Closed on my first BRRRR, Questions about financing

5 Replies

Hello everyone! I am new to BiggerPockets and Real Estate. This is my first post, so please forgive any newbie mistakes but feel free to give me constructive criticism.   My prop story...

This is my first property.  I closed on a 1bd, 1bath apartment in City Heights, San Diego on 7-12-19.  Bought at 145k, all cash, with a 20k seller credit at close, so essential the prop was 127,500, all said and done.  The complex is 15 units, 60/40 owner occupied and 2 of the units sold in the last year for 163k, and 165k. The prop appraised at 160k and I have it rented out at $1275, month to month and a H.O.A. of $190/moth.  Currently we (all the landlords) are repaving the parking lot, installing security cameras, landscaping, fresh paint on exterior, new roof and updating the laundry room.  This should all be done in 3 months without a loss of income from vacancies.  

  I plan of pulling out all my original seed money, which after rehab should be $137,500-140k. The local comps are $210-$230k.  I currently bank at Chase and have been there for 5yrs.  I don't want to use them for my refinance because they have one of the highest rates for brick and mortar.  I was looking into local San Diego credit unions but the problem with them is they won't do loans out of state and my next prop will most likely not be in California.  

My question is about financing and banks. What brick and mortar national banks if any are best for starting a relationship with (business, personal accounts, making my primary bank) in hopes to refinance my first BRRRR and hopefully many more down the road?

Or should I just stick with Chase for my banking needs and go through non brick and mortar lenders when refinancing?

Thank you guys for your time!  I hope I gave all pertinent info!

Josh Z.

Hi Joshua, Find a mortgage broker. They know where to find the best rates and work with nationwide companies. Be sure you put 6-9 months reserves away to cover any vacancies including taxes, utilities and insurance. Make sure tenant is carrying insurance on their possessions. The HOA is paying for all the items you listed. Make sure the reserves in the HOA cover roof, replacement of balconies and other items. A good HOA sets the reserves to cover all replacements and insurance without calling for a capital fee from the homeowners. And consider sitting on the HOA board. Best to you and congratulations on jumping in.

Hey congrats on your first deal! Tell us about how you sourced the deal: MLS? Craigslist? Know a guy that knows a guy?

How come you're looking for a credit union that loans for out of state? Are you refinancing your cash out of your City Heights apartment to use in an out of state purchase? There seems to be some conflicting feelings about out of state (OOS) investing; some people insist managing from a distance isn't worth the hassle and/or that the grass is NOT necessarily greener, while others have demonstrated success with OOS.

Originally posted by @Peggy Beauregard :

Hi Joshua, Find a mortgage broker. They know where to find the best rates and work with nationwide companies. Be sure you put 6-9 months reserves away to cover any vacancies including taxes, utilities and insurance. Make sure tenant is carrying insurance on their possessions. The HOA is paying for all the items you listed. Make sure the reserves in the HOA cover roof, replacement of balconies and other items. A good HOA sets the reserves to cover all replacements and insurance without calling for a capital fee from the homeowners. And consider sitting on the HOA board. Best to you and congratulations on jumping in.

Thanks for the reply and info. I have all the above mentioned covered except for renters insurance from the renter. What is the thought process behind having them carry a policy? Am I liable for their possessions? I'm one the H.O.A. board now, there will be a special assessment for the exterior rehab but max at $1000 a unit. They had a decent amount of cash in reserves but we don't want to deplete them all. I don't mind the $1000 in x cap as i'm going to see a ROI of 30X that after the rehab. Thanks again!

Originally posted by @Joshua J Cawthorn :

Hey congrats on your first deal! Tell us about how you sourced the deal: MLS? Craigslist? Know a guy that knows a guy?

How come you're looking for a credit union that loans for out of state? Are you refinancing your cash out of your City Heights apartment to use in an out of state purchase? There seems to be some conflicting feelings about out of state (OOS) investing; some people insist managing from a distance isn't worth the hassle and/or that the grass is NOT necessarily greener, while others have demonstrated success with OOS.

Thanks for the reply!  I was actually looking at another unit in the complex with my Realtor and put in an offer that was denied(too low).  Another owner heard about my offer and wanted to have lunch.   This owner is president of the H.O.A. and has 5 of the 15 units.  She liked what I had to say and my ideas for rehabbing the property.  So she sold me one of her units.

I wasn't looking for a credit union that loans out of state.  I'm looking to start a relationship with a bank to make it easier down the road with financing when I have more properties.   From what I understand credit unions usually have some of the best rates but only loan locally?  So that relationship would just be for one property as apposed to a national bank that has locations in multiple states.