All Forum Posts by: Andrew Tanner

@Jeffrey Allen that would be awesome. Would love to pick your brain and see how someone with your experience analyzes his deals. @Wayne Brooks, our team has had the exact same discussion. Some members of our team want to sell it outright, another wanted to keep it and find a different way to raise capital for our pending deal, as he did not want to lose a property that was cash flowing well and would continue to grow in value YoY. In the end we compromised after getting advice from a local mentor that we would sell the house and use down the payment for our next project and seller finance to keep some cash flow over the next few years and try to maximize our total return on the property.

If you have differences in opinion I would definitely love to hear them and how you would execute. Personally I am in the camp of selling outright as I believe that to be the path of least resistance to our goals, but also see my partners perspective. I posted this situation here to get fresh eyes on it for this exact reason, to hear some new thoughts. Appreciate all your insight.

Hi Jeffery,

We did run numbers but I DID fail to mention in my original post avg rent in that neighborhood for a similar renovated SFR has now exceeded $1200. The house is located in KC. It is a higher end remodel so when the lease expires it can be renegotiated or rerented for $1400. It would be our plan if we were to keep it.

In any case I see your point. Even with good short term upside this is a low monthly cash return for the investment which is not necessarily attractive to most investors, especially when we need to sell, and probably not too competitive even against hard money. If you were in a similar situation how would you envision the deal going?

Appreciate you taking the time to help us think it through.

Hi Lee!

Thank you for the reply. It definitely seems like the wraparound mortgage is the way to go thank you for pointing me in the right direction. However we would most likely be selling to another investor, not an owner occupant. The current tenant does not have the funds to buy the property and has a lease through Dec 2021, hence selling at the higher interest rate.

Hello BP community,

My partners and I have a BRRRR property we are ready to sell to start to scale our business. Here are the figures:

$40k purchase

$41k renovation 

$141k (Sept 2019) appraisal 

$105k cash out mortgage @7.5% interest only.

Rents for $1200/mo, renter has been in house since Nov 2019, lease runs through Dec 2021. She always pays late, but always pays and happily pays late fee with no fuss. There is never any drama at all from the renter or her kids. She loves to care for the yard  as a hobby so we knocked $50 off the original rent of $1250. We know the renter does not have the resources to purchase the home. Would happily recommend to an investor that the tenant stay with the property.

Net cash flow after expenses is $425/mo

Property values in the neighborhood have increased 10-12% since appraisal. 

While ideally we would hang on to this property for another few years (values in this neighborhood will continue to go up due to proximity to KC downtown and commerce areas, and big mixed use developments that have begun in the area) we have had some huge opportunities land in our lap that require us to have some cash on hand, so we are looking to sell and 1031 the profits into this opportunity. A majority of the excess cash from the cash out is tied up in another BRRRR project we are working on now.

Based on the increased property values and NOI we believe the house should sell for around $165k.

Our thought is to sell the house with seller financing with a 15-20%, down payment (more than enough to get us into this new opportunity), 8-10% on the remaining loan with a 5 year balloon. This allows us to move onto bigger things and and still receive the monthly cash flow.

My question is how do we execute this and satisfy the current mortgage holder?