All Forum Posts by: Jared Baker

I would imagine going to a local lender to refinance would not be a big issue. The one thing that may be a bit challenging however is the new terms that you will get with a commercial loan. I do not know what most places use as a LTV on commercial property but the other one is the term limit. For my local bank they only offered 10 and 15 year balloons, which can be refinanced again after the term is up, but the puts a higher payment per month so you'll have to be careful and check the numbers to make sure they still work.

First step would be going and talking to a local bank/credit union to see what they can provide.

Welcome to BP.  Biggest thing is going to networking events and letting people know what you are doing.  Personally I think its going to be difficult to find investors to fund your properties unless you have a good arrangement that benefits them.  And when it comes to actually getting funding a lot of people want to see experience.  You may have to go out and get the first couple deals on your own to show other investors that you are serious and you know what your doing.  Most people won't lend $100k to someone for their first deal when they have no experience to back it up.  Since you are working for a property management company you do have a leg up there but its not a guarantee.  Best thing to do is hustle and show people you are serious and know what your doing.

Well there is a lot of information missing here to really give a proper answer.  Weren't you able to see this issue during your initial walk through, before you placed the offer?  What are the numbers on the place, do the numbers make sense?  The flooring really doesn't make a difference unless you are using it to add value to the house.  A proper constructed house will have a good footing and wall which can definitely be brick and stone.  Biggest thing is if the numbers make sense.

I walked away from a place because it had a bowed basement walls.  I contacted a few foundation specialists and got some estimates to fix the whole basement.  Looking back I should have jumped on that.  I followed the property when someone else bought it and they were able to buy it for $155k, put about $50-60K in it and then sold it for almost $300k.  I was worried about it being too big a project, but I realize now that if the numbers make sense and if you are really dedicated you can figure it out.

Your first property your going to make mistakes, that's how you'll learn.  Nothing is going to be good unless you get the experience yourself to back it up.

Figure at least 20% more money and 20% more time.

For my triplex I did a traditional mortgage.  So I funded the rehab out of pocket.  I can do all the work myself so I was able to save quite a bit of money that way.  If it was funded by the lender, especially a bank, all the work would needed to have been done by licensed contractors.  Since this was my first place trying to do hard money or get a special financing to cover the rehab was a bit daunting.  For my second place I plan on looking at other financing options because I was able to learn so much.  I now have a mind set of if its a good deal I will figure out how to get the money.  The triplex was something within my budget.  But I passed up on the first property that I looked at because it was in a higher value market and I didn't want to take that big of risk.  I found out earlier this year someone did buy that place for about $155k, I estimated they did about $50-$60k worth of work and resold it for $295k.  It was a great deal, but I passed it up because I didn't know any better.  

Also, the specific numbers I used for my calculations dictated it would be better to pay out of pocket for the rehab because I will get more cash flow when rented vs having a higher mortgage payment.

No problem.  I'm hoping in the next several months to purchase another property and the experience I have gain not only in the costs or rehab but also the time it takes was definitely worth it.  I could go in now and just eyeball what the rehab is going to be to fix the place.  New flooring for a small house is probably going to run about $3-$4k, bathroom remodel $1500, paint/drywall repair $750, remodeled kitchen + appliances $4k.  I would be pretty confident using those numbers on a small house in my area.

Another thing is going to be unexpected costs that you are not factoring.  For instance my plan on my triplex was just to update the units and get the place rented.  Over the year I have owned the place I have done some things I wasn't planning on doing because I want to have this place as maintenance free as possible.  I'm residing the garage (this went from a $600 project to almost $2k) and I plan on residing the building as well.  I'm redoing all the concrete steps so the basement can stay drier (steps have pulled away so water gets down there when it rains) and I plan on doing the driveway as well.  I've also decided to replace all the windows and doors ($7k) to do the same time as the siding.  All these things I was not planning on doing but have decided I should because of the maintenance free benefit it will provide down the road.  This is why you need good cash reserves when you get into a rehab.  Your not going to see everything on your walkthroughs until you get the experience.  And by no means would I say I'm experienced because this is my first place and I'm still learning, but I can take this with me to the next place I look at.

@Jazmine G. I would definitely say that if you are new its going to be hard to get accurate numbers to start.  I mostly use the calculators for rentals/cashflow analysis.  Experience is invaluable.  Perhaps if you found a deal that seems promising you could reach out to someone locally that you may be able to partner with to walk through and figure out the rehab cost.  I haven't done much property evaluation since I bought my place but I plan to start doing so soon.

The other thing is to go to your local hardware store and look at the price of the individual goods.  For example a common thing for most places is a bathroom remodel.  You could go make a list of the items that are going to be needed, vanity, sink, hardware, toilet, shower, flooring, paint, drywall, etc.  and you can see how much this will cost.  This isn't a sophisticated method that requires exact square footage, you could use the place your living in now as a base line.  My bathroom alone cost close to $1500 and that is with me doing 99% of the work myself.  If I paid someone it would be closer to $2250-$2500.

As a lot of people say your first property you'll make mistakes on. I think so far I'm pretty lucky. I'm not negative yet, but in the end I think it will be a net 0 for me on the first property. I was hoping to be able to BRRRR it but between the refinance and rents in the area I would significantly reduce my cash flow to a point that if all three units aren't rented it would not be good.

There's only two options to fix it.  Option 1 is you get a foundation company to come in, jack the house, demo, and pour a new foundation.  Option 2 is put up braces.  I've never heard of anyone doing option 1 in this situation.  Braces will prevent the wall from coming in more (if this happens its going to destroy the rest of the house anyway).  You can always put a sealer in the cracks to keep moisture at a minimum too.

This is a basement after all so its probably not going to be perfect.  If you are trying to do a finished basement you'd be better off getting a contractor in to do some additional drainage as well to keep it as dry as possible.  Just putting up braces is going to provide some insurance from things getting any worse down the road.

Get the book on BP on estimating Rehab costs.  Very inciteful.  Of course costs are all going to be dependent on your specific market.  The other option is to start viewing potential houses and have contractors come with to provide estimates.  This might be more difficult to do but they are the experts after all.  Experience is also going to be the most help.  I'm rehabbing a triplex currently and was expecting to be about $5k cosmetically in each unit, I'm almost done with the first unit and I'm about $9k in at this point and went for a 4 months to 14 months.

I learned so much from just doing.  I was surprised at the costs of some things.  Flooring alone was 1/3 of the cost.  Again everything is so dependent on your specific area.

I've seen this in Wisconsin, results for poor construction practices.  Foundations should never be backfilled with clay due to the moisture retention.  As a result when the ground freezes, the clay will expand pushing on the wall.  If the wall isn't bowed in you can take a precautionary action and brace the wall.  If it is, you'll need a foundation specialist to come and push the wall back and install the bracing.  Other option of course is if it is not bowed to leave it.

If the place is gutted most likely you will most likely need to go a hard money route or private money.  Second is have you run the numbers?  Have you got contractors to walk through and provide quotes for the work?  This "deal" could go sideways very quickly if you have not gotten costs for all the work that needs to be done.  Finally 8 unit is commercial so your financing is going to be very different than a standard mortgage.  Finally if this is your first place you are looking at even if you get hard money the terms may not be beneficial to the deal.  Ie. if you haven't done this before you may pay a higher interest rate or pay more in points up front or higher down payment.