MY FIRST REHAB WENT A BIT TOO WELL. CONCERNED!!!

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MY FIRST REHAB WENT A BIT TOO WELL. CONCERNED!!!

Laurence Obi
Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes

So guys, it you refer to my first post I spoke about my very first rehab and how it was coming along.

For context, we purchased this home at an auction, used a PML to finance the deal @ 9.5% APR, 80% LTV on Purchase and 80% LTV on Rehab.

Purchase price was $187,500 (winning bid), ARV was appraised at $240k.

Rehab cost: $21,500

To be honest at the start we had no idea what we were doing. We just decided to jump in and give it a go. After I ran the numbers when I did eventually get some experience, I realized we would actually make a profit 馃ぃ馃ぃ馃ぃ馃ぃ

Our plan was "Get in there, U may lose money on the first one but GET IN THERE".

We have actually decided to do a trial STR cashflow for this property and see how that pans out. As a result it is currently listed on AirBnB.

Thing is I feel worried cuz we gambled on our first property, looks to have worked out good. We've already paid up this month's interest on the PML via the STR.

I just feel like there's a bubble waiting to burst somewhere up ahead.

That said, here are a few pictures of our rehabbed home. Proud of what we achieved.

Kitchen
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Craig Jeppesen
Rental Property Investor 路 Chubbuck, ID 路 Member since 2018 路 532 posts 路 466 votes
6y

So if you flip it you make $6k? Are you refinancing it to keep long term? If so that is a big house and will have some big expenses if anything happens. Yeah I think you need to be more conservative with the numbers going forward.

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  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @John Teachout:

    I'd like a clarification on some terms you're using as I don't understand them. You referred to "appraised" values that are for a future condition of the property. Is that even possible? I thought an appraisal was for the current value of the property in its current condition. How can an appraisal value be determined based on something that hasn't happened yet? From my understanding, ARV is an estimate based on comps, etc. but it may or may not apply once the property is actually renovated. ie, the market may change, the finishes may vary, etc.

    Hi @john Teachout, I'll try to explain as I'm new to all of this. When the lender wanted to grant us a loan, there's usually two options. Take the loan based on what your purchase price and rehab price are or based off of an evaluation of what the home would sell for after you carry out the repairs you claim you would on your SOW. So basically, Yes, a future valuw of the home. Surely there has to be some way of estimating what the home would sell for in the future taking into account what other homes have sold for, repairs and property appreciation?

    Yes I meant ARV. Future value after repairs and yes it was quoted on the appraisal report. Not sure if I got that right but as far as I know that's how it goes down.

    0Reply
  • Ian WalshBusiness Member
    Lender 路 Philadelphia, PA 路 Member since 2016 路 2k+ posts 路 1k+ votes
    6y

    Congrats WRR

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @John Thedford:

    NICE! Action is all it takes. Congratulations. How do you like owning motels (STR LOL)?

    Hi John Thedford, never in my life thought I'd be a motel owner 馃ぃ馃ぃ馃ぃ

    NEVER! But here I am. Receiving guests. Checking them in. Ensuring they're okay so I get my 5 stars. Life comes at you faaaaast. 

    2Reply
  • Natalie Schanne
    Real Estate Agent 路 Princeton, NJ 路 Member since 2016 路 1k+ posts 路 1k+ votes
    6y

    @Laurence Obi - good job. So how much would you make if you sell? Ballpark 187500 purchase plus say 5000 in closing costs = 192500 plus 21500 rehab is 214000. If it sells for 240000 and you pay 10% in total closing costs that cuts your net down to 216000. So $2000 profit? Not including time and holding costs? Did I do that wrong? Are you better off than this?

    I bought a place for 87 and sold it for 145 within 3 months and made only about 9k after paying everyone.

