Renovate To Rent On HGTV

8 Replies

I'm on vacation this week and caught a new show on HGTV called Renovate To Rent. It's about a couple of young guys, one a RE agent and the other a GC, who buy distressed properties, renovate them to a condition above what I think the average renter would expect and then rents them out. I was curious if anyone else has seen this show and if so, what their thoughts were? They supposedly have in the neighborhood of 50 units and seem to do above average renovations. I think they operate in the Minneapolis area. I'm curious, how could they be funding all this with a buy and hold strategy and what your thoughts are on their strategy in general given the current market conditions? Is it a sign that the end is near because this show is now on HGTV?

Ditto. They buy all these property's and renovate them into high end properties and then rent them long term. They've said often they buy them for cash, but the last episode referenced a mortgage. At any rate, it sounds like they started right out of college, so where'd they come up with cash?

My other thought is that often times, it doesn't seem like they're clearing much cash flow for all the money they're putting into these properties. More insight on the business end of their venture would be interesting.

They also own a food chain/restaurant so I'm guessing that's where they get some of their money for their investments.
Originally posted by @Chris Bynion :

I'm on vacation this week and caught a new show on HGTV called Renovate To Rent. It's about a couple of young guys, one a RE agent and the other a GC, who buy distressed properties, renovate them to a condition above what I think the average renter would expect and then rents them out. I was curious if anyone else has seen this show and if so, what their thoughts were? They supposedly have in the neighborhood of 50 units and seem to do above average renovations. I think they operate in the Minneapolis area. I'm curious, how could they be funding all this with a buy and hold strategy and what your thoughts are on their strategy in general given the current market conditions? Is it a sign that the end is near because this show is now on HGTV?

 I run a pretty similar operation.  Myself, my wife, and another partner have been doing this for 4 years with relatively good results.  5% down payment is all we need for the mortgages because we live in the Renos.  As long as the property is your primary residence, you don't need 20% down.  So the three of us move every 4-6 months.  Our lender provides us with a mortgage +10% for Renos each time.  So if we buy a $450k home, we put down 22.5k split 3 ways, and the bank gives us 495k for the home and Renos.  

So far, the value of the homes have increased by at LEAST 1.5 times the cost of the Renos each time. Especially since we do 100% of the work just the three of us, allincomes have been 100% legal, all permits and inspections in order, the Renos have been done to a really high standard, and the homes have been purchased in prime locations only.

You might ask... What about debt/income ratio right?  With every home we add roughly $400k in debt, and only $3k/month in income...Well, as long as our MTG+prop tax is no more than 80% of our total rent for a property then the lender (First National) considers that as extra income, not debt.  Most major banks wouldn't do this for us.

So $3000 rent on a $2100 MTG+prop tax is looked at like $375/month income straight up instead of $3000 income against a $400k MTG.

For me, saving 7-8k every 4-6 months wasn't all that hard, and is really easy now that I have several income properties.

I have used the same strategy, acquiring with a hard money loan to cover purchase and repairs and refinancing into a long term conventional loan. The strategy is pretty straight forward and works well on houses that would normally fit the build as a flip. I was buying houses with literally 5-8k out of pocket to purchase, the rate and term refinance allowed me to roll any costs from that loan into the long term financing at 75% of value. In most cases we would rehab to a little higher level than a normal rental -to get my end value appraisal and to attract better tenants at higher rents.

In Minnesota the values are still down and rents are up.

I am currently doing this as well in the Minneapolis area. I use Pine Financial for the hard money loan then refi out of their loan to a conventional long term loan. 

I have seen quite a few episodes. They seem to be buying mostly distressed or under market valued properties. My best guess is that they are borrowing short term money from a private lender prob up to 75-80% of arv and once the renovations are complete and the homes are tenant occupied they probably refinance the homes with a portfolio lender to a long term 20-30 yr fixed rate loan and pay back initial investor. If they are buying them right they are probably even pocketing a few bucks. An example would be purchase a home for 200k. 25k Reno. Rent itnforn3000 a month. 5k in loan fees and holding costs. Appraised out are 300k get a loan at 80% for 240k. Pocket the 10k left.

an ad popped up in my news feed that they are coming as a conference or seminar to my area just outside of st Louis, Mo.

I've been to a few real estate seminars and they range from free to $100 to go. Then when you get there they tell you a lot of info, then comes the sales pitch. If you have 10,000 - $20,000.00 we can be your personal mentor and walk you through how to do this. 

My local real estate club says then they get a lot of calls saying that the company's (in general, not specific to this one) that put on the seminar, tells them to reach out to their local clubs in addition to any other information they give out.

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I actually hit search to see if anyone else has run across this seminar and hoped to see what all the hype is. 

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