$0 money. 3 multifamily deal thoughts...

13 Replies

If owner will carry the agreement, will the Brrrr method still work? Especially if once renovated and refinanced by a hard money lender I could pay for the properties? Where will this leave me and what should I watch out for? 

If the deal is right how do i find a private lender for renovations?

@Bryan Harper I'm curious why you would be refinancing using a hard money lender? Typically the rates would be very high and it would be a short term loan (less than a year). Is there a reason you wouldn't try and refinance through a local bank or credit union to get your cash out?

As far as the renovations, you can start with friends and family for private money. After that, I haven't had much experience, hopefully someone else has ore insight. It can also help to get a 0% APR credit card (it's usually for 12-18 months) to pay for the rehab. You just would need to be careful to pay it off in time, otherwise you're hit with some hefty interest.

@Danielle Wolter , well hard money would be a large bank correct Wells Fargo, BOA, etc...

Our local banks here can only fix interest for 15 years, 30 was ideal. I have not yet checked credit unions

Credit card sounds good!

But all in all the model should work, assuming the purchase price was right?

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My take: BRRRR is very difficult to work if you come in without any cash because you're starting from essentially a zero position.

Example: You find a property for 200k that the owner owns outright, and is willing to carry for some really low price - let's say $1k, plus let's say 6% interest, and let's say it cost you another $1500 to close (title work, etc). You fix it up with a bunch of free friends and some leftover material from your parent's house and get the value up to $250k with no rehab costs out of pocket (this is artistic license, but go with me here). You go to the bank 6 months from now and they agree to refi 75% of the ARV back out (typical on investment property), and you end up with let's say $4k in closing costs.

$250k x 75% = $187.5. You still need to come up with $12.5 to pay off the seller, not to mention the closing costs on this loan. Now you're way ahead of the game in equity - you have a $250k property with about $20k of your own money in it and a mortgage of $187.5 - but in terms of cash, yes you needed something to make this work.

Making a BRRRR work with absolutely no money is pretty tricky. Most BRRRRs will leave some of the money behind, because the bank won't cash you out 100%. It can be a relatively small amount of money, and sometimes it can flush even, but you have to get the property at a significant discount to ARV in order for that to happen. The chances of getting that kind of discount on a seller-held note, with essentially nothing down, is going to be very slim. Most sellers want something for their trouble to sell something at a severe discount. Usually that's a cash closing, or a quick closing, or being rid of a property that has severe challenges. All of that requires money.

@Bryan Harper Banks/credit unions will typically do 30 or 15 year refinances. Hard money lenders are not your big banks. Hard money lenders are typically private lenders that provide short term loans (usually only on what they consider to be a good deal) at much higher interest rates and typically charge several points (read: several thousand dollars).

Everything said by @JD Martin is great info! I would look into perhaps partnering with someone.

Originally posted by @Bryan Harper :

Any help is appreciated.

I'm not sure how else we can help you. If you don't have any money, there's generally not any way to extract the equity as your next chunk of cash. You sound like you need a partner, which should be not too difficult to find if it's a great deal. Or bring this deal to someone who has money for a fee and then you'll have seed money to get things started. 

In your original question you asked what were the chances the owner carries the note for you, with no experience (and, presumably from this thread, no money). I would say the chances are about as close to zero as you can get. 

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@JD Martin sorry I’m not sure where that message came from.

Since my last message I came up with money to put down, close, now working on renovation money.. we’ve yet to put the deal together. So my offer will be based on what I can make happen granted it’s accepted or not. It’s an opportunity and I was waging on the side of guidance, as I’m very new to real estate multifamily in-particularly. Thank you for your info and examples. Perhaps the opening discussion was not worded properly to achieve that, I was pretty excited when I learned of the possibilities.

So if you have any advice for preparing my offer or what to expect I’d greatly appreciate your time in a brief run down.

Planning to post more details..

Once again I appreciate your professional opinions!