All Forum Posts by: Annchen Knodt

Hi P!  If you haven't already, check out https://www.biggerpockets.com/… - there's certainly no shortage of events in the DMV area! I've been to a couple of the "DC REI Rockstars" meetings and gotten lots out of the,, though space at those fills up quickly so be sure to RSVP early if you're interested. Meetup.com is another great place to look for meetings.

Best of luck getting started!

Investment Info:

Single-family residence buy & hold investment in Burlington, NC.

Purchase price: $61,000
Cash invested: $24,000

Contributors:
Tom Knodt

First buy-and-hold single family rental (of hopefully many!)

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

I am looking to build a portfolio of cash-flowing properties to achieve financial freedom. My agent / property manager convinced me that Burlington is a good nearby place for cash-flow - I live in Durham which has become more of an appreciation market.

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

Found on MLS with the help of my agent, initially offered asking price ($64k). Asked for a $4k concession after inspection turned up a few sizable unforeseen issues, sellers granted a concession of $3702.50 (?!)

How did you finance this deal?

Cash with partners (/parents :-)

Initially applied for delayed financing, but fell through since the funds used to purchase were from a partnership, and I applied for the loan in my individual name (with plans to ultimately deed the property to our partnership's LLC). Lesson learned! Waited the 6 month seasoning period to do a standard cash-out refi instead. House appraised at $82k, loan is 75% LTV, 4.25% over 30 years.

How did you add value to the deal?

Did $19k of rehab work - probably more than we should have! Got a crazy story out of it though… through some sort of miscommunication, the roofing sub-contractor replaced the roof on the wrong house! At least it was a small house…

What was the outcome?

Renting for $950/mo (+pet rent)

End result is ~$200/mo cash flow for ~10% CoC return on the ~$24k left in the property
(nb: I've wondered what the "Cash invested" field in this form is intended to refer to, I think folks interpret it differently. I'm assuming that it means the ultimate amount of cash you're investing, not e.g. rehab etc expenses above purchase price)

Lessons learned? Challenges?

Learned I need to get better at estimating rehab costs and understanding where is the best place to spend $$ for rental value. Learned that purchasing a house can be very stressful and it's easy to feel like everything is going to go terribly wrong, so very important to be confident that your numbers and strategy are well-founded, and let that drive you more than your emotions!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes! Jesse Marinez (One Village Property Management) - his enthusiasm is contagious!

If you have time for it, definitely!  It's always good to be constantly aware of what's out there on the market, and until you have an accepted offer you really can't be sure where it's going to go, and you want to be ready to move on to the next opportunity if you need to.  Good luck with your negotiation, hope you get it (at the right price)!

Hi @Tim Swedberg!  With your skill set you are definitely well-positioned to make connections with investors.  I would think this would happen organically by working on projects you do for investors, but it sounds like you are looking for a way to accelerate that.  Definitely the best way to gain experience is to partner on a project with a well-seasoned investor - there are many ways you can do this and it just depends on what agreement you come to with the partner you have in mind.  Maybe in your case you could offer some work in exchange for mentorship and build up to having an interest in the deal.

If you haven't already, I'd definitely attend local investor meetings - that would be a great way to meet people and potentially learn about people/organizations who could offer you lots of experience.  Often real estate clubs need volunteers to help with various tasks, and that's one way to get involved and surround yourself with people you can learn from.  You might also want to mention where you're from on here so that people in your area can see your post and chime in!

Congrats on getting started early!  Be sure to start with a great education, which it sounds like you are already working on.  Also try to attend as many local meetings as you can, and ideally build some relationships with folks in your area with lots of experience so that you can go to them with questions (can't emphasize enough what a huge difference that makes!!)  It hopefully shouldn't be too hard to find experienced flippers who are excited about helping out genuinely enthusiastic young people, especially if you are able to add value to them in some way.

Also make sure you have long and thorough discussions with your partner about your expectations for your endeavors and how you plan to handle any contingencies you can think of.  Get as much as you can in writing.  Partnerships can easily get messy, so be sure to tread carefully!

Good luck!

@Breelon Bryant, it’s definitely a powerful tool, but can also be tricky so you want to make sure to do all your research and talk to your lender about the exact requirements.  A few points:

• Per the Fannie may guidelines for the "delayed financing exception", you can borrow up to 75% LTV, OR your initial purchase price (this can include closing costs), whichever is LOWER
• Lots of people have had success with including rehab costs on their HUD / closing statements, so that the second part of the above guideline isn't the limiting factor, enabling a BRRRR-type strategy without having to wait the full 6 month seasoning period. See this blog post for further details. It seems like other people have had issues doing this though so make sure you talk specifics with your lender! 
• I don't think that it works on a house purchased with hard money, because the purchase has to be done with YOUR funds, not a loan from someone else.  I actually had a delayed financing application fall through bc I was applying for the refi in my name, but the house was purchased with funds in my partnership's bank account.
• Alternatively, you may be interested in another creative strategy for doing a cash out refi without waiting 6 months, described here 

Hope this helps!

@Spencer Crist, wow that really does sound too good to be true, but congrats if you have actually found yourself a home run! I will add that when weighing the cash purchase + refinance later strategy against simply purchasing with financing, another thing you want to keep in mind is that you will be paying some closing costs twice (e.g., title company / attorney fee, recording fees, etc)  I have done this once and am thinking of doing it again, since a cash offer is more competitive and the numbers still seem to work with the homes I’m considering (I’ve estimated that the extra cost in my case is ~$1200, which doesn’t kill the deal)

I like the system Brandon Turner outlines in his blog post: https://www.biggerpockets.com/…

You can take each big ticket item and estimate the cost per month given its replacement cost and lifespan - items you've just replaced will have a longer lifespan so a smaller amount to set aside for reserves each month in the total calculation.  Hope this helps!

Most BRRRR deals are purchased up front with either cash or short-term financing such as private money (e.g. a rich uncle lends you the purchase + rehab amount at 8% interest for a year) or hard money (more institutional lender that will lend based on the property / "hard" asset for 6mo to a year, usually charging 10-12% interest and some points up front). Once the property is rehabbed, you do a cash-out refinance to long term financing (e.g. conventional 30 year), and pay off your short term lender. Hope this helps!

Exactly!!