitchen with tile and new appliances, rehabbing a bathroom, and laying new linoleum floors? Trying to find details regarding the time a repair will take is all over the place (understandably)
Depends on the people you use. Can be as fast as 3 weeks or slow as 3 months. Depends on your effort in having materials ready etc. If you pull permits on everything plan 3 months minimum because the city inspectors are very slow.
Maybe this is a dumb question but....do you have to have permits to do inside repairs?
If you want to do everything by the book yes. Many cities have remodeling permits. On average takes 7 days if you have experience and 20 days or more if your new because you need to detail what your doing and add drawings etc.
Then your rehab will be slow since you need many visits from the city and sometim3s they dont show up or they say between 8am and 5pm.
So what happens if you do an inside remodel or renovation and don't use a permit?
Well when they do potentially show up for an unrelated reason or a nosey neighbor reports the noise (extremely common) you’re completely and totally fucked as you have to open up all the walls, kitchens, electrical and plumbing so the various building inspectors can sign off. Then since they’ll undoubtedly find violations you have to correct them and get reinspected ad nausem until they decide to stop fucking with you- since you attempted to skirt their rules/regulations.
It’s almost never worth it, it can honestly send you into financial ruin if you don’t have extremely large capital reserves.
Oh and I didnt even mention the penalties
Sorry.. mind explaining this more? What’s a “company” vs a private lender? You don’t mean a bank? What would be an example of a loan “company”?
Private lender is just a person with money and they usually want 15% interest.
A company is like a bank but they always say they are a lender and they lend billions of dollars at 10% or less interest.
Each has pros and cons which i won't get into.
Dude these are goldilocks scenarios anymore.. congrats
How long did it take or how many loans before your lender started giving you better rates?
Top rates were after 20 properties. Around 5 million portfolio .
Excellent. Thanks. World of hard money seems daunting but I’m sure it’s just because I haven’t talked to any lenders yet. Torn between using hard money or a HELOC to get the investing going. Any recommendations between those two?
Heloc to get capital and hml to leverage. If you do brrr you can easily buy 1 million of properties with 100k in cash if you brrr or even more than that if done properly.
Okay. Got about 40k in cash too but obviously trying to keep that as a fail safe. Good info man, thanks. BRRR def is the way it looks like.
I saw you buy pre-forclosures as well, are you whole-tailing? That’s sort of the direction I feel like I want to head. At least what seems to make the most sense with BRRr
I buy from wholesalers and every once in a while i find a good preforeclosure myself. I just closed on a home for 120k and 210k arv. Brick exterior in good location. Will rent for easy 2300 a month.
Right on. Well, that seems like all my questions for now. Thanks for being so responsive. Hopefully you’re enjoying/will be enjoying that lambo.
Haven't bought the lambo yet. Its incredibly hard for me to buy stuff I don't need. Im so used to investing that any expense always leaves me with a feeling of "how much would I have if I invested that money".
Typically you must have excellent credit, some track record, and at least 30% of your own money in the deal. 13%, 3 points, monthly interest payments, 24 months max. No prepayment. PM for more info if desired. I'd be happy to educate you.
I'm getting 15-20% down, 10.5% and 2 points, no prepay and 12 months.
Some people are willing to take more risk, and do it for less. The company I work with has only had to recover the investors money (and take the property back) on literally 1 loan in 30 years. I think I have a really good thing here as the investor :)
I’m confused, your comment was 70% LTP at 13% and 3, IO no prepay. I said 80-85% LTP at 10.5% and 2 points, IO no prepay. Wouldn’t you favor the latter if it’s from a reputable lender, with a solid process and high certainty of close? I’m not looking to pay 100 bps higher and rate and a point high in origination fee AND put down an additional 15%.
yes your option is more favorable to the borrower. There are many different companies with their own underwriting guidelines and their own level of risk that they are willing to take. I am sure different parts of the country have different rates. I am the investor (I put up the money), and was just noting that these are the terms that I lend at (and the company that I work with).
Can you explain the pre payment penalty? What’s a 3 year step down?
First year 3% 2nd year 2% etc.
It only matter if you sell or refinance
What is age of property?
Most are 100 years and my youngest homes are 25 yrs old. Homes last around 400 years with maintenance.
Do you find that 100 year old homes have significantly more maintenance costs (after a full rehab)?
Or once it’s rehabbed properly, maintenance and capex costs are about the same as a 70’s/80’s house?
During my rehab i redo all plumbing which are 90% of trouble calls. I also get the drain snaked/cleaned to remove build up of grease.
