So... I have been thinking.

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So... I have been thinking.

Jerryll Noorden
Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes

I somehow am getting several really good deals.

One of them is crazy good. So a bit about me ... I don't network, I don't partner, I am not a people person.

I know REI is ALL about networking and partnering...

The thought of touching OPM just gives me the shivers.

But now however... let's say I get this amazing deal. For deals like these isn't it "better" to do the flip yourself to basically get the wholesale fee + flipper's profit all for yourself?

I guess I am hoping I can convince myself to take the plunge and become a more serious investor and play like the big boys...

So now I am looking into taking that awesome deal, get funding somehow (private lenders/ hard lenders), buy rehab flip, and then BRRRR it?

That is how to do it right?

So correct me if I am wrong..  let's say I get a property for 20K and arv is 200K (these are just numbers I pulled out of my marblely sculpted butt). Repairs are let's say. 40K.

So I get a PL to pay  60K.

But now the house is worth 200K. So I refinance it for 200K right?

I get 200K (do I get the full 200K?)  and then pay a mortgage? and then pay the lender back his  60k..

Thus leaving me with a freshly rehabbed 200K property, + 140K (minus the lender's fee) in cash? (while I started with 0?)

This just seems like a perpetual energy machine.

Something can not be right.

I start with 0! and suddenly poof I have a new house and 140K in cash to play with?

Say it ain't so!

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Karen O.
NYC, NY · Member since 2016 · 617 posts · 456 votes
10y

No.  If after repair you have a $200k property, that you are not living in, you likely won't be able to get 100% financing.  But you might be able to refi for 75% or 150k, you'd be left with 90k after paying off the private lender.  And you'd have 50k in equity in the property.

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  • Andrew Beaver
    Malden, MA · Member since 2016 · 112 posts · 63 votes
    10y
    I'm curious to hear the answer to this as well
    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    Finally I asked a good question it seems. Whaaaaattt?

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    No wait.. even worse.

    I get :

    1. A new house
    2. 140K in pocket money
    3. 200 a month in positive cashflow if I put renters in one unit
    4. live for free if I live in the second unit

    For some reason I feel  like I have to sign my soul away with the devil to make this feasible...

    My head hurts..

    0Reply
  • Karen O.
    NYC, NY · Member since 2016 · 617 posts · 456 votes
    10y

    No.  If after repair you have a $200k property, that you are not living in, you likely won't be able to get 100% financing.  But you might be able to refi for 75% or 150k, you'd be left with 90k after paying off the private lender.  And you'd have 50k in equity in the property.

    3Reply
  • Karen O.
    NYC, NY · Member since 2016 · 617 posts · 456 votes
    10y

    PS maybe a little less because of the cliaing costs andvpossible appraisal costs.  

    Hope this helps.

    0Reply
  • Hoan Thai
    Wholesaler · Philadelphia, PA · Member since 2016 · 15 posts · 10 votes
    10y

    @Karen O. is right on! The refi may be as high at 80%. The original lender (hard money person) need their points and interest paid (1-6 points, 10-22% interest). Also they would also probably only finance up to 65%-70% of the acquisition and 65%-100% of the rehab (these figures for the hard money do vary widely as I am stating). The acquisition had closing cost and the refi had closing cost. 

    Acquisition: $20K + $6K closing cost

    Hard Money(75% of $60k): $900 @ 2 points and $2700 @ 12% for 6 months

    Utilities: $600 (guess)

    Insurance: $1000 (guess)

    Refi cost: $3000 (rough guess)

    ARV Loan = $150,000 ($200K @ 75% LTV)

    Math time: $150K - $60K - $3000 - $1000 - $600 - $900 - $2700 - $6000 = $75,800

    You will have $75,800 to do another deal and this time you won't have to go through the hard money lender and pay their points/interest. Sounds crazy that this works but it does. You will have to personally guarantee the refi loan and maybe the hard money, but with numbers these good you have a lot of cushion for mistakes and miscalculations so your risk is much lower. 

    3Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    Karen and Hoan, (first, thank you)

    Indeed, I figured I wouldn't get 100% Refi... but my actual point was the principle..

    So it really IS the case?

    I start with nothing, get a PL to fund it all, and I end up with free living conditions, a newly rehabbed home, monthly (POSITIVE) cash flow  AND some pocket money?

    This is incredible! What the heck am I getting grey hairs for doing wholesaling!

    Hoan, you just gave me  goosebumps.

    I need to look into this!!!

    0Reply
  • Hoan Thai
    Wholesaler · Philadelphia, PA · Member since 2016 · 15 posts · 10 votes
    10y

    My first deal was a 6-unit apartment building that I bought for $38K, rehabbed for $120K, got an ARV of $285K, refi'd at 70% LTV, paid off my hard money who charged (6 points and 16%), put some money in my pocket after the refi and have been collecting rent on the 6-units since 2011 ($3400/month).

