All Forum Posts by: Jeffrey Holst

@Caleb Heimsoth I like it.  Keep it up.  Also given the uptick in the market it might make some sense to hold a little extra liquid.  I have been focusing on increasing my cash position and diversifying investments as well.  

You will need to know the AVR in order to know if its a good enough deal to wholesale but a work of advice, if you have to ask this question you probably arent ready to wholesale a deal yet.  Keep reading the forums, listen to a bunch of podcasts and go meet someone other wholesalers and investors and pick their brains.  Learn some stuff and if you think you have a good deal hopefully one of those new local contacts can help you through it or partner on it with you so.  IMO it is dangerous to attempt to put property under contract if you dont have enough knowledge.  You will never know everything but it seems that you still have some time before you are ready to make this jump.  

Assuming you are able to understand the transaction and are confident in your ability to represent your own interests then call the selling agent directly.  There are good reasons to have a local agent working for you though, they might bring you deals you missed or where otherwise unaware of they also ideally can function to double check everything to make sure everything is handled correctly and finally the very best agents also have great relationships with vendors and can help you through the whole process.  It can make for a easier and smoother transaction.  All that is to say there are reasons to go either way,  Personally I sometime use myself, sometime use other realtors and sometimes let the listing agent handle it all.

@Bryant Tumbelekis @Omar Khan @Caleb Heimsoth @Stephen R. @Account Closed

Return on Equity only matters when you sell,  what you need to focus on is cash on cash return,  if you are getting a large jump up in equity then you might also be getting a better cash on cash return or you might be able to get in with less cash and juice up that cash on cash even higher.  Lastly sometime when you get a big equity gain the best choice is to flip it out and capture that equity to reinvest elsewhere.  

All that being said if you want to calculate return on equity, you need to estimate the equity take the net return annually and divide it into the equity

for example if you expect to make 10K a year as a return on the property, and you put 20K down your cash on cash would be a very nice 50% return 10K/20K=50% but if as in your example you were getting a bunch of "free" equity then you still put take the same 10K but instead divide it by the total equity (the 50K plus the 20K you put down) ie 10K/70K= a still nice 1428% return on equity.

@Attaullah Khan I agree with @Larry Turowski that your second question is too broad, regarding your first, we have attempted to get as long a term as we can but always look at shorter terms if the rates are better.  It is however very difficult in a raising rate environment (like we are currently in) to get 30 year ams on mid sized multifamilies ie 5-20 units on those we are seeing mainly 20 year loans

The general idea is the bank will loan you extra money to cover the cost of repairs,  this is typically only done with commercial loans and they usually escrow the money and release it to you as you complete the repairs

By way of example say you buy a 500K house that need 100K in repairs. A traditional loan would be 80% of 500K or 400K. You'd put 100K down then pay for the repairs yourself and be all in for 600K , a 400K mortgage and 200K our of your pocket. If you instead got the bank to agree to finance the repairs, they would list 100K in budgeted repairs on the HUD statement (closing statement) and then you would put down 20% of 600K (the all in price) and get a mortgage for 480K (you put up 120K) they would then hold the extra 100K in escrow and release it to you as you made the repairs.

Techincally this is different than BRRRR since you are really just buying, rehabbing renting and repeating ie BRRR but are skipping the final R (refinance)

It is possible to get 100% financing if you are creative.  Perhaps it might be smart for you to get @Brandon Turner 's book on investing with low and no money down.  I think that would be a good starting point.  As for paying off personal loans and your car its probably wise to consider it and also to at least save up some surplus cash because even if you do get the property with no money down there could still be costs and you need to be ready for them.  Unless your personal loan is very large you should be able by getting some extra income get rid of that think pretty quickly.  Id save up a 1K emergency fund, then get focused on paying that loan off.  

Brandon's book can be bought here

It would take a long time to make 500K at 12K a year.  If you could take the 500K and the current equity and invest that at 10% cash on cash you would come out way ahead.  However you better be sure about your after repair value and the comps because you will have some costs and if the sale price is 800K and not 1.2 by time you pay holding costs and costs of sale then you probably wont have any profits or worse could have a loss.  In truth you wont likely make 500K, cost of sale at 1.2 will probably be 70K+ and you will have points and interest on the hard money loan so even if all your numbers are correct you still will likely only make 400K but assuming that is the case Id say do it sell and reinvest the 400K plus your current equity via a 1031 and get a nice 10%+ cash on cash return via 50-70% leverage.  At those numbers you should have rental income of 50K ish a year vs 12K thats a big difference over the long term.