All Forum Posts by: Jesse Lynch

@Tom S. Aha! That makes sense! Thank you!

@Fred Shatzoff very good to know! Is there a specific percentage you require for reserves?

@Tim Swierczek thank you for that insight! I do think you’re right about the partnering up for the extra money, and especially reserves. Would it be possible to buy a house with a conventional loan, and just get hard money for the renovation once the house was under contract/after purchase?

I am also pursuing a flip using a 203k loan, but that is certainly not without its own restrictions and headaches. Haha.

Hey BP folks,

Looking for licensed general contractors in Twin Cities Metro! (Minneapolis/St. Paul)

I've flipped a couple houses on my own, but I am currently in the process of finding a flip(or possible BRRRR) with the possibility of using an FHA 203k loan on some of the rougher properties. I have some i'd like to pursue, but to make an offer I'll need a simple bid from a licensed contractor, and then upon acceptance of an offer a more thorough estimate to get the final approval of the loan.

I’d love any references for a general contractor in the twin cities metro that would be willing to work with on a flip using a 203k rehab loan.

I appreciate any help!

@Samuel Hill i hate to say it, but it depends. Haha.

There are a too many unknowns right now based on that info. What neighborhood is it in? How many bed/bath and square footage? How far away from “up to code” is it, and are the non-compliant issues grandfathered in? A lot of the time, if you don’t change something that is no longer up to code it’s okay, but the second you change something you open a can of worms to bring everything around it up to code.

Do you have any photos or do you have a rough idea of rehab costs?

Hi BP!

I've successfully flipped a couple houses partnering with my mom, but she is now retired finds herself too risk-adverse to use a HELOC as we did in the past, and truthfully she is quite content with her retirement financial situation.

Which leads me to now. I am at the early stages of my solo investing career, I have $10k for down payment, and have been preapproved for about $200k FHA (3,5% down) or $155k Conventional (5%) down.

I would really love to either flip to gain a bit more capital or use the BRRRR method, depending on the numbers, but I think my best chances in this market(Twin Cities, MN metro) will be to have a cash offer or hard money, as it seems the value add here comes from property distress, which isn't exactly FHA/conventional friendly.

As an example, are there hard money lenders in Minnesota that would lend $170k for purchase and rehab based on an ARV of $270k, if I only have $10k cash?

How does my cash come into play? Is there a traditional “money down” situation with hard money?

Thank you so much for any input!

Jesse

Hey all!

My three siblings and I recently inherited my father's house within the city limits of Two Harbors, MN.  For all intents and purposes, it's a 2 bedroom, 1 bath, (nonconforming bedroom and bathrooms downstairs).  1 car garage with a carport, nice double lot yard, about a block from the main street of town.

It's definitely outdated, but very functional and not awful to look at.  There is a fair amount of charm left in it, as it was built in the 50's and has some architectural character.  I have also flipped a couple houses, and I'm capable of putting some work into it to make it more desirable.  My siblings are emotionally attached to the house, and selling it is not something they're into at the moment.  I am more sentimental to the area, and less the house itself, but I understand their stance on the issue.  

Anyways, I have figured out that the bare minimum costs of holding the house (once it's paid off, which is a whole other issue), are about $416/month... $4,992/year.   Currently the mortgage payment is around $500, but paying the house off is a possibility.

I am trying to, at the very least, push to try to make the house a vacation rental, given that it is in a pretty desirable area, 3 hours from the twin cities, and just a couple minutes from Lake Superior, etc.  I'm curious if anybody on here has done any sort of VRBO, Homeaway, or AirBnB in the area and if so, was the juice worth the squeeze?  Is there enough interest in the area to rent a home out for 100 days a year at $100/day, for example?

I really appreciate any insight you can offer into this rather specific query.

Thanks!

Thanks @Sherwood Sohmers!  I really enjoy the learning process, and look forward to giving back! 

