All Forum Posts by: Brady Morgan

Sounds like you have already done a fair amount of research on the wholesaler, great job! Plan sounds solid, wholesaler sounds legit from the info you provided.

When it comes to the properties, never take the wholesaler at their word on any assumptions. Do your own analysis from scratch, make sure the numbers make sense for you. I often get deals sent to me by wholesalers only to find out they cherry picked comps or under estimated rehab. Of course they are running a business and need to make money, so I chalk this up to salesmanship and generally wont hold it against them. Its up to the investor to do their due diligence.

The hard part is getting it all done in time. Usually these wholesale deals move quickly and usually require a non-refundable deposit within a few days. So you have to move quick on the due diligence. I always get a GC and inspector out to walk the property with me at the initial showing to get bids. This helps me immensely with making a decision on the spot. Also, always bake in some contingency. Personally, I like to add a 10% contingency to any rehab bid I get from the GC.

In the end, know the market, know your numbers, do the analysis, and use the wholesaler for what they are, a salesman. That said there are some great wholesalers out there and if you find them, build a strong relationship with them and this process will become much easier.

CoC return is after all expenses and debt service.

NOI is the calculation before subtracting debt service.

NOI - Debt Service = Cash on Cash return.

You can be a passive investor in syndicated multifamily deals. This would be completely passive, all you do is collect checks every month/quarterly. I know many people who do exactly this in my area and average 10-15% cash on cash return. I would recommend investing in multiple deals though to diversify and reduce risk. Only invest with operators you know have a good track record and have an attorney review anything before you sign. Personally, with 2 mil, I would probably do 250k max per deal and try to get into at least 10 deals. Look for yield plays (class A apartments can be good for pure yield play) so you start getting paid as soon as possible rather than waiting for unit turns and rehabs.

Thats my advice and I know people who have millions invested in exactly this way. It is what I am building up my investments to eventually be able to do myself.

Good luck!

The deals are more common in the areas around DFW. Look for working class communities and you can still find deals for a brrrr, although other Texas markets such as Houston and San Antonio will be more investor friendly. 

If going the brrrr route, wholesalers are a good route in these markets. Just educate yourself on dealing with them. These cities have strong investor communities so reach out to locals and go to meetups. 

As for interest rates, you are looking at around 4% on conventional I believe, but I haven’t checked conv rates in a min. 

I posted this in part of a response to another thread, however it is relevant here so I will repeat the relevant portion  

I will explain what options I have found and how I intend to use them. My investing strategy is essentially the basic brrrr. I buy a house that needs rehab with hard money, then refinance. However I am currently looking into refinancing with what is called a portfolio loan (balance sheet, not blanket). This is because my parter, who is providing the capital, is retired and has no income but a lot of asset accounts. So the portfolio loan allows us to qualify based on assets rather than income. This also means we can buy in an LLC which we preferred for our particular strategy. The portfolio loans do come with a slightly higher interest rate, currently around 6%, but have flexibility in areas such as interest only periods. For example, one of my hard money lenders also offers portfolio lending for the refinance at a 6% rate which can include up to 5 years IO with a prepay penalty of 5% in year 1 and 1% less each year until year 5 when it becomes a standard loan essentially.

So the question is then, when does it make sense to use the IO option? For me this is a matter of strategy. In my current deals we are focusing on building up cash flow to reinvest as quickly as possible over the next few years. According to my modeling that will provide the best 10 yr return on investment and meet the goals of my parter and I both. So we are using the interest only option on deals that make sense for it, getting a nice boost to cash flow, while keeping in mind that our return on sale when we sell in five years as planned will be much lower with none of the principal having been paid down. Because we will be 1031 exchanging into a new property to basically reset tax liability and enter a new IO loan rather than banking on a big profit at sale, this works for us. Because of the time value of money, we prefer to get bigger returns now in exchange for less in 5 years.

This is just one example of the many IO loans and credit out there, but it’s one that I think can be useful with the brrrr strategy when used wisely.

I will add my two cents here, as this is something I have been looking at myself.

To start with, if you can’t make a deal work with traditional financing then please stay out of the deal until you are Moreno experienced. That I should probably my number one advice on the topic. If you are having a hard time finding good deals, then try a different market perhaps? Texas has some great market for example.

To go into more detail, I will explain what options I have found and how I intend to use them. My investing strategy is essentially the basic brrrr. I buy a house that needs rehab with hard money, then refinance. However I am currently looking into refinancing with what is called a portfolio loan (balance sheet, not blanket). This is because my parter, who is providing the capital, is retired and has no income but a lot of asset accounts. So the portfolio loan allows us to qualify based on assets rather than income. This also means we can buy in an LLC which we preferred for our particular strategy. The portfolio loans do come with a slightly higher interest rate, currently around 6%, but have flexibility in areas such as interest only periods. For example, one of my hard money lenders also offers portfolio lending for the refinance at a 6% rate which can include up to 5 years IO with a prepay penalty of 5% in year 1 and 1% less each year until year 5 when it becomes a standard loan essentially.

So the question is then, when does it make sense to use the IO option? For me this is a matter of strategy. In my current deals we are focusing on building up cash flow to reinvest as quickly as possible over the next few years. According to my modeling that will provide the best 10 yr return on investment and meet the goals of my parter and I both. So we are using the interest only option on deals that make sense for it, getting a nice boost to cash flow, while keeping in mind that our return on sale when we sell in five years as planned will be much lower with none of the principal having been paid down. Because we will be 1031 exchanging into a new property to basically reset tax liability and enter a new IO loan rather than banking on a big profit at sale, this works for us.

So to sum it up, financing doesn’t necessarily make or break the deal, it’s more of a strategic choice. If the deal doesn’t make sense with conventional lending options after the hard money for rehab, then I would recommend moving on to a different deal rather than trying to make it work with creative financing. Hope this helps anyone out there curios about the topic.

Let me know if you are still looking for someone. I have a lot of experience in analytics and I am very good with searching listing sites for deals and working with spreadsheets etc.