All Forum Posts by: Chris Bounds

A buyer comes along today (10/27/2015) and offers full price using FHA financing. They want a 10 day option for $100. You agree to take a $200 option fee from the buyer and to set the execution date for 11/10/2015.

Will the lender have any issue with this? I'd assume as long as the loan application isn't submitted until 11/10 they would not have an issue.

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Originally posted by @Rick H.:

@Chris Bounds This will probably drive you nuts (semantically) however, a believe you are confusing the terms 'leads' and 'prospects'.

A lead is a tip or data from a list, who may or may not have responded to a stimulus like a direct mail piece.

A prospect is a principal who has met certain criteria that you've established and is further along in your sales funnel.

You may not care, however there will come a time when you'll involve third party help or vendors and you'll want them to understand what you mean.

Keep on mailing!

Good clarification Rick. Internally, I understand that. It might be a good idea to make the terminology change now for the purpose of systems design (for 3rd party training later on).

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Originally posted by @Fitzgerald Hall:

@Chris Bounds Congrats on a successful campaign!

I am thinking about using yellowletters.com as well.

Are you finding that your typed letters are doing just as well as you zip letters or are zip letters hands down the best performer?

That's hard to say. I wouldn't say either is better than the other really. @Michael Quarles at YL usually suggests the variable approach. I've been using that strategy.

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@Fitzgerald Hall, I sent out postcards on the first batch of the bigger list. I think I got 2-3 calls total and they were not deals. The next batch with zipletters I got a ton more calls and specific feedback stating they called me because my letter was different. That was the decision point for me to scrap postcards, at least for an absentee list in my area.

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@Kyle CabralMy list came from list source. I did not filter for years owned on this last run. Only equity and median price range. Area is fairly large, West to Southwest Houston which is my backyard. It's been a successful run so far.

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@Owen Dashner, with only 5 deals so far from this campaign it wouldn't be accurate to give an average profit. We have 2 flips that have not sold yet. Est. profits for those range from $15-30K. We've wholesaled the other 3 making anywhere from $2000-20,000.

@Fitzgerald Hall, we tried postcards but the response rate was unbelievably low. It's cheap so every wholesaler in my area that wants to do direct mail uses them. I want to stand out. That change alone increased our response rate. We may do them here and there to change it up, but it is not a primary mailer choice for us currently.

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@Fitzgerald Hall, I took @Sam Craven's advice. Here is an updated breakdown:

Target Market: Absentee
Campaign Type: White typed letters and zip letters using YellowLetters.com
Total Prospects: 5735
Total Mailings: 4
Frequency: Every 6 weeks
Total Leads: 102
Total deals: 5
Comments: This has been the best campaign yet. Only a slightly higher response rate and still a high cost per deal, but it's been the most profitable campaign yet. I'm still working on several warm leads too.

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I'll be there

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@Richard Fields, correct. As long as your debt-to-income (DTI) ratio is good, with W-2 income and an 820 score you shouldn't have any trouble refinancing conventional. You'll likely start getting capped out at 4-5 properties, but it's possible to secure up to 10 conventional loans before you'll need to look into portfolio / commercial financing.

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Originally posted by @Richard Fields:

Originally posted by @Chris Bounds:

@Account Closed,

Depending on how you finance the acquisition the benefits of BRRRR can vary.

Situation 1: Private Lender or Hard Money Lender agrees to fund 70% ARV which is $105k based on your hypothetical. They will withhold the $35k in repairs and release them to you in draws (so make sure you have a line of credit or cash to get work started). After the house is repaired you immediately file your refinance paperwork (I'd have it filed before hand, but the appraisal can't be ordered until the repairs are completed). There is no need to wait 6+ months to refinance. You can typically get up to 75% ARV on the refi. In this situation, other than closing costs, you have very little out of pocket expenses. Your ROI / CCR will be great and your cash flow will jump when you lock in the lower interest rate. I've used this strategy many times!

Situation 2: You do the same as the above except you use cash for the acquisition and repairs. I have not done this before. There may be some seasoning required (6-12mths) before you can do a cash out refinance. Once you refinance though, you will free up your cash to do other deals. This may "save" you on costs by not using an acquisitions lender, but you are tying up your cash that potentially could have gone towards other deals (opportunity cost).

Situation 3: Instead of using a PL or HML, find a local portfolio lender. Some will lend 60-70% ARV and hold repair reserves just like a HML. The difference is their rates are usually much better than HML. I did this recently and the loan was about 4% with 1pt. It was much better than 12% with 3pts. Plus, you don't have to pay for two closings. However, many portfolio lenders will want to see skin in the game so you may have to put some cash down regardless of how cheap you buy it. They will also want good credit and experience.

In your situation 1; Where can you find a bank that will refinance you for 75% of the ARV AND without the seasoning period? This is EXACTLY what I want to do BUT it was my understanding that I had to wait that seasoning period and even then could only get about 70% of what I had into the property

If you have W-2 income and decent credit then conventional financing will do it. Find a broker that works with investors.

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All Forum Posts by: Chris Bounds

Chris Bounds has started 83 posts and replied 450 times.

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Post: BRRR strategy confusion - Refinancing

Post: BRRR strategy confusion - Refinancing