How to Leverage FHA and make $100K++ profits

Question

Investment Info:

Single-family residence buy & hold investment in Columbus.

Purchase price: $77,001

Cash invested: $6,900

This is a SFR with 3BR's and 2BA. We did a live-in renovation on and contributed about $7,000 with a lot of sweat equity. At the yr 1 appraisal we had created $50k in equity and leveraged the property to buy other flips. This gets pretty complicated as we were blanketing properties under a portfolio loan and using LOC for renovations...and re-financed this one after we pulled $30k from a HELOC then moved and rented it at $1,200/mo.

What made you interested in investing in this type of deal?

This was an FHA owner-occupied live-in flip. We were doing 1 a year at the time

How did you find this deal and how did you negotiate it?

Market listed

How did you finance this deal?

FHA

How did you add value to the deal?

We did a live-in renovation

What was the outcome?

$100k++ made from leveraging this property to do other flips...and we still own it...and it cash flows very well.

Lessons learned? Challenges?

Live-in renovations are hard work.

Brandon Sturgill · Answer

@Kevin Diesel Refinances can be quite complex...no 2 are the same. I've seen lots of folks get burned on re-fi's thinking it's a simple deal to calculate the ARV and then you'll get a 70%-80% LTV cash out...cash out re-fi's are expensive...I'm not saying it won't work, but be sure you fully understand your costs and market value.

Best of luck going forward

Kevin Diesel · Answer

@Brandon Sturgill

No worries! Thank you for your response.

Yes, I’m using cash to buy and given that I don’t have a steady income at the moment, I think that trying to find a few good deals to flip is the best way.

Rentals are great but you would need 40-50 units to pay you bills and live off. Until then you would need a day job.

I get the rental advice a lot even thought I do mention that my income in not stable at the moment. So I guess taking advantage of that 100k and doing some flips makes more sense to me.

Please correct me if I’m wrong since I’m just stating now. I bought my first place last August and I will be refinancing next month. Tenants should be out by June when I am planning on doing a rehab and list it.

Thank you!

Brandon Sturgill · Answer

Refinances are not that easy...lots of complications...lots of costs...and each one is different...the only folks I have ever known to make BRRRR work are cash-buyers buying at around 50% of value.

Brandon Sturgill · Answer

Thus, the issue with BP books...they publish the theoretical, not the factual application of techniques...it makes writing books a much simpler task....anyway, are you buying with cash? Maybe let's start there.

@Kevin Diesel sorry for the delay...I typed this on the phone and forgot to hit send.

Kevin Diesel · Answer

@Brandon Sturgill

Hey Brandon, I have a question for you and seems you could help.

I was reading “the book on rental properties investment “ by B. Turner on how to make 100k a year with BRRR. But it seems that this only works after the 5th year.

The book for example says that you buy a house for 70k , add 30k in renovations, rent it out, refi it up to 70% and make you money back. But after refi the value should be higher

A lender refis up to 70%-80% when you hit the 6 month mark, but they could refi 100% after a year, is that correct?

So if I bought two homes for the same amount mentioned above , and after rehab the value has gone up to 150k for each , wouldn’t I be able to refi both a year later and take out 100k in equity if I wanted to? What would be the pros and cons of such way of doing it ?

Thank you in advance!