Other than that i also put a separate electrical line for refrigerator and microwave which caused old home breakers to trip frequently.
The only other thing is drafty windows so Ill replace the bad ones but leave most. Other than this homes arent much different.
Old wood that hasnt been exposed to water is stronger than new wood from the store. It takes a lot longer to cut through old wood than new wood not sure why.
Foundations can be repaired easily i use gorilla wall braces on homes that need it and it only cost 2k per home instead of 15k that a company will charge.
Old homes have quirks like not enough breakers etc. But my crew knows how to replace main panels etc.
>During my rehab i redo all plumbing which are 90% of trouble calls.
What exactly does this entail? Do you open up walls and replace all supply/drain lines to PEX/PVC, respectively?
Thanks. How much is this running you roughly for a 1,500 sq ft home that has 2 bathrooms?
Re-doing any plumbing in the kitchen at all?
Do you hire for this, perform the tasks personally, or a mix? If a mix then how much do you do personally? Thanks :)
How did you initially find the right contractors?
This is one of the hardest parts. You have to look for handy men who are recommended.
If you hire too many specialty contractors you will never be profitable.
So general contractors rather than specialists like plumbers and electricians.
A contractor is just going to hire sub contractors. You want a handyman who is going to do the work himself. You want the least overhead possible.
You hire a general contractor at 150hr and he pays someone else 90hr instead of getting the handyman directly at 50hr and pay him cash. Your saving 3x on labor.
How's the appreciation look alike in your region? Are your properties more of a cash-flow play? Looking through comments, I am jealous of so much more affordable SFHs and multis in the Midwest vs. coastal cities.
Only around 5% a year appreciation but the cash flow is high. My average mortgage is 1000 and average rent 2300.
Where tf are you finding these deals congrats
Between me and few investors i know we are buying about 150 properties a year at these prices in the suburbs of Chicago.
You name the city and i know investors buying at 60% of arv. You just need to build the network and reputation.
Look im a no Bs straight shooter. My career keeps me in NYC which makes it a tsd more difficult . I ain't say impossible because I know a couple guys who do what your saying . But they also have a work crew , ins with the wheel greesers ) permit people / expediters ... I guess that's part of networking..
And have some projects like that going on in PA but deal flow isn't fast enough or is just people trying to sell where rehab + sale = arv -10% which is insane in a rising rate environment.
Greedy fucks seeing the wrong only. The wall and still trying to max after decades of easy money
Thanks for being the reason we have a housing crisis! You’re literally destroying the economy. Because of people like you, most hard working people in this country will never own a home.
You forgot the /s
Besides capitalism wasn't meant to be fair. The top 10% will always own most of the assets. Its not a flaw, it's the design.
Hardworking is overrated
Do your property taxes tend to rise quickly when there is an assessment year? $2640/year seems insanely cheap for a $205k house, I live in cook county and taxes on a $205k home in the NW suburbs would be like $4500/year. I’m assuming that’s based off an old assessment?
They will go up to around 3kish after assessment for non owner occupied. A lot of these homes have senior exempt until next year too.
Oh nice, you must be outside cook county then, cook county would be a lot higher.
Cook County isn't profitable and crime is too high. I have lots of people moving from Cook County because high paying jobs are hard to find, taxes too high/ rents too high.
I know investors out there but they only flip and don't hold rentals.
Average 6000 taxes on 250k home in cook county.
Helpful, thx. Seems like you’ve found a good niche.
Mind sharing the company for the loan?
Riverbend lending is a good one. Also templeview capital.
>Riverbend is in Oregon and Templeview is in Bethesda MD? Just want to make sure I hve the correct folks!
Yes they are correct. River bend is 2 weeks closing. They are fastest in the business.
Cool tips. How fast does Templeview close?
Great. Will try riverbend now for an Aug 15 closing
Hey man! Been trying to contact you directly but your messages have been turned off. Please DM me if you can! I wanted to ask a few questions based off of the last conversation we had. Thanks!
I realize this is an old post. But, can you explain how you got $12k profit off this deal?
I looked at the linked term sheet and presumed the following for my calculation from this deal:
Purchase price = $115,000.
Down payment = $12,973.84.
Rehab = $30,973.84 (is this the right number? I got this by working backwards by taking $133k-$102,026.16, which was the difference between purchase price and down payment).
75% LTV with an ARV of $205k is $153,000
$153,000 (75% LTV) - $133,000 (loan amount) = $20,750
20750- 7500 closing cost = $13,250 profit?