    3Reply
  • Andrew Beaver
    Malden, MA · Member since 2016 · 112 posts · 63 votes
    10y

    I need to get me a deal like yours @Hoan Thai

    0Reply
  • Rich Glover
    Real Estate Agent · Pompton Lakes, NJ · Member since 2016 · 1 post · 1 vote
    10y

    @Jerryll Noorden Sounds like a great deal and you'll be off to a great start in REI. You won't actually be living "free" though, since you will be refinancing, you will have a mortgage payment to make.

    1Reply
  • Andrew Beaver
    Malden, MA · Member since 2016 · 112 posts · 63 votes
    10y

    outside of real estate... @Jerryll Noorden, seems as if you have an impressive background. Kudos to you for the work you're doing. Looks like some real change in the world can come from it..

    0Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Good luck getting a home for $20k with an ARV of $200k!

    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Jerryll Noorden, if you want/need to start with zero, you have no option other than going down the OPM avenue ie. the one that gives you "the shivers".

    And for BRRRR to work (yes, done right, it works!), many more "shivers", over and over again!

    So, what ARE you going to do with these "really good deals"?...

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Rich Glover:

    @Jerryll Noorden Sounds like a great deal and you'll be off to a great start in REI. You won't actually be living "free" though, since you will be refinancing, you will have a mortgage payment to make.

     Right you are my good man. The way I meant it was as follows. If done right and you did the calculations right the property should be giving positive cash flow after all bills. That is what I meant with free. So in fact I will be getting money to live there. This game is finally starting to get exciting. Thanks for all the help.

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Andrey Y.:

    Good luck getting a home for $20k with an ARV of $200k!

     Unless you are mr. Hoan here above me. I will need all the luck I get a 20K deal :).

    But that will not stop me from trying

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Brent Coombs:

    @Jerryll Noorden, if you want/need to start with zero, you have no option other than going down the OPM avenue ie. the one that gives you "the shivers".

    And for BRRRR to work (yes, done right, it works!), many more "shivers", over and over again!

    So, what ARE you going to do with these "really good deals"?...

    Absolutely right you are. And that makes me think now. And I am just thinking out loud now. Maybe find somebody with Deep Pockets I will then give them all my good deals he will find all the repairs and he will buy the deal and maybe we can split the profit. Some of the deals I'm looking at right now are actually about $80,000 profit . However I learned the hard way not to celebrate success until it's done. So I better hush now and just Hustle

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Andrew Beaver:

    outside of real estate... @Jerryll Noorden, seems as if you have an impressive background. Kudos to you for the work you're doing. Looks like some real change in the world can come from it..

     Wow that is so nice of you to say thank you very much. This is something I always say. if you follow 90% of the people you will end up where 90% of the people are. I always Advocate  useing your own logic to get anywhere in life. I'm trying hard to incorporate this as well in my real estate business. My motivation for drive and success is if I made it this far in the academic world which is absolutely not easy I should be able to make it that far in the real estate business. It's all about your mindset. The one secret that got me this far outside of Real Estate is always be playful always learn always ask questions never have an ego. 

    0Reply
  • Sharnell James
    Investor · grand rapids, MI · Member since 2015 · 28 posts · 3 votes
    10y

    this was such a great read !! Thank you for posting this because it helped me out a lot 

    1Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    Like the french would say... but of course! :)

    0Reply
  • Account Closed
    Le Roy, IL · Member since 2016 · 3 posts · 3 votes
    10y

    Thank you Jerryll,

    This thread has been a great read for me as I am just starting out also.

    1Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    any of you that are just starting you may get a kick out of my blog. I made it a point to document everything from analysis paralisis to where I am now.

    Hopefully it will push you towards making your first deal.

    I have an other question...

    What are points?

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Account Closed:

    Thank you Jerryll,

    This thread has been a great read for me as I am just starting out also.

     You are very welcome. The thanks should go to Hian Karen and all the others that were kind enough to answer my questions and put up with me monkey shenanigans!

    0Reply
  • Daniel DevinePro Member
    Worcester, MA · Member since 2016 · 7 posts · 4 votes
    10y

    Points are 1% of the loan amount.  

    Ex.   Borrow 100k with 2 points up front.  You need to bring 2,000 cash up front.

    0Reply
  • Andrew Beaver
    Malden, MA · Member since 2016 · 112 posts · 63 votes
    10y

    @Hoan Thai seeing that this 6 unit building was your first property. How did you assess it's repairs at 120k? Use a contractor prior to accepting a deal and the decided that it'll be worth X amount? Then presented this info to hard money lender?

    random anyone question: if assessing a property what would you specifically consider cosmetic vs serious repairs (that you'd expect the client to pay for)? How does each (cosmetic and serious capital expenditure repair) impact what your willing to pay and/or NOI if you don't move your "willing to pay" amount

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    andrew, this is what I do d .Numbers do not lie. I asked three or four contractors to walk the house with me and I will have them give a very accurate quote where they have room to put a signature on it. That way regardless of serious repairs or cosmetic repairs you have all the information you need to see if it is a good deal or not. Once you look at the numbers you can be significantly confident about your deal. But then again that is just me and I am also a newbie.

    0Reply
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