All Forum Posts by: Billy Brown

reach out, i'd be happy to help.  Can also potentially do a commercial line of credit against those

What you need is a banking relationship that will give you a line of credit against those existing homes to go buy more. They would bundle into small portfolios at 75-80% LTV so the properties would debt service and you would get most if not all your money back. Look up Alternative Capital Solutions in Franklin, TN and Yogi Dougher. Investors who are also bankers and get REI

@Adam Pollard i have the perfect one. send me an inbox with your email and i'll send you details. or i just posted here on BP

Currently unoccupied, rents entered are estimates if you would live in one unit and short term rental the other 2.  Also could work for Residential Senior Assisted Living or Furnished Executive Housing because of location.

Text me for link to see photos and proforma. 615-202-4790

Why do I see this for sale on the MLS? So here is the story…

My business partner Jeff did a mailer to this gentleman and he agreed to sell the property to us, but went ahead and put the property on the MLS the same day through an online agency who was not friendly to us.

If it’s such a good deal, why are you selling?

We closed on the property with the intention of doing short term rental or executive housing. With both our work and family schedules, the timing couldn’t be worse. We have done quite a bit of due diligence on this and happy to share our findings. Also, my wife and I used the “house hack” method to get where we are and want to offer the same thing to those disenfranchised by the lending system.

Can’t someone get a mortgage on it?

Yes, but it would take the right borrower and lender. With 3 separate dwellings and 2 electrical meters, most lenders will see this as an “illegal” triplex. It would need to be underwritten as a single family residence and that would force us the owners to convert the property back, which would eliminate the awesome income opportunity. Also, with the zoning as RS, that puts the cap on conforming loan amount to $466,900 without having to put 20% down. This is why our selling financing works well for a larger pool of people. Plus, no underwriting!

Are you negotiable on the price and terms?

No, if we don’t get our number we will keep it

What is the highest and best use?

There are several options, the one we investigated the most is Type 1 Owner Occupied Short Term rental. Other options include furnished executive housing because of the location to the hospitals and downtown. Also, Residential Senior assisted living is an option because the countertops are already at wheelchair Height.

I’ve never done Short Term Rental, how do I manage it?

You don’t, hire this out to a professional service. I cannot stress enough how much I recommend using Leslie Eggleston at TurnKeyVR. [email protected]. They do EVERYTHING for you inside the house and collect all taxes paid by the clients to pay. Plus, they will consult with you on how to maximize profit. She has already run the numbers on this property for us and has been on site. And she is one of the foremost experts on the laws of Short Term Vacation Rentals as well as current atmosphere with city council in Nashville.

How much can I expect to make?

This depends on several factors including who your clients will be. On short term rental, the 4 bedroom 2 bath will generate a minimum of $60-65k annually. In peak season in the summer, it could generate as much as $700-800 per night. If the owner lived in one of the other small units, they could rent out the other 1 bedroom (eg. traveling nurses or health care staff) for $900-1000 per month furnished. Total gross income on the low end is about $75-80k.

Terms

We want the new owners to stay in the loan 5 years. There will be a 5,4,3,2 pre payment penalty. This means if you pay off in year 1, there is a 5% fee to us, year 2, 4% fee, etc.

$535k purchase price

-$60k Down (not including closing costs)

$475k loan amount @6% amortized over 30 yrs.

Principal and Interest payment of $2847.86

Taxes run about $6k and hazard insurance is $1400-1500/yr.

We will require a $5,000 non refundable earnest money after contract and due diligence period.

Is there an application?

Yes. On the financing, since I’m a licensed loan officer, I want to make sure there is a good probability in 5 yrs this can be refinanced so I’m requiring an application. Fee for the application is $100 and covers the credit report and background check. Link to be provided later.

What is the criteria?

Because Bankruptcies and foreclosures have minimum wait times for lenders, we are looking for those to not be recent. Credit scores can be improved easily, but the most important criteria is cash flow compare to debt. Ideally someone right now that has less than 50% debt to their income. Lenders are looking for 43%.

What happens in 5 yrs?

If done correctly, you should have the ability to do a refinance. Assuming a moderate growth and upkeep, the property should appreciate to the $600-$620k range. You can pull out 80-90% of that value and pay off our mortgage. The remainder is tax free money you can use for whatever you want.

I’m a Realtor. Will you pay my commission for bringing a buyer?

Unfortunately no. All compensation will need to come from the buyer directly.

Who draws up the documents?

We will be closing with Rudy Title. This is also non negotiable. They have all the documents in place to create the Note and record it.

What about the contract?

We have a simple one page contract that is appropriate for this transaction.

How quickly can we close?

In as little as 3-5 business days

Have you had the property inspected and appraised?

Yes, and we will gladly share that information with you.

What happens next? How do we see the property?

We will contact you to schedule a showing.

@Jim Huish we haven't really finalized the numbers yet. Roughly, assuming no realtor, we would do a purchase price of $535k, $60k down, finance $475k at 6% for 5 yrs on a 30yr am. Pay your own closing costs. If you live in one small unit and get a type 1 STR permit, the numbers i have run are $80k-$130k year income. Other option is executive housing for doctors because of the location-White Bridge Pike in between Harding and Charlotte pike. It does need some love, but it's 5 miles from downtown ($10 uber ride). Could also work as a Residential Sr Living facility.

After we close tomorrow, i'll have a flier created to post on BP.

Are you looking for owner occupied or as an investment? We have one that we are putting back on the market tomorrow with owner financing that would be perfect for an owner occupied "house hack" where they could get a type 1 short term rental permit.  3 units, 4/2 on top, 2 one bedrooms on the bottom with pool.  zip code is 37205.  

Alternative Capital Solutions in Franklin, TN would be a good source. They can do lending in all 50 states and are also investors themselves.

overall, what @Todd Dexheimer and @Andrew Postell said is correct. It all comes down to the property and knowing what lenders will do for you. Interview several of them and stay away from big box banks. go local community banks.  Find a lender who is also an investor that understands the end game, not just making a commission.  Once you know what those guys are looking for, then you can back into your strategy.  Hope that helps.

@Allan Smith Seriously? You know i can do that.

@Doug Emerson Here is a hint (and you may know this already) Say yes, i'd like to buy them all but in order for me to give you a number I need to see how much net income these produce.  Put in a letter of intent then get the Profit and Loss statement for the portfolio for last 2 years and the Schedule of Real Estate Owned.  Off the Net Operating Income, divide that number by 12, for monthly income.  Then divide by 1.3 (Debt Servicing Ratio banks will lend on), then divide that number by 6.88. That is the factor for a 20yr amortized loan at 5.5%.  Then multiply that number by 1000 and that will give you debt amount current income will cover.  even though he will do the financing you need to have a backup plan. 

Here is an example of the math:

annual Net Operating Income $120,000. 120,000/12=$10,000 per month Net Income.  

$10,000/1.3 (conservative debt servicing ratio)=$7692. This is how much debt service per month the income will cover and allow for profit

$7692/6.88 (factor on a 20yr am at 5.5%. I can send you the link)=1,118.  x1000=$1,118,000 debt.

This will allow you to start negotiating from a power of truth.  If he is asking $2mm for the bundle then it's overpriced and he needs to sell individually.  Also need to factor in condition of properties and appraised value.  Don't close on it until you and inspector have seen all 200, i GUARANTEE you there are some dogs in that portfolio he is trying to hide.