Editor / Producer · Asheville, NC · Member since 2015 · 31 posts · 0 votes
BP squad, here's what I'm looking at:
nice looking 3/1 brick ranch a right turn away from thriving Augusta Rd in Greenville, SC.
30K purchase price
ARV of 75K (most pessimistic scenario)
15K of rehab costs (pessimistic scenario)
Hard Money Loan (HML) terms:
10% down ($4,500)
$3,500 origination fee
interest only loan at 10% for 13 months - ~$400 per month x 13 month = $5200 max holding costs - goal to have property rehabbed and refinanced in 120 days
no prepayment penalty
total cash needed to get into deal: $8k
expected rent: $1000 / month
goal is to hold onto the property for the long term and have a property that cash flows as area continues to appreciate.
my only other deal so far is a rehab / rental that i purchased through a combination of cash out refinancing the down payment and having the seller hold the note.
i've never dealt with HML so any advice you have would be greatly appreciated.
Investor · Greer, SC · Member since 2015 · 25 posts · 3 votes
10y
I haven't tried to flip them to retail. I think most of the market under $125k is investors. When you think about a retail buyer, those that could afford/qualify for a mortgage on a $125k house of this nature are probably more inclined to rent for another year or two and step up to a $140k-$200k house where you are getting stabilized neighborhood, not fringe and much more house. Again havent tested it but my inclination is that I'm in these properties (with nice cashflow) until the neighborhood really takes off or I'm exiting to an investor at a cap rate that is attractive to them which is prop high single digits ie $65k-80k. It all works and a year or two after the 8,000 multi family units downtown/west end that are currently under construction come on line there will be tremendous demand for the single family houses .5-1 mile away. Its happening in a big way it just needs to play out. I believe these houses are a 3-4 year double on a total return basis.
Investor · Greer, SC · Member since 2015 · 25 posts · 3 votes
10y
Most of the stuff that I own that sounds similar (3/1, purchase <$30k, + $20k rehab) rents for ~$850. It seems to me that I never get the value out of that third bedroom with only one bath. I have one house I'm converting from a 3/1 into a 2/2 with a master. Haven't listed it yet but hoping to get $1,225. The only thing that makes my numbers work is no debt service. Augusta Road area will hopefully provide great long term appreciation but I'm not seeing it translate into rents....yet.
Also, I have had a lot more success with homes with washer/dryer & HVAC which may require stepping up to 200amp service ie more money. Just stuff to think about.
Most of the stuff that I own that sounds similar (3/1, purchase <$30k, + $20k rehab) rents for ~$850. It seems to me that I never get the value out of that third bedroom with only one bath. I have one house I'm converting from a 3/1 into a 2/2 with a master. Haven't listed it yet but hoping to get $1,225. The only thing that makes my numbers work is no debt service. Augusta Road area will hopefully provide great long term appreciation but I'm not seeing it translate into rents....yet.
Also, I have had a lot more success with homes with washer/dryer & HVAC which may require stepping up to 200amp service ie more money. Just stuff to think about.
Investor · Greer, SC · Member since 2015 · 25 posts · 3 votes
10y
I haven't tried to flip them to retail. I think most of the market under $125k is investors. When you think about a retail buyer, those that could afford/qualify for a mortgage on a $125k house of this nature are probably more inclined to rent for another year or two and step up to a $140k-$200k house where you are getting stabilized neighborhood, not fringe and much more house. Again havent tested it but my inclination is that I'm in these properties (with nice cashflow) until the neighborhood really takes off or I'm exiting to an investor at a cap rate that is attractive to them which is prop high single digits ie $65k-80k. It all works and a year or two after the 8,000 multi family units downtown/west end that are currently under construction come on line there will be tremendous demand for the single family houses .5-1 mile away. Its happening in a big way it just needs to play out. I believe these houses are a 3-4 year double on a total return basis.
Editor / Producer · Asheville, NC · Member since 2015 · 31 posts · 0 votes
10y
100% agree with you @John Coleman on the big upside play for those cheaper SFR properties -- that's my big draw to this area (not to mention the town is just super cool).
had one final clarification for you:
The only thing that makes my numbers work is no debt service.
can you clarify? are you buying these properties outright with cash, no financing?
Investor · Greer, SC · Member since 2015 · 25 posts · 3 votes
10y
Yes. Friends and family $. In 18m to 2 yrs we may finance some money out for more properties or to find new construction. A few of our deals in 2014 came with buildable lots next door/behind the properties.
Gville is a super cool town that is booming in all the right ways. It's millennial nirvana from a city planning perspective and there are jobs. I expect big things.
Great piece here:
http://archive.uli.org/spring2016/reachingfuture/ReachingFuture-Navarro.pdf