Private money loans and BRRRR markets

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Private money loans and BRRRR markets

Amit Roginsky
Member since 2020 · 4 posts · 0 votes

Hey everyone, first post here. I own a rental property (not in the US) and I've been wanting to invest long distance in the states for some time now, using the BRRRR method in order to start with a relatively small amount of cash and build my portfolio from there. My Dad's company (architecture firm) has some money saved up and we are considering to give it to me as a private loan (under contract of course) in order to invest in the US. Here is where I need your help -

How would you construct that kind of relationship? What are the standard rates for such loans? How would you plan the payments to be (i.e, full bacxk payment onve receiving RF or monthly payments according to the numbers, in order to preserve cash flow? 

Also, as a long distance investor i've been researching several markets with no success so far (Las Vegas Metropolitan is a bit too pricy for me, and several attempts to analyse the Seattle metro also came up short). I am looking for Fixer Uppers, listed for around 90-120K, to purchase and rehab in cash (and later refi and make a BRRR property). It would help a lot to hear from you guys which markets offer deals with these numbers. If you have some in mind, and also can refer me to agents/PM/GC in that area, blesses upon you!


Thanks everyone!

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  • Zach WesterfieldPro Member
    Warner Robins, GA · Member since 2016 · 244 posts · 167 votes
    5y

    @Amit Roginsky congrats on getting started. As for the private money loan, you can structure it anyway you can imagine, but ideally you want both parties to be comfortable. If you dad is okay with it, i would recommend interest only payments for 12 month. I would also have clauses to extend and restructure, in case something goes wrong. Think through the "what-fis" and what you will do if things come up. Have that conversation up front, and make sure your dad is okay having the loan out there for 2-3 years. If things go wrong, it may take you a while to pay him back. The good news is if you analyze your deals correctly, the BRRR method is great at erasing mistakes over time, and you will eventually pay him back. Im speaking from experience here.

    As for long distance investing, do you have rehabing experience, or are you able to leverage someone who does. Be careful taking on rehab projects with little to know experience, unless you have a GC or PM or friend in that area that you TRUST 100%. Otherwise, i would recommend starting closer to home until you get some experience. With little money of your own, you dont have much room for error if a rehab goes bad. I would say an okay deal close to home would be better than a home run far away. In today's market, home runs typically mean high risk (for new investors). 

    If you insist on going long distance, read several books on flipping and managing flip rehabs. BRRRR is the same as flipping, with the exception that you "sell" the property to yourself at the end.

    Good Luck!

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  • Amit Roginsky
    OP
    Member since 2020 · 4 posts · 0 votes
    5y

    Thank you very much Zach for that detailed answer. I appreciate it!

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