All Forum Posts by: Beau Ryan

Bottom line if you aren't experienced enough to know all the ins and outs put an inspection contingency in there. 99% of offers will have it. Have your contractors go through and give you a thorough bid. If it doesn't work with your numbers you can bounce. An all cash offer continent on insepction is still a super strong offer. 

I am looking for a good hard money lender for a fix n flip in the minneapolis metro area. I am an experienced investor and certified appraiser with years of experience in buy and holds and flips. I have never used hard money before. All previous deals have been conventional financing, portfolio lenders, cash, Etc. Any help would be appreciated. 

I obviously don't have all the info in front of me. But there seem to be a few things I think that may need tweeking. First off the appraisal for a property of over 4 units will be a commercial appraisal, not residential so the sales comparison approach is not the best way to determine value it will be determined by the income approach, cap rate, gross rental multiplier , etc. If it is a good deal the appraisal should tell you base on dollars not comparables. But knowing that 2 similar, better condition properties sold for under 200k less than 2 years ago should be a huge red flag. Price appreciation is much slower and much less in general in smaller towns. 

Now your $650 rent per unit does that have tenants paying all utilities, gas, electric, water/sewer, garbage, etc. Or is that actually a greater cost to you. You have a $614 monthly utility costs which comes out to about $80 per unit so I'm assuming something is paid by you. Vacancy rates are probably too low. Small towns can have much larger vacancy rates than larger metro areas. Especially if you are the worst property, you will be the last to be filled. I don't know the age and condition of the property but $18-$23k seems really really low for needed repairs and there will probably be other big ticket items needed well beyond your cap x budget. Siding, windows, roofing, heat systems, exterior, Interior painting, landscaping, parking lot, new appliances, etc. 

Insurance also seems quite low at $100 per month. Seems like it would be well over double that. 

Go talk to the owners of the other 8-plexes and see if they would be willing to share some actual costs with you as well. 

Get your numbers super tight, get

The offer under contract but if the property doesn't appraise close to what you offered run away. Good luck. 

If actual rents really should be 700, 600, and 500 for a total of 1800 and the property doesn't need a ton of capx big ticket items real soon, wonders, roof, siding, etc than you should have good returns.

First get a new agent. If your agent sent your properties to compare and you are buying a triplex and none of them are 2-4 unit properties they don't know what they are doing. Research the income approach on how to value properties. if there really truly are no comparable multi family properties it may not be a good area to buy that type of property or there maybe other issues as well.

Put no stock in the assessed value. Nothing to do with market value. Only for tax purposes. And values are set from a formula 2 years prior to current year. They use a formula to come up with the value and has nothing to do with actual comparable sales or listings. Some areas will have assessed values greater than market value and some will be less. Some are actually close but know way of knowing.

I would only hire an appraiser on properties you put under contract to verify the current market value and the after repair value to make sure you deal works. Otherwise this would get quite spendy. An appraiser will give you the actual market values for both. Using an real estate agent may get you somewhat close sometimes but they are not in the business of valuing properties and have no training in how to do so. Some seasoned investor friendly agents will be better than others but good luck.

I would find a different insurer. Never ran in that issue and almost every property I've ever flipped was 40+ years old.

I would def paint and put in new flooring. Most buyers want turn key. They don't want to have to do the work. 8k on a 600k house is very minimal. Do the work asap. And the home will sell asap. Always sell a property move in ready. If the home is vacant stage it as well.

Rather than asking the homeowner what they owe and possibly offending them just research the loans yourself. Realist is one example that gathers property data in my area. It will show all of the basic characteristics of the property, sale and listing history as well as mortgage history. It will tell you the dates and mortgage amounts. This won't have current balances but should give you a very good ballpark number based on the number of years since those loans were taken out.