All Forum Posts by: Justin Ellis

 Dell, please clarify for me, how would one use hard money in an invest and hold strategy? Wouldn't the interest rate kill you! And what if you can't get traditional financing after the 1 year (typical hard money terms) is up? 

I also talked to a sales rep at a company called B2R that will lend 75% LTV on rented properties with a minimum 6 month lease signed. They don't look at credit and debt to income as much because they're looking for rental income. Not sure the interest rates, but may be worth looking at (BTW, this program is not yet available through B2R, the rep told me 4-5months out. They currently only lend on $300k + rental portfolios). I see a deal going like this

- Find Deal

- Finance with hard money

- Rehab

- Get a lease signed

- refinance with B2R (or like lender)

MAYBE?? Dell?

Based on what the realtor is saying, they don't have the ability to separate utilities. 

"An interesting thing to note is that the units don't have individual utility metering and so the owner has been paying the utility/electric bills for the units to the tune of 15k per year in expense themselves. I think that is unnecessary. As I understand it, the property could have electrical work done by a contractor for approximately this same 15k amount in order to give each unit separate metering, and if done, the estimated income to be received after expenses are deducted would be close to or about 50k per year"

GREAT local insight! But in you saying that, I realized I misspoke, the property is JUST south of Broadway off of Plummer. It's by the Quickmart there.

@Roy N. you are correct! I forgot to use the full rent value of unit 1 in my calculation (But it's strange that their number is off as well?). Your's makes the most sense.... I'm not sure about the breaker situation, I just know the owner pays all the utilities and without putting a meter on each unit there is no way to separate them out. Thanks for for the evaluation, do you think with your numbers (Obviously with a few missing variables to fill in) and a CAP rate of 10% an investor with available cash would be interested in a deal like this? If not, what sort of rate would they look for in a multi-family like this (In general, I know not all investors work on the same principals).

Also forgot to mention the current loan at $180k is assumable @ 7%

@Anthony G & @Jean G. I couldn't get image uploader to work but here are the numbers provided...

RENT ROLL (Feb 2015):

3br - $360 Occupied (Reduced rent, on-site maint)

1br - $425 Occupied

1br - $425 Vacant

1br - $425 Occupied

1br - $425 Occupied

1br - $425 Occupied

3br - $740 Occupied

2br - $575 Occupied

2br - $560 Occupied

2br - $520 Occupied

Studio - $290 Occupied

INCOME/EXPENSE STATEMENT:

Annual Income (Per Rent Roll): $66,120 (My calculations give me $62,040)

- 5% Vacancy: <-$3306> (This seems low to me)

Plus Annual Laundry Income: $960

___________________________________

Gross Income: $63,477

LESS: Property Insurance: $2890

LESS: Repairs & Maint: $3808

LESS: Property Tax: $2970

LESS: Utilities: $14,963

LESS: Manager Rent Reduction: $4560

____________________________________

Annual Net Income: $34,286 (Adjusted for their math error $30,206)

There it is by the numbers, and Anthony, it's at Tucson Blvd and 22nd, so not the BEST area, but certainly not the south side. Structurally it seems sound, block construction and a good roof. It's ugly as sin, however it's rented out and cash flowing. My original inclination on this would be to slowly clean it up and market it as UofA student housing and transition it out of low income families, create a college kick it spot, and charge more for rent.

OH! And it's been brought up that one could pay a contractor to split the utilities and have tenants pay their own, saving $15k per year, for a one time investment into the electrical work.

Question. Is the house you just bought your primary residence or are you working on flipping that (or both). 

And from what I understand, hard money is really only for flips. You can use it in invest and hold scenarios to carry the property until you can get traditional financing however the interest rate will eat all of your cash flow if the deal is not strong enough, and if you don't get financed in a year, you'll lose the property (Plus from what I've heard from talking to a lender, you'll need 20-30% of your own money in the deal, plus a few points). I would suggest reading "The book on investing with no or low money down". In there you'll find some interesting strategies that can open your mind up to creative ways to begin without a lot of cash. My favorite, "The lease option sandwich"!

By the way, I'm just starting out myself so PLEASE don't take any of this as gospel! I'm in the Tucson market, we should connect.

Thanks for that scenario rundown Andrew, I don't see all of those things going JUST like that, but I see your point, "where there's a will". 

And Matt, I briefly looked into that and from a quick look, seems like that funding is only available for multi-family up to 4 units, however I did find one that did commercial multi-fam, but minimum was $500k. This deserves more research.... 

I'm leaning towards Jerry's thought; looking for a more experienced investor in my market to bird dog it to and maybe build a relationship!

Thanks to ALL of you for the input and for helping a new guy!

I'm a super beginner, just started looking for my first hard money single family flip when I run into this deal. It's 11 doors with an onsite maintenance man, right next to the University of Arizona in Tucson! Problem is, my credit is shot and I'm broke! The deal seems awesome but I don't think this is a hard money scenario, right? So, is it possible to get this deal funded with some sort of creative financing technique or do I just give up and get back to focusing on finding my flip?!