    0Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Natalie Schanne:

    @Laurence Obi - good job. So how much would you make if you sell? Ballpark 187500 purchase plus say 5000 in closing costs = 192500 plus 21500 rehab is 214000. If it sells for 240000 and you pay 10% in total closing costs that cuts your net down to 216000. So $2000 profit? Not including time and holding costs? Did I do that wrong? Are you better off than this?

    I bought a place for 87 and sold it for 145 within 3 months and made only about 9k after paying everyone.

     Hi Natalie,

    Firstly, my main aim of doing this flip was to get my feet wet predominantly.

    Secondly in Georgia state, closing costs are normally more around 4.5%

    If we sell in 6 months I'll make somewhere around $11k in profits. We won't be selling this home. We decided to STR it for cashflow and see how that pans out. Then refi.

    0Reply
  • Anthony Rosa
    Rental Property Investor 路 New York City 路 Member since 2019 路 703 posts 路 538 votes
    6y

    Pretty house, congratulations on a great job! Are you covering the cost of the PML payments through the STR, 9.5% APR is steep and you need to wait at least 6 months to refinance? Flipping it is also an option, you have nice equity.

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Anthony Rosa:

    Pretty house, congratulations on a great job! Are you covering the cost of the PML payments through the STR, 9.5% APR is steep and you need to wait at least 6 months to refinance? Flipping it is also an option, you have nice equity.

    Yes. Our monthly interest payments are at about $1100 right now. The STR covers that comfortably. We wana refi in April and keep the equity locked in.

    Exactly!!!

    1Reply
  • Chance Brookins
    Rental Property Investor 路 Dover, DE 路 Member since 2019 路 42 posts 路 14 votes
    6y

    @Laurence Obi

    Wow that鈥檚 nice man congrats ! I鈥檓 gonna have to move to GA if you can buy houses like that for 190 lol

    2Reply
  • Ola Dantis
    Multifamily Syndicator 路 Houston, TX 路 Member since 2016 路 1k+ posts 路 2k+ votes
    6y

    Congratulations @Laurence Obi. 

    Looks good! 

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Ian Walsh:

    Congrats WRR

    Thank you @Ian Walsh

    I really do appreciate it.

    0Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Chance Brookins:

    @Laurence Obi

    Wow that鈥檚 nice man congrats ! I鈥檓 gonna have to move to GA if you can buy houses like that for 190 lol

    Damn right @Chance Brookins.

    Sometimes I'm overwhelmed at the kinds of deals I stumble on. Albeit with no intention of participating. You can only do so much as a beginner. But this hasn't deterred me. I drive out and see the property. Go through the motions like I'm gonna buy it. Analyze the deal, then run it by my more experienced friend and get his take. It's helped me immensely.

    0Reply
  • Michael Lewis Lee
    Wholesaler 路 Dallas, TX 路 Member since 2017 路 306 posts 路 133 votes
    6y

    Hello Lawrence!  A couple oof things that came into my head.  First of all, it鈥檚 a hot market for sellers right now.  All houses on my street sell in one day but it does depend on where you鈥檙e at.  Secondly, your loan sounds like it was from a bank and it matters if you can pay and not on the property.  Just remember that they are not the only one in town.  Location does matter also.  You must done a realistic evaluation which actually takes the risk down as opposed to how the stock market can end.

    Continued good fortune!

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Michael Lewis Lee:

    Hello Lawrence!  A couple oof things that came into my head.  First of all, it鈥檚 a hot market for sellers right now.  All houses on my street sell in one day but it does depend on where you鈥檙e at.  Secondly, your loan sounds like it was from a bank and it matters if you can pay and not on the property.  Just remember that they are not the only one in town.  Location does matter also.  You must done a realistic evaluation which actually takes the risk down as opposed to how the stock market can end.

    Continued good fortune!

     Thank U.

    Yes I kinda did an evaluation before purchasing. But it was with minimal knowledge. And yes it's a seller's market lately. 

