All Forum Posts by: Debra Grumbach

Many times with a BRRRR you are using short term money originally (from a private lender of HML) at a higher rate and shorter term. Mainly because many of these BRRRRs are not financeable through regular means before the rehab. Once the rehab is complete and you rent it out, financing is easier due to the condition and the fact that it's rented. So then you refinance, pull out as much cash as you can to repay your original loan, plus any cash you put in (hopefully) and a little extra - all while being able to still have cash flow on the property. I know investors who will use this strategy even if the cash flow is small or non-existent, so long as they have no money into it once they refi, and especially if they can pull 10k-20k out on the refi in addition to any cash they put in.

Originally posted by @Wayne Brooks:

You do Not want to improve a property you do not own......87 different things could happen to make you lose your money, no matter the contracts.

As mentioned, you would want to buy (yes, a closing and everything) subject to.  You get title in your name, you pay the mtg until you pay it off when you sell....just a few grand in closing cost.

@Debra Grumbach BTW, the seller is Not protected in a sub 2.  He would no longer own it, and couldn't take it back if the buyer defaulted......sub 2's are great for the buyer, but can be dangerously risky for the seller.

 Thanks for the correction.

@Wayne Brooks - yes, you buy it. closing and all, but instead of getting your own mortgage you buy it "subject to his mortgage." Meaning you leave his mortgage in place, you make the payments. When you turn around and sell it, his mortgage gets paid off and you get the difference.

Very interesting. If the income is good I would look at WHY the credit scores are different/low. My husband and I have been married for 23 years and all our mortgages have been in both our names. We are both on each other's credit card accounts mostly but my score is 20 points over his. And he has a JOB and I don't! 

Look to see what the last couple of years are like for their reports. Old mistakes, while you shouldn't ignore, shouldn't be held against people forever.

I am not an expert at all but I would think that if you buy it direct from him subject to his current mortgage you would be protected and he would be also. If you don't make the mortgage payments he can take it back and he gets the improvements.

Originally posted by @Charlie MacPherson:

@Account Closed I must be misunderstanding something:  "$3000-$3300 per unit per month. 12-13k total rent per month."

$3300/unit X 3 units sounds like $9,900/month.

Are you adding a 4th unit?

@Charlie McPherson - yes he is. It's in the first post. 

Originally posted by @Rahiem Bush:

I feel like u guys feel like little to nothing will happen and I'll save money not paying monthly 

 Not at all. But why pay for someone to do nothing? When things happen, call him and then pay him for his time. You could do the "retainer fee" as someone suggested. This fee could go towards just having him "available" or could go towards actual hours he works on the property. Even an attorney's retainer is applied to hours actually used before you get billed.

depending on when you actually stopped living in the home you may still get the sale of primary residence exclusion. If you live in the home for 2 of the previous 5 years and sell, you get to exclude all the gain on a sale that size.

Originally posted by @Kole Kingslien:

@Michael Henry, thanks for the advice. My wife and I are more than willing to make those changes, and we do want to find an owner occupied opportunity. We have been to a lender, and shouldn't have a problem getting an FHA loan, up to 4 units. I just feel like I can't find any good deals in my area, the numbers just haven't been adding up. Not sure what to do, every property I seem to check, has a pretty heavy negative cash flow. Should I take negative cash flow, or hold out?

Is it negative cash flow with you occupying one unit and positive if it was rented? So long as you can cover the negative while living in one unit I would probably do it. It would be very unlikely to find one that cash flows with just 3 of 4 units rented. And yes, I would go with a 4-plex. Perhaps you need to find an off market deal to get something that works for you or something a little further away from the primary market. 2-4 plex prices tend to rise and fall with the residential market vs the commercial market (which depends on NOI). Maybe you can find a 3 plex you can convert to 4 and make it cash flow?

Is there a legal address for the new owner in the probate record? I doubt the probate court would allow only a PO Box.

And why not send an offer in the mail? I doubt most would try that. 

I would NEVER allow the previous owner to stay in place after closing without a written agreement. Especially those who live in squalor! What happens if they decide not to move and claim a verbal lease?