I've got financing! Now what??

Question

Hello all,

I've posted before regarding my attempts at dipping my toes in the real estate investing pool. A quick background...I'm a 3rd year orthopedic surgery resident and have signed a contract with a hospital in South Georgia where my wife and I plan to set up our life after I complete my training. I have been obsessive about reading/listening to books/podcasts regarding the topic of real estate investing. My niche interests include SFH residential and small multifamily. However, I would love to branch into larger multifamily once my medical school contacts/residency contacts are all out and ready to invest together. Anyway, I have recently secured some zero money down financing from local banks in south Georgia that are willing to lend me the money based on my current debt/income ratio and my future contract. This has opened the door for two single family investments valued at $100k (6% rate with a 20-25 year am and a 60 month balloon). I also have access to a commercial lender who has agreed to a slightly larger number depending on the deal at 5.75% and a 25 year am. I am more than excited about the potential here. However, I am having some difficulty making the numbers work from a cash flow standpoint initially due to the terms of these loans. Would it be possible to essentially BRRRR with these initial loans and refinance into a traditional 30 year am on the single family homes that would bring my monthly payment down after purchase price and rehab? I am open to ideas. I am also very much open to making contacts with realtors in the South Georgia area who are willing to get after it. I am a big fan of small town life. However, sometimes things happen quite a bit slower than I would like. Thanks and I look forward to hearing back from everyone!

- Franky

Cam Jimmy · Answer

I would buy a multifamily right in the vicinity of the hospital you are going to work at. That way you can live in one unit, and you will be super close to work. You will be living for cheap or sometimes for free doing this strategy, since your tenants usually pay for most of the motgage and utilities. Also Housing around large hospitals are usually easy to find tenants for, since they would rather live close to their job. In my case we have a University and a large Hospital in the same area called the "UMED" area. I get great tenants in that rental.

Larry Turowski · Answer

@Franky Davis Congrats on getting started.  Was "dipping my toes" a nod to your profession?  Haha!

Generally, the types of properties you'd BRRRR are not mortgageable by traditional lenders.  Possibly you could get a constructions loan, but that won't be easy.  Most investors who BRRRR use either private money (their own or family/friends) or hard money (someone who is in the business of lending investors money based on the value of the asset).  They then make the repairs and refi.

That said, if you can't make the deal work with a 6% mortgage you've got to find better deals.

Franky Davis · Answer

I hear that. I guess I just need to do a better job with my search. I’m nervous about taking on a rehab so was hoping for turnkey ish for my first deal or two. That’s gonna make it hard to cash flow with no money down. At least that’s what my provisional numbers have shown.