All Forum Posts by: Arpan Patel

Not to derail the post but you don't need to season the company - it is more a question of if the operators are competent and experienced. Most lenders know that something bad will happen - that's the nature of the biz - so they are usually not only looking at the deal and the ability to pay back the loan but also about the skills of the operator to get out of difficult times. As for the actual question, there should be many lenders who would consider that 80-20 deal. Just be aware that these private lenders are looking for a better rate than what the banks would offer. Good luck!

LLC (we have a series concept here so we use that but basically just a bunch of little LLC's)

I would get a property under contract and then have a good long due diligence period to where you can interview contractors because you have an actual project to show them, to get lending on, to talk to an attorny about, etc. You have something real. But it will go fast as soon as you get that contract. I would talk to an attorney and CPA almost immediately after the contract, then the home inpsector that week along with many many contractors that first week. Then the second week go through lenders until you get one you like and then start the lending process. Make sure you have all your docs good to go so you aren't search for them a ton. You may need to push closing back to 6 weeks but put that in your offer to begin with and you should be fine. But it is going to move very quickly once you start so be ready!

It is a bit hard to follow your numbers. Could you put them in the BP calc and then share the results of that calculator? I would be happy to help you walk through the numbers if you can share the output of that calc.

Depends really. Both can work but I would run the payments against each other. If you are trying to get the same amount of money then take a look at the monthly payments for both and see which one is more cost effective. Then look at the pay down for each and from those two make a decision. I would go with a refinance if you are living in an area that historically have some appreciation above 1% (20 year rolling average) but a HELOC if less. Just seems to work better math wise but honestly just splitting hairs. At the end of the day, it might be easier to get a HELOC then a refinance so maybe because of speed and a lack of closing costs, I would lien towards the HELOC.

Correct

I have a bias towards Chicago of course. You get the midwest cash flow but in a global city. Vegas can be good as well but just prone to much to market crashes. Upstate NY can also work especially around college towns (I went to school and upstate and missed out on that opportunity as I found real estate as an investment my senior year...)

Also, try understanding in full detail how the BP calc on rental or flip property works enough so you can recreate it in excel. That will help you with the fundamental concepts behind the calculator. Then turn that analysis on your local market. You will learn through trial and error. See if there are other rehabbers in the area and find out what the rehabber thought the house that looks newly renovated for. You will start to learn you margins that way. 

Depends on a few factors: risk tolerance, time, resources, network, activity and what attracts you the most. How are you on these factors?

I'd say the clear difference is the cap ex factor. If you redo part of the home then you essentially restarted the clock on the cap ex. For instance if you replaced the furnace in the BRRRR and you did not when you bought the place raw, then you will have to replace the furnace that much sooner. That and the maintenance could be higher as well. Lastly, I don't know - at least in my area you can't - find a fixed up ready to go property for a discount. If that is the case, then over time if others in your area do the same thing you just did, then your equity gets eroded because if 6 other houses that were worth 100 are now bought for 75 with no work, then all of those houses are not worth 100k anymore but rather 75. There was no work or value add so why would an appraiser appraise your property for a higher value. That is trouble I see in one of my target areas - investors bought ready to go investments and didn't update them and ran down the prices in the neighborhood. If you BRRRR then you are improving the value of the home but renovations and can make the case that you are improving the area and values. BRRRR relies on the valuations staying high and if you set a trend of value add in your area, other will need to do the same to get your valuations. I hope that helps a bit.

Probably start with the BP book store and read the book on no and low money down investing. In the end, you will want to keep your job and restructure your finances as much as possible so you can save as you will probably need some cushion in the beginning if things go wrong. I don't think you should start with nothing however there are those who did it and have excelled. Just not the best chance for success in my opinion. Good luck!