All Forum Posts by: Austin Fruechting

Exterior is just google street view with the old roof. 

THE PLAN:

• 2X new HVAC systems
• 2X new hot water tanks

EXTERIOR

• replacing rotted trim and siding where needed
• paint entire exterior
• gutter work where needed
• deck repair

INTERIOR

• New flooring where needed
• 2X Reglaze tubs/showers
• paint cabinets white, new hardware
• paint all brown trim/doors white
• replace some light fixtures
• sheetrock bonus room in bottom level
• install garage door openers
• redo a staircase

Roof & carpeting are very recently redone.

TIMELINE: 2 weeks (depending on weather, it may bleed into a 3rd week)
COST of WORK: $19,000

Duplex: $66k

Carry/Closings: $5k

TOTAL: $90k

Post Reno Value: ~$110,000 ($700 rent per side, with all new HVACs, roof, water tanks, and updated interiors going rate 1.25%-1.3%)

I'll close Friday April 28th. $40k my money, $50k private lending at 12%. We'll start work Monday May 1st. Targeting the 12th for completion. Hope to have one or both sides rented for June. Then will look to sell to another investor.  

I have a duplex under contract to close April 28th, and I'll be flipping it for a new toy. 

The toy is an expensive one, and WAY more than I could justify spending. So I thought "What if I flip a property to pay for it?!" That way at the end of it all I have the same cash in the bank AND my expensive my toy. I'm just trading some time running a project in exchange for my toy. I've only flipped a property twice, but I have BRRR'd 4 homes, one duplex, one 4 plex, and a 6 plex... so I'm no stranger to projects.

I notified some realtors I know in different areas that I was looking for a flip. The market is fairly hot. Nothing was available and rare for any good values to hit the market right now. They'd been looking for a few weeks with not even a single possibility. 

KARMA: Well, after my Financially Free at 32 post , I received about 50 private messages/emails with congrats and questions.  I took the time to respond to all questions in the post as well as all messages/emails.  A younger KC guy trying to get started wanted to meet up.  I invited him to my house, shared a cigar and some fine bourbons with him while talking real estate and trying to provide some guidance.  Towards the end of our time there I get a text message from someone I hadn't even talked to about looking for a flip.  It was this duplex opportunity.  I thought it was cool that I had been looking and not finding anything.  Then after all the time trying to help people by answering their questions, and while I was meeting with a beginning investor, the opportunity came to me. 

Originally posted by @Jay Hinrichs:

@Austin Fruechting  not sure what you posted to have only 144 posts and 396 votes but your my new hero !!!! awesome dude

 LOL - I hope you remember where those votes came from because you offered me a scenic plane ride around Oregon when the wife and I get up around that area on an adventure and I was planning on looking you up when that happened!  (financially free @ 32 post)

What Jay Hinrichs said. I'm in a cheap area with good cash returns and 2% is impossible. I've only hit that maybe a couple times by forced appreciation through BRRR. As far as buying anything even somewhat operational, 2% is a unicorn. You'll wait forever if you're going to wait for that.

If you're just getting started and your friends and family don't have the money to loan, it's going to be very hard to do. I don't know how to say this without sounding like a jerk, so know I'm saying this trying to be constructive: If you want to attract investors you'll have to use proper grammar and spelling. Outside investors aren't going to trust your professionalism or that you are meticulous enough to run a project if time isn't even spent to communicate with proper grammar and correct spelling.

Congrats @Jared Saunders - thank you for sharing and giving back! What you've done is incredibly impressive!

@Brian Garrett - I second what Andrew said.  You'll need to know how much to it will cost to get everything rehabbed as well as carry costs to hit 80-90+% occupancy (which if things go well would probably 12-18 months. 6-9 months for rehab and 6-9 month to fill up)

You are right as far as expenses: their numbers are crap.  Although they may be their real expenses they had last year because they clearly don't repair or maintain anything!!! 

Given the lower rental rate, I would probably factor 45% expenses in my numbers for post rehab and stabilization.  Especially with a pool I would say zero chance they are less than 40%. 

As far as valuation to know what a bank may say for as complete, an appraiser would most likely use 45-50% for their calculations.

ASSUMPTION: If rents are $650 per unit post rehab. 45% expenses. $15k per unit in total renovation costs. $100k in carry costs to break even. You're sitting at a 14.4 cap.

Typically every hard inquiry drops your credit score by about 2 points.  A bank will almost always do a hard inquiry every time you apply for a loan. 

Originally posted by @Johnny Young:

Thanks Austin, I do really know the numbers, and my timeline. Where the problem for me lies is the excess for contingencies. If I go this route everything I have access to is maxed for the duration of the project. In my rehab estimates I have a 15% contingency built in and that should cover anything construction wise. It's the fact that all the payments on the money during the flip push our budgets right to the limit. It's doable but if the house goes one day over my estimate, or a paycheck comes short we will sink. Fast. During the flip we will be adding 1400-1700 a month to our current bills which is all our extra cash in our budget. If I had a good contractor already doing 85% of the work I could work some extra jobs to give us that extra cushion. However at this moment I'll be doing the 85% myself. Doesn't leave room to wiggle. I think it's just too close to the line for me. Especially for my first flip.

 It does sound too close to the line with that info IMO.  Look into setting up additional LOCs and other contingency cash sources to have ready for the next one.