@Blia Xiong Yeah, I lived in the property while flipping it.  It wasn't literally "free," we just took the holding costs out of the overall budget, so, while I could have paid the interest on the loan, and the utilities as though I was  renting, and come out of the deal with a bigger check, I just got the advantage of not having to pay rent.

@Marc Jolicoeur I would take four of your deals over 2 of mine any day of the week, work-wise.  haha!  I was rehabbing part time, while still working a bartending gig and also touring, rehearsing and recording with my band.  But still, a pretty aggressive part-time.  

In regards to the estimates, I would say I went over on rehab budget both times, but probably largely on account of over-improving.  I think I could have happily outsource the work to a contractor, while not living in them, and feel just fine without over-improving them so much.  They both sold within 2 weeks though, so I can't be too bummed that I put more into them than I needed to.

And I would say the biggest surprises on the second one were a result of the neighbor down the street (dubbed "Drunk Bob" by one of the other neighbors), who had done a fair amount of the "improvements" and really just wasn't very good.  i.e. framing new closet doors in the bedrooms, to 60" width, which is all fine and good, except that he didn't take into account the trim, and I had to make some custom barn style sliding doors.

The probate was a deal that our agent had in the pipeline from January till June, they just hadn't cleaned the house up, nor taken it through probate by the time we looked at it.

Best of luck to you on your flip!  What area are you flipping in?

Starting in the beginning of 2013 I partnered with my mother to try our hand at flips. She, the lender, me the designer/grunt. After what was certainly an absurd amount of house showings (I still feel bad for our buying agent), we found a home that was listed on the MLS, but headed to auction (dot com, in fact) shortly after we viewed it. To our benefit, it was listed on the MLS as a 1 Bed, 1 Bath, but was realistically a 1 bed, 2 bath, which basically made all of the investors lose interest. It easily became a 2 bed, 2 bath (with the master suite in the basement... I know, I know. That's weird. But it was also pretty cool, and made it much more marketable, even if a bit odd. We purchased it for $92k. $50k in Rehab. Sold $185k. Net profit $22k (as well as free rent for 6 months) after realtor fees and $8k in "income" taxes. Effing taxes.

Here's the kitchen/living room:

Took out that goofy wall. Ikea cabinets, granite, stainless, pulled up the tile, and managed to salvage the hardwoods hiding under 2 additional layers of terrible linoleum. Also, note the "before" refrigerator, in the back entry, hanging over the steps. Apparently this was rooted in the days of ice boxes, when the "iceman" had a key to the back door and wasn't just a nickname for a mob hitman.

Much better, right?

On the second flip we offered full asking price of $99k, before it hit the MLS. It was in probate, and the sellers had been clearing the house out for something like 6 months, and it was still pretty full of stuff. As part of our offer, I said they could leave what they didn't want, and we would empty it out once we closed. Probate then lasted another 4 months, and we closed in October of 2014.

I feel it noteworthy, that because of the lengthy probate, I had 3 days to do any work on it before moving in. This was something of a nightmare, and lead to me sleeping on a cot, wearing shoes indoors and basically burning candles 24/7 for the first month. (Not really 24/7. Blow out before you go out, friends.

Anyways, here’s a taste of the transformation.

Exposed the brick chimney that was hiding behind awful popcorn textured plaster. Increased the “passthrough” to a more open feel, and the granite now hangs over for breakfast seating. New cabinets, appliances, everything. Didn’t do new windows, but maybe should have… Hindsight, you know?

Purchased: $100k, Rehab $60k. Sold $199k. Net $18k. Also, "free" rent for 10 months. Not a bad deal.

More than anything, I would say these flips taught me that doing all the work myself burnt me out.  But the upside is that it lead me to change my approach a bit.

From here, I plan on buying a small multi-family property to live in, and rent out. Buy and hold awaits. I’d love some larger multi-units at some point. I do still see flips in my future, once I secure some more private lenders...

 I also see contractors, properties with more meat on the bones, and shorter renovations.