Bronx, NY · Member since 2016 · 50 posts · 32 votes
Hi everyone :) someone may have already asked this question so please link the thread below if so.
What is the best way to finance a BRRRR in your opinion? HML? Private money?
I was leaning more towards HML but I'm worried about not having the required personal funds to use it to pay for: points, interest and origination fees. Does someone have a ratio perhaps of if they are borrowing X amount from a HML, they make sure they have Y amount in their own cash reserves to account for these costs? (On top of whatever % LTV they need to pay to use HML in the first place).
Yeah I agree - takes a lot of research and understanding the area but also the help of a good local team! What out of state areas have you invested in?
90% ?! That’s great ! How did you decide on Indiana and how much experience do you have investing out of state? I see you’re in Houston which is a hot market so I can see why you chose the out of state option.
90% ?! That’s great ! How did you decide on Indiana and how much experience do you have investing out of state? I see you’re in Houston which is a hot market so I can see why you chose the out of state option.
I’m on my second round of trying to be a real estate investor. First time I tried made money year one, broke even, third year lost money. Never raised rent but taxes and insurance went up.
This time I’m going out of state to force myself to get help. I’m building my team. Facebook has been amazing for that.
I’ve never thought of using Facebook before but looks like it’s working for you to build your team. Good luck with the new endeavor! I hope it works out nicely for you.
In your "first attempt" at REI, what methods were you using? Also doing BRRRRs?
We used the house that my wife owned before I married her. We paid off the house and it wasn’t worth what she bought it for. The good thing was it appreciated over the 3 years and so she made a profit when we sold.
Fairfield is great, Bridgeport & Stratford are dumpy but have good areas where you can make some money. New Haven is also pretty good. CT has a ton of distressed RE. Check out Agnelli Real Estate, James Macchio is the executive in charge of the REO book he or anyone on his team can get you in front of inventory.
In our market there is a private lender who will loan me 70% of the after repair value. So if I can buy right I can borrow all of the acquisition and renovation cost from the Private Lender, which I find very helpful. I refinance into a conventional loan and if I hit my target I have zero of my money left in it.
Currently I'm refinancing a BRRRR deal where all I will have left in the deal is about $10,000. I was able to refi cost of acquisition, most of the renovation, cost of private loan and cost of refi on a 15 year loan and the property is cash flow positive with little expected capital expense in the next 10 years as almost everything is new.
I have and use a HELOC tied to my primary residence which is a great tool for liquidity if needed.
If you are a new investor find someone local to shadow or have coffee with (remember try to bring that person some value for their time) and learn. I suggest you focus on your local market until you become more experienced. One of the posters provided his methodology for investing out of state and it makes a lot of sense but you can see that there is time and work involved.
Brrr is one of the fastest ways to accelerate wealth. Stabilized value add is more appropriate with commercial and requires more sophistication.
Private money always first
Your money and income to back it up
Hard money If above two fail AND you have a homer run deal. To me that is buying 30-40% of ARV.
I’ve purchased and brrrr’d 50 houses in the last 4 years. 45 of them from a distance. 40 of them never seeing them in person. And I don’t call it a brrrr I call it an infinite return because when I’m all in for 120k and the bank says the house is worth 165k and gives me a loan for 120-130k. My return is infinite.
Commercial loans don't require seasoning but need LLC and terms are 1-2 points higher and shorter AM period.
6 months and refi with residential loan Fannie Mae. 30 year fixed at 4.x%
You need to build the team.
Wholesalers
General contractors
Property managers
Broker/realtor
Lender.
You must know the area, know how to analyze a rehab and rental analysis.
It’s not hard but requires some
Learning and repetition and common sense.
Again, value add is solid IF you have a networth, or have specialized skill (mobile homes, storage, multfamily)
Infinite returns with single family houses is the best way for quickly growing your networth, increasing cash flow and having velocity of money.
Just another option that may not be to difficult as its a short plane/train ride. I know that West NY has much cheaper property Rochester, outskirts of Buffalo, etc. You could likely make that 250k to 350k that you are rehabbing 1 home with, can stretch to 2- 4 homes.
I must have called every bank small and large in my area talking with there commercial lending department. They all have a 6month seasoning atleast and most will only lend loan to cost not ARV which does not help me.
Buying two properties a year is not exactly the fast track to financial freedom.
@Steve Vaughan I must have called every bank small and large in my area talking with there commercial lending department. They all have a 6month seasoning atleast and most will only lend loan to cost not ARV which does not help me.
Buying two properties a year is not exactly the fast track to financial freedom.
Yep. And yet seasoning is rarely discussed. On the forums here or on the podcasts.
Had a New guy asking if it was feasible to do 4 a year. With VA loans. LOL
@Lee Ripma How are you purchasing these properties? All conventional loans with 25-30% down? Or do you have a different funding source? Are you living in these properties like a house hack, or just fixing them up?
@Lee Ripma: When you say "Fixer you can add value to but stabilized enough that you can get bank financing" you are implying using your own funds to purchase the property, right? HML or PML would not work in that case, right?
A property in decent enough shape that a bank will lend on it. It doesn’t have holes in the roof and missing windows. It’s tenant occupied or it’s livable.
Distressed property: major repair items, a bank will not lend, not livable.
Value add: make something worth more money usually by increasing the income. You increase the income by making the place nicer to live and people will pay more to live there.
Let’s put it all together now - a stabilized value add property is one that is stabilized when you buy it but has upside on the rents with renovation, that’s the value add.