All Forum Posts by: Brandi Carballo

I'm planning on doing the exact same thing this year. I don't see any issues coming of it, and I've heard of lots of people moving out of FHA loan homes after the OO period ends and the banks don't care, as long as the mortgage payment is made.

Depends on the neighborhood. In my tiny town of Independence, OR a nice 2 bedroom apartment with washer/dryer goes for $850/mo. But 20 minutes away in Salem, OR I have a 2 bedroom rental that rents for $640/mo. It's in the ghetoo and the building it's in is old. But It's cute and I have good tenants.

What repairs does it need?

No, he is not paying cash. He has pre-approval for an FHA loan. I am familiar with the lender requirements and I am making those needed repairs prior to the inspection so that it will pass. Everything else is cosmetic.

He has deposited earnest money into our escrow account. It is refundable, I do not feel like a non refundable deposit is ethical. We do have a contract that is pretty standard for home purchases, so he can only get out of the purchase should something go wrong with the inspection or appraisal, if he just changes his mind then the earnest money is not refundable. 

I purchased my grandparents house from my aunt/uncles after my grandparents passed away. I basically let them determine fair market value, and they went with the county assessed value for that. I felt it was reasonable, although I think it they had listed it on MLS as-is with an agent it would have sold for about $10,000 less. ARV was substantially higher because of how outdated it was and other problems (no heat and siding falling off the garage), it is in a very desirable area and on a huge lot for homes in that area.

I fixed it up and it is now under contract. I will make about $50,000 on the deal. 

I really just let my relatives dictate the terms, they were reasonable to me, so it worked out well. I did NOT do seller finance, I used a hard money loan, because I did not want anyone involved or to have any say in what I did with the house after purchase. 

Personally, I would start by getting together with the relatives who can make decisions and just saying something like "I would like to buy grandma's house, this will help get her some money for when she needs it. Would you be interested in that?" If they might be you can start asking them what they think the value of the home is, as-is. You can pull comps, be sure to use homes in similar condition (outdated, etc). Let them pick the number first, and if it's too high, point out what other homes sell for in similar condition. 

So this is a new one. I purchased my grandparent's house form my aunt and uncles when my grandma passed away. Of course I got a really good deal on it. I own other properties that I rent out and I think they just kind of assumed I'd keep it and rent it out.

Original Plan:

Purchase price $86k

ARV $179k

Repair estimates: $25k

Loan/carrying costs $8,000n (hard money loan points and interest, utilities)

Realtor Commissions: $10,750

Potential Profit: $49,250

I live on the other side of the state, so I planned on driving down here and staying in this house while I fixed it up, doing all of the cosmetic work (paint, refinishing floors, refacing cabinets, etc) and bathroom remodel myself and hiring out the heavy work (replacing siding on garage, new rollup door, electrical work, new heat). Initially I was going to stay for 11 days then come back 3 days a week until I was finish, I estimated it would take me 4 to 5 weeks total. Still cheaper than hiring a contractor to do the stuff I was going to do.

My first day here I get internet installed (can't live without that, lol) and the Charter guy strikes up a conversation since I just have an air mattress on the living room floor. I tell him it was my granparents house and I am fixing it up to sell it. He look around and says "I might be interested" and starts asking questions. I tell him all about what I am going to do to the place and my price. So he asks if I would be willing to forgo all the cosmetic stuff and sell it cheaper. I run the numbers and give him a price that would get me the same profit (only way I'll do it) and he agrees to it! Fast forward a couple days and more conversations and his family coming over to check it out and we are under contract.

Actual Numbers:

Sales price $150,000

Purchase price: $86,000

Loan/carrying costs: $5160

Attorney fee for contract: $1500

Actual repairs: $6020

Actual profit: $52,670

Repairs, if you are wondering were:

$1,100 siding for garage installed by me and my husband instead of hiring a contractor, we also skipped the rollup garage door and left the wood doors that swing open

$3,000 new wood stove, installed

$1,500 new electric panel

$100 misc (4x4 post I had to replace and paint for trim with peeling paint, GFCI outlets)

$320 stuff I'd already bought and can't return (ie paint). I'll end up using it on another project, but still including it as a cost for this scenario

I'm really excited about this. I usually only buy projects I am going to hold and rent out. This is my first flip/sale. I doubt this will happen again, but it has me excited for the next deal!

I'm only speaking to the terms of the hard money loan, not the deal itself....

They're nickle-and-diming you to get as much out of you in "fees" as they can. It's a bad deal. They shouldn't charge points plus an origination fee much less a "processing fee" and an "underwriting fee", it's kind of ridiculous. 

My very first flip where I used a hard money loan (I had done 4 Brrrs so I wasn't brand new, just hadn't sold a property) I borrowed 65% of ARV at 12% interest only for 2 years and 3 points which was rolled into the loan. The only fees I paid up front were the title/escrow fees. I did not have to have an appraisal or inspection. My lender sent someone to the house to look it over, he didn't even go inside and my realtor provided my lender with comps for ARV. I only wanted a 1 yr loan but my lender insisted on 2 years since it was my first flip in case I had a hard time completing the work or selling. But there were no prepayment penalties, so I could sell it anytime and it not cost me more.

 Yes, any bank would likely want good credit. There may be private money out there for longer term loans, but you would likely pay a much higher interest rate.

You can improve your credit score by huge amounts in about 6 months. Having good credit is a really good bargaining chip.

To refinance after a rehab:

Small, local banks and credit unions are usually the best place to find a portfolio lender. That is what I use. You can call and talk to, or make an appointment with, their loan officer. Sometimes there's just one, sometimes there are several people, usually you will want to speak to the loan officer in charge of commercial loans. A traditional mortgage loan officer will be dealing mostly with people buying a primary residence, who want a traditional mortgage.

Not all lenders will use the term "portfolio lender", I just tell them I am a real estate investor, I own 9 properties (or whatever it is at the time) and I am looking to refinance a property I already own that I have rehabbed. I ask if they loan to investors with multiple mortgages and if they do cash-out refinances. Some banks won't lend to you, some will but will not do cash-out.  I also asked if I have to own the property for a minimum timeframe before they will refinance (some banks will require a year, and that usually doesn't work for me), some will even require your renters to have been there for 6 months before they will consider their rent income as part of your debt:income ratio.

You may have to call a number of banks or credit unions before you find someone that will work. Don't call larger banks or chains, or you could try, but they probably won't do it. It's the small, locally operated banks and credit unions that have the ability to make decisions in-house, they don't have to conform to a set of standards written by someone at a corporate office. 

I own properties in Salem. It does pretty good, you just have to be careful not to buy in a bad neighborhood or you will have trouble selling. There are some really nice neighborhoods in Salem and cheaper than Portland.

Prices in Albany are a little lower than the other places you mentioned, but I haven't tried to sell anything there before.

Eugene is good, homes sell well, but prices to buy are higher for investors.

If I were in your place I would run numbers on a few deals in each city and compare profits. It's also always easier to flip a house close to home.