All Forum Posts by: Chris Bounds

Houston investors, I'm looking for local (portfolio) lenders for long-term buy & hold financing / refinancing. I use the BRRRR for acquiring rentals. Also, does anyone know of a good lender that will do equity lines of credit on rental properties?

@Chris Uhler, I agree it's good practice.  We get about 98% of all calls live.  We've actually called a few back.  Most I think wanted to be removed from our list or were unmotivated. Otherwise time limits so far have been preventing us from doing it systematically .  

A story on answering live calls...Once I called about 10 postcards/letters from other investors to add them to my buyers list.  Only 1 answered live and only 1 other returned my voicemail.  After that I figured competition may be fierce, but answering live is an easy leg up.

@Undrea King, our goal is to answer every single call as well.  To be honest, calls that are missed and do not leave a message we do not bother calling back.  If I were in your position I'd try to find someone local, maybe a friend or a relative, that you can train specifically to take messages for you during a certain period of time. 

@David Billings, not yet.  So far we've decided to hold on to the higher paid tasks and outsource some of the simpler tasks.  We outsourced bookkeeping a long time ago.  We recently outsourced blog writing for SEO.  We're still looking for motivated acquisition agents, but meanwhile we're developing our systems to minimize training time.

@Joe Villeneuve, agreed. The BRRR is a pretty straight forward and simple way to effectively design a zero down deal.

I'm not recommending that, but it is what I would do. Do your own Cash-on-Cash returns (CCR) with zero debt and with 70% debt. Compare the two. Then since the 70% debt is now cash in your pocket figure out how many other houses you could finance. Determine the CCR on those properties. Add up the total cash flow and compare it to the cash flow you had with only 1 property.

Ultimately it's a risk vs. reward calculation of opportunity cost.  Of course, your stage of life and financial position does matter with this decision.  

@Account Closed, yes - it's getting a conventional mortgage with better terms to pay off the short-term high interest mortgage (HML).

Make sure you're improving your financial position now though. Secure lines of credit, pay off consumer credit cards, and save cash. Even though HML loan based on the asset (house) they usually still require 6 months of reserves to make sure you can make payments and fund repairs.

@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.

@Candice CuccoWelcome to BP! This is the place to be to learn about REI. To add to what others have said, Be sure to check out some of the many local REI meetings in Houston. Find a few to attend regularly. You'll learn a lot by networking.

@Bryan Monks, to add to what Brandon said - check out the BP podcosts too. They are full of incredibly valuable information and cover all sorts of RE topics. Also, there are a lot of local REI meetings around Houston. Be sure to check them out and find a few to attend regularly. You'll learn a lot by networking.