All Forum Posts by: AJ Exner

Hey Angie,

I guess it depends on what you are going for. Many lenders (specifically, Hard Money) are okay as long as you are not losing money on it. 

It's important to see it as either a true 'cash flow' where you are making money each month, or as an investment. The idea that you can make an investment that pays for itself, and if you do it in a good area where the property itself increases in value, then you can have a portfolio of free and clear properties that you can sell/cash flow 30 years or less from now is also a way to look at it.

All that to say, immediate cash flow may not necessarily be the goal, but is important to consider when you are looking for a lender as many differ on their required DSCR.

Preston, 

You can, but not of the ARV. You could do a 'delayed purchase' refinance which would give you 80% of the initial purchase, or you would wait ~3 months and do a seasoned refinance and get 75% of the 475k.

I know of at least one lender that would do the ARV that quickly but the max leverage is only 50% so its up to you how and the timing of what you would need.

Trenton,

That is great to hear and with the plethora of information that is out there, the key to achieving these things often comes intrinsically. So utilizing those resources to help motivate and get started is a great place to be.

Let me know if you run up to Springfield and would like to connect! I saw that you are down in Branson and would love to grab coffee or anything if you bounce up North at all!

 Hey Roohil,

You will find some good section 8 opportunities all over the country, I even have a client that finds them throughout Oklahoma. So wherever you can find good properties, build a reliable team, and have a solid property manager that can help screen and understands what Section 8 brings, then you should go for it.

That being said, the area I'm seeing a lot of work being done has been up in Philadelphia/Pittsburgh. The housing authority is pretty tricky, but a lot of good opportunities all over.

Quote from @Cory King:

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $185,000
Cash invested: $55,000

Contributors:
Gregory Crane

Sourced on the MLS. Partnered with a member of our local investor community & BP member who fronted the down payment on the private money loan. I cover insurance and utilities. We hired a local GC to manage the rehab which is largely surface level outside of some bigger cap ex items like roof, windows, hvac. Thankfully those are a once in 20 year items so we should be clear after that. Duplex was built in 1997 so newer materials used helps keep from other big updates from being done. ARV looks to be around $325k and we expect each side to rent for $1500/mo range. Planning to BRRRR this and hold.

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

Growing area of town where new developments are headed and prices are still below the median for the area w/ a 10% growth upside in the short term.

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

Sourced on the MLS. Being able to offer cash aka hard money made things easier to win seller over

How did you finance this deal?

Hard money loan

How did you add value to the deal?

New roof, windows and surface level updates throughout

What was the outcome?

In progress

Lessons learned? Challenges?

Opening yourself up to partnerships unlocks more opportunities. Leaning on each others strengths goes a long way. Trust is huge. Don't let anyone tell you that you can't find deals on the MLS.

Congrats! Looks like a great opportunity.

What are you thinking on the back end for financing? I don't have clients in Knoxville in particular, and I assume with it being a duplex that the cash flow will be good even with a healthy ARV, but I am intrigued by your thoughts and early calculations.

Hopefully the ARV comes back healthy and you've got a good opportunity to cash flow and grow!

Hey Matthew,

Congrats on the property, even if it happened outside the norm, getting it done and having it cash flow is great!

I have a lot of clients doing BRRR right now and would love to talk through it with you. I know in particular that the Milwaukee market is pretty tough, so would love to talk through what some of my other clients are doing and some ways that you might be able to keep growing your portfolio, which it sounds like you are trying to do.

Congrats again!

 Hey Charles, 

That is the good thing about HML, if that program doesn't fit your needs, there are plenty of others that will be happy to help you with that. I have clients that use lenders that can do 50k or even less, depending on the type of deal that you are trying to do.

Don't let the 'box' that a lot of lenders try to put you in pigeon-hole you into doing or taking deals that you don't want to do.

Hey Jaden,

Congrats on a new stage of life! I used to play baseball too (DII and got hurt Soph year; so MUCH easier transition) but I hope you find that this new phase is just as, if not more fulfilling.

I don't think it is ever too early to at least start looking, but having some reserves, or money to put down is going to be one of the most important parts. The toughest property is usually the first, so figuring out what market you want to invest in, and what type of investment strategy you want to function in (BRRRR, Subto, Buy and hold, etc.) is going to be important as well.

You'll also want to figure out how much risk you want to take on with these deals. Having a year of savings before you start is one thing, but I know clients who just have some reserves and are operating through that. It all goes with your strategy and how much risk you are willing to take on.

But don't underestimate the difficulty of finding the 'right' property either. Depending on the market, it can be VERY competitive, so familiarizing yourself with the types of deals and areas you want to get in will be a great start.

I hope that helps! 

 Hey Elijah, so I help with Hard Money so my answers will be focused on that.

-When do you start using ARV to help one qualify?

Most lenders that are doing rehab-bridge loans are going to largely base the deal off of that. Of course, it is always wise in analyzing a deal to consider that value in determining if its something that you would want to go after anyways

-When do you start using rental income to help on qualify?

After you have done the rehab and are looking to refinance is when the rental income is considered. It would not be needed on the initial

-Can I have multiple loans with this lender?

Yes, almost every lender would do this as long as you have the funds to do it

-Can I change my title to an LLC eventually?

Highly recommend this, if even based largely on the liability and safety that comes from doing it this way. It stays off of your personal credit and lets you keep it off of your personal DTI 

-does this lender sell their mortgages?

Sometimes, depends on the lender

I hope that helps!

Having experience with STRs is a HUGE advantage with hard money lenders on long term STR debt. It reduces a major risk obstacle for them and shows that you are worth the "investment" on their end.

As for the front end of the BRRR, just making sure that your lender has a 12 month term to ensure that you have enough of a "runway" with whatever lender you are able to use for your refinance. The last thing you want to do is have a lender requiring something like a 9-12 month seasoning period and you are on a 6 month rehab loan.

That being said, there are lenders that don't need a year, usually about 6 months will do.