All Forum Posts by: Eyal Goren

Interesting. I've been BRRRR'ing for almost 15 years and basically stopped doing it as of 3 years ago, because there is almost no price difference between run down and move in ready. Instead, I am now buying properties close to turnkey and focus more on negotiating a discount and letting the market take care of the value increase - Milwaukee has seen very steady 7-8% appreciation per year for the last 10 years.

Why do I not buy run-down anymore? Because I can't get enough discount for poor condition. That is the whole basis for BRRRR. Our inventory is so tight that sellers don't have to lower their price, they can just sell to a desperate first-time home buyer, who thinks he can rehab on weekends with the help of his uncle and 10k in materials.

One of the best deals I have done was stepping in on a deal that had fallen through on financing and was also daisy-chained to a purchase, so the seller was very motivated, had a huge amount of equity and was excited that we could keep his original closing date.

A full-blown BRRRR for us typically means 50-80k in rehab cost and it is actually to spend 5k per week consistently and avoiding empty weeks with no work done by very tight planning. The problem of removing buffer time is if one trade takes a couple days longer you might loose the slot for let's say your drywall crew and then they have to push you back a couple weeks, which impacts everything else. So it's management-intensive.

Much easier to buy, maybe paint and carpet, install some extra ceiling lighting and dimmer switches (50s and 60s homes always lack lighting) and then have it rented 2 weeks later.

We are moving to SE Houston / Baytown area in the spring. I'm trying to analyze available properties for house hacking. Did I lay this out right?

https://www.zillow.com/homedetails/1309-Jefferson-St-Baytown...

I would say this is a B area? Certainly felt safe enough to move my kids into with good school district but older homes.

Asking $319k, I ran numbers with 10% down, 7% rate, $6k closing costs. We would obviously try to get lower than listing.

Unit 1 - 3 Bedroom & 2 Bathrooms - 1196 sf - Previously rented @ $1550/Month. <- We would occupy this unit
Unit 2 - 2 Bedoom & 1 Bathroom - 818 sf - Previously rented @ $950/Month
Unit 3 - 2 Bedrooms & 1 Bathroom - 741 sf - Previously rented @ $1250/Month

I ran a rental calculator using a rounded up tax $1500, $2000 insurance, 5% vacancy, 5% maintenance,  and rents listed. I get a cash flow of -$224per month with a mortgage payment of $1916. We can easily pay the whole mortgage if needed. Cash flow would be $1177 per month once we move out. 

Is small negative cash flow while you live there but $392/door once you move out decent? 

Would it make sense to put 20% down to have a neutral $0 cash flow while living there and $1390 or $464/door after we move out?

Quote from @Eyal Goren:

You weren't crazy :) 

Really? The updated rate for rent is around $1400, which completely changed the stats

Curious - what are the numbers that you find good for a deal?

 @Eyal Goren Everyone's definition of a "good deal" is different. I tend to like to focus on a deal's 5-year IRR. For SF rentals, I'd look for 15%-18%, with 2-4 MF at 18%-20%. These are annualized returns that can be compared to stock market returns so that you make sure you're getting paid a premium on investing in real estate over just dumping money into an index fund.

For your deal, you'd need to negotiate the sale price down to around $142k to get that kind of return.

Why is you Sensitivity Analysis based on a purchase price of $194,900? And I see a 6.50% interest rate. Have you been quoted that based on your credit score and experience? That seems a little low. I'd expect something more in the high 6's/low 7's depending on credit score.

Quote from @Eyal Goren:

Hi, 

Just looking at this sensitivity table, I guess 55% is probably where I can have a little bit of cash flow to handle ongoing issues while being not too far from the optimal CoC.

Yes, I'm aiming for section 8 - I hope I didn't make a mistake there with the rent. Will double check.

 @Eyal Goren Got it! But again, how did you come up with rent of $2,060 for a 3-bedroom unit in that zip code?

On your C/O refinance. If you're thinking a Conventional loan... did your lender say if you'll be able to pass QM with such a small loan amount?

If you're going DSCR, can I ask who you/your lender is using? I'd like to know who else can do loan amounts under $100k. The interest rate you have listed seems extremely competitive - especially given the rough news on inflation this morning.