    0Reply
  • Olicia Spence
    Real Estate Agent 路 Hermitage, TN 路 Member since 2019 路 1 post 路 0 votes
    6y

    Congratulations Laurence! If you have any general questions regarding real estate investing, don't hesitate to reach out. Happy Flipping!

    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host 路 Longmont, CO 路 Member since 2014 路 7k+ posts 路 10k+ votes
    6y

    @Laurence Obi, to tag someone in the forums, they either have to be colleagues with you, or have already posted in that forum.

    If they are colleagues, type the @ symbol plus their name to bring them into the conversation.

    If they have already posted in the forums, type @? and you will get a scrollable list of everyone who has already commented in the thread.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    1Reply
  • Joel Florian
    Member since 2019 路 111 posts 路 130 votes
    6y

    @Laurence Obi

    Congratulations on a successful 1st investment. Kudos for keeping realistic expectations -- many newbies feel like failures if the process isn't smooth and they dont double their money in 45 days. I especially like that you seemed pleasantly surprised with the equity you gained -- that tells me your main objective was education.

    And your discipline to consistenly evaluate deals and consult with a mentor will help you immensely.

    I percieve that you are poised to become a successful RE investor, not just a onetimer.

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Joel Florian:

    @Laurence Obi

    Congratulations on a successful 1st investment. Kudos for keeping realistic expectations -- many newbies feel like failures if the process isn't smooth and they dont double their money in 45 days. I especially like that you seemed pleasantly surprised with the equity you gained -- that tells me your main objective was education.

    And your discipline to consistenly evaluate deals and consult with a mentor will help you immensely.

    I percieve that you are poised to become a successful RE investor, not just a onetimer.

     Thank you.

    This was very encouraging. I have loads to learn and I'm like a dry sponge dumoed in a pool.

    0Reply
  • Eric Lee
    Rental Property Investor 路 Philadelphia, PA 路 Member since 2019 路 2 posts 路 1 vote
    6y

    Nice keep it going I wish you the best on your investments

    1Reply
  • Laurence Obi
    OP
    Atlanta GA 路 Member since 2019 路 101 posts 路 59 votes
    6y
    Originally posted by @Eric Lee:

    Nice keep it going I wish you the best on your investments

     Thank U Eric Lee

    0Reply
  • LaQuan Bates
    MD 路 Member since 2019 路 46 posts 路 15 votes
    6y

    Congrats Man! Im very new to Real estate so I had a quick question. You mentioned you used a PML, how much of your own money did you put down towards the loan? What was the application process like? 

    0Reply
  • Account Closed
    New York, NY 路 Member since 2019 路 34 posts 路 47 votes
    6y

    Laurence this is honestly very inspirational (especially your bio), Congratulations! 

    0Reply
  • Floricel Argosino
    Lynnwood, WA 路 Member since 2013 路 4 posts 路 0 votes
    6y

    @Laurence Obi

    Looks great, congrats!! Keep going!

    0Reply
  • Joseph Bagley
    Investor 路 Chula Vista, CA 路 Member since 2019 路 51 posts 路 21 votes
    6y

    @Laurence Obi

    Great man for jumping in there. I feel you. Profit is profit when your main goal was to get your first out the way to learn the ropes and not lose money. Hopefully I鈥檒l be right behind you soon with the first deal and not lose money. I鈥檓 from the A, as well, but residing in San Diego and will start looking in ATL very soon.

    1Reply
  • Dylan H.
    Rental Property Investor 路 Savannah, GA 路 Member since 2018 路 174 posts 路 129 votes
    6y

    @Laurence Obi

    Hey Laurence, congratulations! House looks great! Are you going to refinance out of the private money or have you already done that? What's your long term play? I wouldn't worry too much of a bubble since you have about 20% equity in the property if the ARV is correct.

    1Reply
  • Brent Paul
    Rental Property Investor 路 Shakopee, MN 路 Member since 2015 路 985 posts 路 374 votes
    6y

    Looks like you did well.

    1Reply
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