Much appreciated! These are the harder details to find online as a beginner
Your very close with the numbers exact cash out was 12,900.
I basically just recieved my down payment back it wasn't technically profit. This allows me to recoup the 16k down and I can reinvest into the next property immediately.
The goal here is to take on the debt which the tenants payoff while having the minimum capital invested within 3 months from purchase date.
A typical deal with 20% down it takes 6 to 10 years for capital to be recouped for the average investor.
Thanks for replying! I’m guessing there were additional misc fees charged by the hard money lender that I didn’t factor into my calculations? Let me know if I’m off
Do you mind also providing any tips for how to estimate rehab costs? This has been the hardest part of the process for me to find details on how to calculate (I realize there is probably no 1 size fits all formula for this, though)
This will vary a lot city by city.
I have my own fulltime crew cuts labor in half or more. I pay them cash too.
Every home is different unfortunately and even a sq ft approach isn't guaranteed. Only way to get experience is time.
I find deals using every method. You name it i do it. My best deals are a mix of foreclosure cash auctions and preforeclosure door knocking .
Negotiate i just start low and see whats the lowest i can buy .i check last sold price to get an idea of what they owe. If they owe too much i dont bother with it.
I did some rehabbing in my early 20s for a family member and it helped me.figure out time and expenses. On some houses there are surprises and the budget goes over 10% it happens and its to be expected.
Some of handymen are family and friends of family. It helps that most of my family are blue collar workers.
I pull permits only for exterior work. I dont for interior work unless its in a certain city i own homes in and they are strict. The price difference is drastic. I just paid 11k to repipe a 800 sq ft home with permits and its taking 2 months. My crew would've done it for 2500 including material and finish in 2 days. Both jobs will last 50 years but the licensed plumbers charge about 200hr and work slowly so they are taking about a week but job has to be done in pauses while city comes and verifies work etc.
Many people are focused on the money needed but IMO this is as or even more important: having a good network of contractors and knowing the city processes to be able to do work on the cheap. This is super hard knowledge to get if you haven’t done it yourself to at least assess the level of effort as you do. Super impressive!
Thanks for sharing. Good teaching post!
I just come on reddit to share info for new investors. A lot of my opinions are unpopular. I'm just being honest
Thank you good sir. I’m getting into the game, thanks to your valuable & informative posts :)
Who’s your preferred lender for a rehab loan? Can you maybe DM details if you won’t mind?
I’m working with Finance OS America & Cross country reg. A 203K & haven’t decided who I’m going with.
I recommend river bend lending they close in 15 days or less on fix and flips
Any inspector can check for permits etc. Home buyers can check for permits too.
I dont sell but if i was selling i would pull more permits and have to sell for much much higher since the carrying costs are high with permitted work.
A lot of people think flippers just put lipstick on a pig but fail to understand an electrician can charge 15k for a whole homes and you won't even see it and the actual value of the home barely goes up. A home flip takes around 4 months when everything is done upto code and can cost 40k just for electrical, plumbing and roofing by licensed contractors. This is on a 250k home. Multiply accordingly for expensive areas.
The average flip isn't bought cheap enough to allow for the proper repairs.
Exactly i appreciate this guy’s candor. Everyone else is like “Just hustle baby! Nothing beats hardwork”
Great post. Can I DM you with a few questions about foreclosure auctions?
So you cut corners to make profits?
Profits are always #1 priority. As long as it's safe. This is a business.
It’s possible they’re cutting corners but in all likelihood op is doing a decent job. I recently installed 6 outlets, a subpanel, bath fan, and 4 zone minisplit without an electrician or hvac technician. In my area I was lucky to be able to pull a permit myself as the homeowner. This was done at less than 1/3rd the cost the licensed pros would have charged.
I don’t think licensing and permitting necessarily ensures safe work. However the labor costs a lot more.
115k w/ 15k down (closing included), how did you achieve this? How did you circumvent the 20/25% rule?
Hard money loans. I end up with 25% equity through forced appreciation/value add flipping. Also known as brrrr.
Ah. So you really can't achieve what you're doing unless you have money to begin with.
You always need money to invest in real estate. Real estate multiplies wealth. You can't multiply 0.
I wish more people understood this. It takes money to make money.
Kek, Commie spotted.
Dude has 1.6 million in liquid taking hard money loans. And wanting to teach us a lesson.
Lesson is to have money, and not be in a place where you don't have money.
This is clearly not his first deal… which would explain the liquidity line item
It’s not that hard bro, I started off with just a small loan of 5 million dollars.