All Forum Posts by: Dave DeMarinis

@Shane Gordon If you are thinking of BRRRR right now, I would put a huge focus on your 3rd R - Refinance. The market for Non QM loans will be extremely hard to navigate for a new investor. A traditional loan will be more feasible, but you will definitely need strong income and credit. Work with some bankers or mortgage brokers BEFORE starting the BRRRR. You do not want to get stuck with no financing options at the end.

Of course you should always be highly focused on your cash reserves but even more so now.

@David Ferguson As others said, certainly speak to an attorney for legal advice as I'm not one. I'm not sure how soon this year you mean, but it is currently nearly impossible to finance a first SFH in an LLC right now and relatively easy to do in your name. That said, many people finance in their own name and then switch the property to an LLC. (Search for the Due on Sale clause in a mortgage and you'll see plenty of threads and opinions on that but it is very common practice).

I would focus 99% of your time on finding the right area and property, as well as team - agent, Property Manager (@Stephen Glover is a very good start on this one btw), banker, Contractor, etc. Definitely do not set up an LLC before you are at least in contract on a property.

As for LLC vs. own name, insurance is 100X more important - plus insurance protects the equity in the LLC which might be a decent % of your net worth? I suggest waiting to get a few properties is probably a good idea before worrying about the LLC. If you think about the $1200 example, that could be an entire year of cashflow for the property.

@Cj Powderhorn You have the right idea to think about another market with a goal of 5 to 7 properties. I think geographical diversification with just one or two properties in each location adds more risk than the benefit of diversification because of the overhead of establishing relationships and knowledge.

I'm a lender and heavy value add investor, focused on the midwest and south east. If you are interested in Huntsville, AL - DM me. I really like that market for the very strong population, job and income growth with great affordability. It is actually set up to continue appreciation based on those dynamics. I have a couple properties you can compare and contrast coming up soon. One is B+/A- (~$200K and $1500 rent) and the others are C+/B-) $115K/$1K rent.

I'm an engineer so my grading scale is harder than most which is why I gave the price and rent to try and give some context. 

@Shakti Ramdass@Jeremy D. There are two groups I spent sometime with, both out of Richmond, VA who would be good connections on multifamily/syndication. They offer opportunity for investors with the financial commitment you are discussing and one even specializes in giving you an opportunity as an active investor in the project to get some experience. It is an interesting model. I haven't invested with either of them nor am I affiliated but I thought well of them and their characters. DM if you'd like a connection.

I also invest and lend in Ohio as well as the Southeast. I'm partial to the Huntsville, AL market because of the strong population, job and income growth with excellent relative affordability. It offers a great mix of cash flow opportunity with appreciation because of the growth and affordability available. You need to make connections and learn the market but it is worthwhile.

If interested in Huntsville, DM me and I can add you to some mailing lists for either rent ready homes or wholesale/value add/renovation opportunities.

OK, those would be really high rates. HML rate are annual, typically Interest Only paid monthly. In your case, 12% rate would be $1K interest per month. One thing to consider that is second only in importance to reserves is your cash out refi. Non-QM (investor loans which won't be guaranteed by one of the government loan programs) are nearly non-existent for a new investor. If you have very strong credit and income, you would probably go traditional which is a big help right now. Bottom line, you want to talk in detail with a broker or loan officer about your long term financing and understand that really well.

I can't tell you how many new investors I hear anguish over high interest rates with hard/private money. In my experience, very often the real estate agents make more than the hard money lender on a well run flip. Pretty much everyone who has really grown their real estate business from scratch has happily used high interest loans to do it.

I think it will really help you if you think about the deal paying the hard money lender and think about it in terms of dollars, not percentages. It is a cost and if your deal can pay it, do it. If it can't it probably isn't a good deal and you should move on.

Yes, I'm a lender so I am certainly biased but my focus is on lending to successful investors and helping them do more deals and make more money. If I do that, my business also does well of course.

@Daniel Johnstonbaugh Most lenders will want to see a minimum of 10% of purchase and loan capped at 70% LTV of ARV. The current environment is going to probably be more like 65% LTV. However, lenders will want to see strong reserves. At least 6 months worth of interest, plus money to pay contractor draws before the lender releases draws to you and money if renovation goes over.

Based on what you said, I would aim for $10K down payment on a purchase from $70K to $100K and ~$25K Renovation cost and $150K to $200K ARV. The other $10K would be reserves BUT I would want to see at least $30K of reserves in a deal like this based on your experience. If you are skilled and experienced in construction and doing the work yourself, that could help. Also recognize you will have to do some serious work to find a deal with these parameters.

@Ray Bruce Welcome Ray. I'm a heavy value add investor and lender in the southeast and midwest. I'm very active in Huntsville and think that market is great from a job, population and income growth combined with good affordability makes for a strong rental market with appreciation opportunity.

I'm starting to offer rent ready homes and occasionally homes needing renovation and are candidates for BRRRR or flip. DM me if you'd like to be added to my list to review opportunities.

Connect with the Dayton Real Estate group. They meet the second Monday of every month in normal times. Dayton is a great market with a great network of investors. 

All of those markets have good data to drive them. I would weigh heavily on quality of life and where you want to be in your situation. I'm partial to Huntsville and actually do a lot of investing and lending there. I'm in a handful of markets and Huntsville is the only one I chose purely by macroeconomics and trends. The diversity, low taxes, reasonable insurance, educated workforce, high affordability are all very strong. I think it also think it is one of the rare markets positioned for cash flow, strong rent growth and appreciation.

That said, "Huntsville" varies greatly. You can literally see home prices change by an order of magnitude within one mile. I always say you should spend about 10X the effort choosing the neighborhood, block and specific property as you spend choosing a market. It seems like most people do the opposite unfortunately.

I do sell some rent ready properties and occasionally wholesale properties in the Huntsville market. DM me if you'd like more information on those properties.