All Forum Posts by: Gil Segev

Hi all, while we are not ready to call a recession or downturn in the RE market just yet, I would like to plan for this eventuality. Obviously it should be easier to find deals in a buyer's market but how about financing? 

If the RE market is crashing and banks have to deal with a growing number of foreclosures and lending related losses, they will probably apply stricter limitations and conditions for borrowers and usually this type of limitations are applied to investors first: lower LTV, higher interest rates, more reserves required, etc.

- My expectation is that homes prices will drop faster and further relative to rent prices so a higher interest rate may not inhibit our ability to refinance and make BRRRR work. Do you agree?

- I see risk with appraisals coming in lower than ARV we projected 6 months before when we bought the property, 6 months in a falling market is a long time right?

How can we better plan for BRRRR in a downturn market assuming we have already liquidated all assets we could?

@Bob B. what you say make sense. The risk of buying a property without physically walking it first is definitely there. Hell, I've been burnt this way as well. But for people who want to get into real estate and live in expensive, non cash flowing markets like CA it's the only way to invest. 

I think that as long as you understand the risk of what you're getting into and plan for it accordingly (like keeping reserve, getting multiple bids, etc), I think it's still a viable way to invest. 

@Bob B. not sure if this is where you were going with this but while he may have not seen the house before he closed on it, I doubt he would be able to make out the issues the inspector missed. In other words, I am not sure a local investor would have been able to spot these issues with the house. 

That said, I completely agree with @Damaso Bautista that going to the property now is a smart thing to do. Mainly for getting face to face time with the inspector and contractor.  

Thinking about it again, I think you may want to find another contractor. Obviously I don't know the size or condition of the property but >100k sounds very very steep.

I would get another contractor to bid on the house now that it's open and the issues are easy to see.

Sorry to hear about your troubles. I don't have much of an advice but have a question: did you have the house inspected before you closed on the property? Didn't the inspector call out these issues? 

Edit: I read your post again and see that you had the house inspected.. Maybe go after his as liable for the undisclosed issues? 

@Andres Ayala I can definitely relate to your hesitation. I have had the same thoughts when reviewing deals. Other, more experienced investors may have a different view but here is mine: 

Unless you get an inspection period when you buy from the wholesaler (which hasn't been my experience), the best you can hope for is walking the property before buying it cash. As a first step, I would find an investor friendly contractor and explain your goals and that you will get to do a lot of business together if this works out. I'd then ask them to walk 2-3 wholesale (or even MLS!) properties with me and learn more about their thought process or even send me a bid for work. This should give you a high level understanding of the costs - is it 20k or is it 60k?

If this doesn't work or is not possible, I would consider starting with an MLS deal which offers an inspection period where you to get contractors bids in. If it doesn't work for BRRRR, you can flip the property or just back out of the contract.

One more thing to consider is the risk: let's say that you buy a 100k property and plan a 50k rehab on it for a 200k ARV and pulling out all of your 150k (0.75*200k) but in reality you end up investing 50% more (!) than planned in rehabbing. In this case, you are all in for 100+75=175k and still pull out only 150k which means you leave 25k in the property. You still get 25k in equity AND have positive cash flow. Still not a bad deal.. And you gain a lot of experience which will make your next deal that much better!

It's all about taking the first step! Good luck! 

One thing I've noticed recently is that granite and quartz cost pretty much the same. In fact, I spoke with someone who runs multiple flips (in AZ) who told me buyers actually prefer white quartz to granite these days - just FYI. 

What we most care about in a case of a crash is having sufficient cash flow from rent and being able to wait it out. 

The amount of equity you have shouldn't really matter as long as you have a positive cash flow.. 

That's kind of a generic question. If you are looking for information on how to invest out of state I recommend David Greene's out of state investing book. If you are looking for information on BRRRR I recommend his BRRRR book.

Both books are very informative and will help you get started. 

Couldn't agree more! While pulling all of the cash invested out is a the goal, high ROI on the cash left in the property (or financing for that matter) would also be acceptable for me.

I actually just started a flip to build some additional cash reserves before starting to BRRRR.