All Forum Posts by: Eric Caudill

Hi BP Community,

Backstory

For years I've heard my father tell me that if he could just unload his real estate properties he could finally "retire" or at least be a lot closer to retiring. The issue is he's got homes spread over several states. 5 in total. Essentially as he moved he bought a place and kept it/rented it after he moved to a new area. He has a very demanding career and i know hasn't put much of any time or energy into renovations/general land lording. In some instances they have equity based on market appreciation and in some cases they are underwater on the loan to value.

After listening to a few podcasts I've heard of people buying entire portfolios from others who had planned on selling one at a time but were able to buy their entire portfolio at once. I want to approach my father to help him get out from under all his mortgages at once when he is ready to act.
 

A win win for both parties. 

Question

 How would you propose to structure the transaction assuming any structure is on the table? Assume that the seller does not care they just want "out". Assume a long term wealth creation strategy is my goal as the buyer. 

@Jason D. - Thank you Jason. I think that is what everyone was trying to get through to me. I just kept going about it from the wrong starting point. 

Now that I start at the ARV and go backwards it makes it a lot clearer. Thank you all. I can sleep at night now in peace.

@Steve K. - Thank you for the second attempt at helping. I think I was getting hung up on my down payment and how that plays into the formula.

@John Leavelle - Starting with the ARV helped simply this big time. My plan was to move into a house using a FHA loan, rehab while I live there for 1-2 years, line up renters then refi into a conventional loan and repeat on a new home. Due to where I live I doubt I'll ever be able to fully get 100% of my money back short term because finding a SFR at 75-80% under ARV will be tough and homes in my area don't fluctuate with appreciation as much as other areas in the country it seems.

@Harjeet Bhatti - I asked my mortgage broker what kind of LTV they offer on a refinance and they told me 80%. They said anything about 80% and then you'd have mortgage insurance which I'd want to avoid.

Hi Everyone,

 So I read @Steve K. 's post several times. I thought I understood but I'm still trying to mentally wrap my mind around the numbers.

Here is the same example Let me know if this sounds right.

Example: Purchase price is $475K, I put 5% down (23,750) and finance the remaining $451,250. I do $25,000 in repairs. to ARV of $550,000. So at this point I have a loan of $451,250 and I put in $25,000 in repairs so in order to get all my money "out" the Refinance would need to be at least $476,250 ($451,250 + 25,000) If the ARV is $550K and the LTV from the refinance is 80% this means my new loan the bank gives me is for $440K which leaves $36,250 (476,250 - 440,000) of my money still trapped in the investment.

@Steve K. - Thank you for taking the time to correct my numbers. I understand now.

@Scott Matthew C. - I definitely understand this market is not for the weak or beginner. I found the Traction REIA in Tysons. but I'll definitely look for the Fairfax REIA. I might reach out to you offline to talk more about your experiences in NoVA.

Hello BP Community - My name is Eric and I've been reading the blogs and listening to the BP podcast for a little while now but this is my first BP post! Exciting times.

I feel that the BRRRR strategy is best for my financial situation and where I live in Northern VA. I feel pretty confident in all the letters in the acronym except the 2nd "R"...Refinance.

Here is my general understanding of the goal for this phase of the BRRRR strategy. Let me know if my understanding is correct.

Eric's Understanding: The main goal is to get as much cash out of our purchased property by refinancing the original loan using the new After Repair value (ARV). Most banks will give you 75% of the ARV based on their internal appraisal. So, to get 100% of my money back, 75% of the increase in value from my purchase price to the ARV would need to cover all my out of pocket costs on the deal.

Example: Original purchase price $475K. ARV is $550K. Total value increase is $75K. 75% of the $75K value increase is $56,250. I will effectively get back 100% of my out of pocket costs assuming that they are $56,250 or less.

That sound right???