All Forum Posts by: Chris Bounds

@Huy N.  great job on your first flip!  Since there are so many variables involved, including a lot of unknowns (especially for repairs), squeaking out a small profit on your first flip is a big success!  As you fine tune your rehab estimating and project management skills each flip after this one should get easier.  

I have a promising offer on the table. Hopefully this one makes it to closing! If not, I'll start looking at private options while checking out more banks.

@Kevin Yeats

Appraisal is 3 weeks old. Payoff is $500k est. Time frame is asap since I'm past maturity date. The HM lender has been flexible since I have a good relationship with them and have been making timely payments.

Units are typically leased within 1-2 weeks once available.

I'm looking for advice on refinancing a 29 unit apartment complex in Houston, TX. It was severely distressed when purchased in April 2013. I posted about the apartment here when I was doing my due diligence. Here is the current situation:

Current Occupancy: 82%*
Current NOI: $66k
Current Appraisal Value: $800k
Proforma NOI: $85k (est. 7% vacancy)
Proforma Value: $940k (9% Cap Rate)
*The 5 vacant units need about $3-5k of rehab each.

For the past 4 months I've been contacting numerous lenders and brokers. Several lenders have had interest in the property, but only with more 12+ more months of stabilized operational history. (It was only 45% occupied when I purchased it and occupancy didn't start to stabilize until March 2014.) One lender offered a loan at 60% LTV which is below the payoff amount of my hard money loan.

I'm considering submitting the deal to private lenders with an equity share option. Any advice on doing this? I'm looking for about $540k to cover the payoff, closing costs, taxes, & insurance. No cash out is needed. What kind of equity split would private lenders look for with this type of property? Any other ideas?

Thanks!

@Dusty Corning

No I decided to keep it. I knew selling was not too likely that quickly, but I gave it a shot anyway. I'm working on my refi now.

@Maurice Horton To use the @ function just type @ then the name with no spaces. The name should pop up at the bottom and you can select it.

Talk to various hard money lenders to see how much of a reserve they require. Generally it is about 6 months worth of payments. That is a safe rule to follow anyway. I know some will consider LOC though. If you want to buy & hold you really need to have the 6 month cash reserve and also self-escrow for vacancy & repairs. That is easily obtainable after flipping or wholesaling a few houses.

@Maurice Horton , pretty much any hard money lender is going to require you to have cash reserves or access to cash (credit lines) to do a loan. Some will make exceptions if it is a very low debt-to-equity ratio. The reason for this is they want to make sure you can make their high-interest monthly payments.

A few alternatives options are: Opening up an line of credit, partnering with someone with extra cash, assigning contracts for a wholesale fee, and double closing wholesales

@Account Closed

Are you working with a mortgage broker or a specific bank? A broker can shop your situation around.

You can use HML and the refinance into conventional once the rehab has been completed. It will cost you more, but banks will look at a refinance differently than a purchase. That is how I did several of my rentals. The good thing about that strategy is it side-steps the 20-25% down payment requirement if you buy it cheap enough.

Other suggestions to consider: If you have to, try wholesaling or flipping a few properties to build up more cash. Use a portion of the cash to pay down your personal debt. Keep your credit accounts paid down to help improve your credit score. Done aggressively, your situation could be much better for a conventional loan in about 6 months.

I won't be able to make this one, but I'll look out for the next planned event.

@Justin Bergen

Successful wholesalers have a systematic marketing campaign that keeps their phone ringing. By using wholesalers for your deals you are basically outsourcing the marketing part of your business. Of course, they'll take their piece of the pie when they sell it to you, but its less for you to worry about. The only way around that is to put your own marketing campaign to action which takes time and money, but if it's successful you'll find deals with excellent margins.