Diary: MLS Buy W/Hard Money Into Rent & Refinance Project
Two of my favorite posts on bigger pockets are the Jscotts new construction diary and the pop top. In general, the more focused and detailed things are the more helpful they become to a novice investor (each time you do something new you are a novice). J was a novice at new construction despite 50 plus renovations. I interview a lot of investors during our wholesaling and hard money adventures and see some really common issues I am going to try and address in this diary. Those issues are:
- Finding a cash flowing deal on the MLS (People say it can't be done in 2017-18. Let's see if they are right! (hint: I think they are wrong)
- Finding an area that makes sense for an out of state or out of market person to own a rental in
- Dealing with the complexity of financing for both hard money & otherwise
- Setting up 3rd party property management
- Analysis of the deal
- Making the offer on the MLS
The people considering buying turn-key or Roofstock homes will find this diary extremely valuable. Infact, I will be using Roofstock as a benchmark for much of this process and show you how you can easily get the deal that is on roofstock, before it got their with the sellers markup.
It will be hyper-specific about one specific end to end process to end up with a cash flowing rental property purchased directly from the MLS using a hard money acquisition and then refinancing into traditional bank financing after seasoning. My goal here is to create a golden thread that a beginner can follow to get to a solid rental investment that puts cashflow in the pocket and with an added element of a little fixing up, the potential to complete cash out and do again with the same money every six months. For that reason, this thread will take at least 6 months to complete, but stay with me. Keep me honest here.
I'm not going to sugarcoat it!!
The reality for me is that I have access to deals that most beginner or part-time investors don't. I am going to purposefully try to make this project work with a not so great, but easily findable deal so that readers feel empowered to use the same roadmap. You won't hear me writing about the property we bought for $100K that is worth $205K from a motivated off-market seller. That will make it too easy to make the numbers work. Instead, I am going to look for a property on the MLS at around 75-80% of ARV NOT including any renovations needed. If the homes needs no renovations then 86% seems to be where rubber meets the road.
Why would I do this?
I definitely would not use this model for my own personal gain. We try to religiously stay with a max of 70% minus cost of repairs, but most people are having a pretty hard time acquiring such deals these days. The numbers above seem to make you a competitive buyer in the current FL 2018 market so I will actually buy something at that price with a 12% interest hard money loan, get it rented, eat the negative cash flow for during the seasoning period, and ultimately refi through a regular bank down to 5%.
I will list the property address
I will list the bank used for refi
I will put up my deal analysis
My property management search info
My experience as a hard money borrower (Disclosure, I am a partner in the lender I will be using, but for this project, I will pay full freight as if I was a beginning borrower)
I will put up all my expenses on the project
Why should you pay attention to this thread?
I am not an expert in building a rental portfolio. I don't currently own a single rental unit. I have bought and sold over 50 properties in the last year and been a partner to millions in hard money lending, but I don't own a single rental property. This will be my 1st. I have no leg up on having a go-to manager, or discounts you can't get yourself. My goal here is to create an end to end project that any part-time buy n hold investor can use to acquire property. If you have a skill such as being a realtor, finding off-market deals, or doing your own GC work to save money then great! Plug that skill in and it will be even easier. This is about finding a system for building wealth that will work at it's worst that you bolster with added skills. I hope to identify a property and be under contract within 7 days. If I am not, I have a back deal I am willing to use to keep the project moving that we bought for $100K and have listed on MLS for $165K as-is. I am getting offers for $160K from other cash investors so I may start the project by giving that property a $160K cost and starting from here as it meets the requirements, of a deal that could have been bought by anyone off the MLS for $160K on North Port, FL (Not my home market). It needs about 10K worth of work and will have an ARV of $205K. Technically, if I was to buy with hard money, and refi out with a regular bank loan after 6months I should be able to pull $164K back out of the deal leaving me with around $10K in cash in the deal. Stay tuned