All Forum Posts by: Jack Inman

As a general rule of thumb it's not good to fudge numbers to make a deal work. It is frustrating when numbers are that close on a property, but it's even more frustrating when you buy a bad deal. My recmonedation would be to hold strong and have the nerve to walk away from the deal if need be. 

@Caleb Godsey There's a couple of routes that you can take. You can get some sort of construction loan from a bank; downside is that closing times will be extended and there's more paper work etc. Using a private lender/hard money lender might be your best bet. You can get a hard-money loan to act as a bridge loan of sorts to fund the project until it's time to complete the cash-out refinance. 

Looks like you've got enough cash to fund about half of the total project. You shouldn't have trouble finding a PML to cover acquisition costs, and then you could pay renovation costs out of your personal cash. That'd probably be the easiest route.

@Doug Spence  If, hypothetically, the home appraised for around 260k then you could pull out 195k in cash assuming your lender allows you to pull out 75%. That'd leave you with around 40k in cash after you paid off your existing loan.

I'm assuming your current loan is amortized over 20 years. If your cash-out loan was also at 20 years, and you paid around 5% interest then your monthly payment would be about $1,287. So, you'll have to pay an additional $242/ month or 2,904/ year to cover the added debt service. If you can reinvest the 40k into an investment that will spin off income in excess of 2,904/ year (around 7.5% ROI) then it makes sense to refinance. Otherwise you may want to look into extending the amortization period or just leaving the capital in the property.

I'm making a lot of assumptions, but the point is that you need to figure out exactly what this would do to your cash flow and decide if it makes financial sense to complete a refinance.

@Martez Bynum  I use BankTennessee for my personal deals. The main things you need to ask about are seasoning time and the percentage amount that they'll let you pull out during the refinance. Most banks will allow to pull out 75% of appraised value, but if you are good at negotiating, or have built up credit with the bank you can sometimes pull out 80%. 

It's also important to keep a detailed record of all of the improvements that you've made to the property. Also, come with comps justifying whatever appraisal target you are trying to get.

@Eddie Woodside coordinating contractors from oversees would be challenging. Turnkey certainly has advantages in that it's a relatively hassle free investing strategy. The downside is that it is difficult to find a turnkey property for less than market value. If you want to go BRRR strategy as an out-of-state investor, then your best bet is to find a turnkey company/property management company that offers BRRRR services. You'll need a realtor, home inspector, lender, contractor, leasing company, and property manager at minimum. Some property management companies offer all of the services in-house, and that would probably be your best bet.

@Richard Townsend  In your circumstance it may make sense to leave the equity in the home until you sell. However, if you can pull out cash and invest it in another project, then you may make enough of a return in the other project to compensate for the first property. 

The goal of the brrr is to cashflow after completing the refinance. In your scenario it would probably make more sense to hold the property without a cash out, or just to sell the property.

@Gregory Fazio I'm not familiar with your market, but where I am good deals can be found on the MLS. Like you said, deals that have been sitting for a while are worth looking into. Since you're an agent, there's no reason you can't submit a large number of offer just to see what sticks. This technique works pretty well, especially once you build up a reputation as a closer. The listing agent will be much more inclined to accept your offer if you've closed on deals with them before.

Using cash (or PML) is a great way to secure good deals. It is significantly more difficult to get a great deal under contract when you have a financing contingency. Just get a property inspection done, and make sure you have cash reserves to carry the note for a few months if need be. If you do your due diligence it's possible to mitigate most of the risk assumed by using a PML. Then you can complete a cash-out refinance later.

@Glenn Jubildo I would be hesitant to rely heavily on the contractor's estimate of ARV. I'd recommend running comps yourself, and/or contacting some local Realtors to get their advice on ARV as well. Having a good team is important as well. Try contacting a local property management company to see if they could offer the services you need for a successful BRRR.

At a minimum, you'll need a Realtor, a closing agent, a property manager with leasing dept, and a contractor. If the property manager can oversee the renovation, then that would be very beneficial to you. As a rule of thumb, the bigger the renovation, the bigger the risk, and a full gut sounds like a big renovation. Make sure you do your homework on the front end. BRRR is a great strategy, but it requires a good team to complete successfully.

@Account Closed   What's the reason for focusing on multifamily rather than single family? 

Most of the appraisers that I've dealt with don't do a very thorough interior inspection of the property. It may be very different in your area, but in my area, it usually makes more financial sense to rehab only with the tenants in mind. 

A general rule of thumb is that it's not worth renovating a rental property to a standard that is above the surrounding neighborhood. Going beyond the neighborhood standard usually brings about only a marginal increase in value. So, match the surrounding properties; if granite counter tops are standard for the area then install granite counter tops. If it's a formica kind of neighborhood then just do formica counter tops etc.