All Forum Posts by: Bonnie Low

Hi, Jesse. If you want to get into flipping there are a few things you're going to want to focus on right now. Finding a lender is just one of them. Do you have a construction background? If not, you're going to want to spend some time figuring out how to estimate your repair costs. It's critical to be able to estimate your repair costs so you know how much you're willing to pay for the property. Since you're checking out investing books, a must-have is the book on estimating rehab costs by J. Scott. This will really help you when you start doing walk throughs. Speaking of which, chances are you're going to have to look at a lot of properties before you find a deal where the numbers work for you so I'd start lining up properties as soon as you can. Especially with COVID it can take longer than usual to get in and look at properties. Get comfortable doing your estimates, running your numbers and making offers. Good luck to you!

@Josh West in most cases private money is the holy grail. It's just harder to find. Hard money is a happy medium between private money and conventional loans. You can use it to buy properties conventional lenders won't touch, but it's costly. So use it for short term funding - less than a year usually. You're going to have to decide what you're going to do when your HML term is up because you want out of that expensive loan. You're probably either fixing it up so you can flip it and sell for a profit. You'll use some of that profit to pay off the HML. Or you're planning to keep it, in which case you want to make sure your rehab forces enough added value into the house that the ARV creates equity you can pull out when you refi into a conventional loan so you can pay off your HML.

Hey, @Jay Hinrichs - I meant Lake California (the gated community in Tehama Co) for the Red Emerson property, not Lake County. ; )  And I totally agree with you about rural property in CA. I've come to believe that Californians are some of the biggest whiners out there (and I can say that because I live here!)....'there's no good deals', 'it's too expensive', 'our Governor is a Commie..'  blah, blah, blah. Where there's a will, there's a way. Sometimes it's not sexy, but it's there if you want to work for it. 

@JayHinrichs I'm familiar with all of those, but I had no idea they were Boise Cascade projects! I've heard that property currently adjacent to Lake CA which is still in grazing today was or is owned by Red Emerson from Sierra Pacific, but I don't know if that's true or just a rumor. 

Merry Christmas to you, too! It's inspiring to see what everyone is focused on. Our goals are:  

- buy 4 SFR properties to BRRRR

- finish the remodel on our current ADU & get it rented

-  Analyze one deal every day

-  Move our accounting system from Excel to Quickbooks

- Establish an LLC

Welcome! We love Idaho and have family in Boise, Meridian, Nampa and Parma. 

@Esteban Cardenas I'm glad people are doing well in Pokie. We found a weird phenomenon in that properties at the low end of the market that needed significant work weirdly did not also appreciate so that the ARV would make sense to an investor. My guess is that people are jumping in and paying too much and the ARV is yet to catch up. We still keep an eye on this market, though.

@Jay Hinrichs yes, CA. Way up north here in Lake California - a gated community in Tehama County. There are a lot of cheap lots out there usually due to tax sales, but  many of them are very sloping and/or heavily treed with oaks. We were lucky to find these flat parcels right across the street from the Sacramento River. Power to the streets and sewer/water hookups available but otherwise no improvements. Since we sold, the prices have gone up further (dang it!), largely due to exceptionally low housing inventory due to the Carr Fire in Redding and the Camp Fire in Paradise. They can't build fast enough. But man, it's tough to find a contractor!

@Asad Malik like I said, I'm not a wholesaler so I don't know what the "recommended" formula is that wholesalers use. But the numbers just don't make sense to me since repair costs can vary wildly from property to property. So in the first example (not sure if these are actual numbers or just dummy numbers for the sake of illustration), your fee amounts to 25% of the ARV of the house. It's hard to imagine house with a $21,000 ARV will a) not be in need of major repairs and b) would cash flow. It is easy to imagine it will not appreciate much, if at all, for a long time. So I'm not sure what the appeal would be to investors.

But if you took a more realistic home price, say an ARV of $100,000 using your formula, your MAO would be $45,000. In that scenario your fee is 5% of the ARV. You now have enough spread in the property to potentially absorb the cost of repairs, produce cash flow and/or set the buyer up with an equity position or cash out opportunity. Maybe it's just the very small numbers you're working with that are throwing me off. What types of properties are you looking at and where?

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Pocatello.

Purchase price: $110,000
Cash invested: $15,000
Sale price: $125,000

Over/under duplex in Pocatello, ID

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

We liked the Pocatello market for buy-and-hold investing. Our intent was to BRRRR this property.

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

We bought this property from our Realtor at the time. We had another property under contract that fell through at the 11th hour due to a previously undisclosed lien. We needed to make a purchase in the calendar year for tax purposes so we we had to get another property bought. Our Realtor had just renovated the upstairs of this house and wanted to sell. We did a facetime "walkthrough" with her and accepted her recommendation that the bottom unit could be renovated for $10,000.

How did you finance this deal?

Conventional loan for "second home" with 10% down payment. Cash for down payment and slight repairs. We used DL Evans bank, a local bank.

How did you add value to the deal?

Appreciation. We had intended to remodel the bottom unit to increase cash flow, but our Realtor's estimate of repair costs to get it livable were WILDLY inaccurate. After getting several contractors and tradespeople to the site, we estimated $25-$30,000 would be required to finish the basement unit. The single unit upstairs cashflowed just under $100/month.

What was the outcome?

We sold the property a little over a year later for a small profit due to market appreciation. We did not convert the bottom unit into habitable space because the numbers just did not make sense. We would have had to put too much into it and wouldn't be able to get our $ back out using the BRRR method because the ARV just did not support it.

Lessons learned? Challenges?

We had visited Pocatello several times and had even drive by this property on a prior trip so we knew the neighborhood and knew it was a solid brick building. However, we hadn't been inside and that was a mistake. Accepting our Realtor's recommendation about potential repair costs was also a mistake. We trusted her because she'd done remodels before. We're still not sure why her estimate was so far off base. I don't believe she deliberately misled us. I think she and her partner just cut corners

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

While our Realtor didn't work out, our Property Management company has been excellent: talk to Garret Durant at Real Property Management in Pocatello.