All Forum Posts by: James Gates

Yes, the bank we used to refinance had a 6-month seasoning requirement. We started the refinance process paperwork at the beginning of month 5 so we could close the day after we hit our 6 month anniversary of the purchase.

Hey Nik,

For the deals we currently have under contract, we are using a combination of funding techniques to make the deals happen.

1) Private Money (Secured Promissory Note, 10-12%)

2) Personal Money from previous BRRRR's (including the deal discussed in the post)

3) Strategic Partnerships

4) Equity Splits if necessary

5) HELOC funds

-James

Yes absolutely using a local contractor and would definitely recommend the steps described in the BRRRR book.

-James

Hey Brandon! Props for making things happen while being out of state. 

The biggest challenge for me on my first out of state rehab was setting up the systems. Once the systems are in place, the project is easier to manage as some things go on autopilot. Checklists help immensely for making sure nothing falls through the cracks. 

The biggest lesson I learned on this rehab was to account for the weather when planning the scope of work. We should have taken care of the exterior items while the weather was dry.

Good luck on your next project!

-James

Hey Cyrus!

We plan on keeping most properties we purchase for 7-10 years for the following reasons.

1) Capital Expenditures. Most properties we purchase we put in a brand new AC unit and install a new roof. Our goal is to not have to replace either of those large-ticket items as long as we hold the property. We keep the useful life of these items as part of our exit strategy for the property.

2) Equity from principal paydown on the loan. We want as little equity as possible in the home. For a conventional loan we need to keep 25% equity in as a starting point, but as equity builds up slowly over the years from principal paydown we want to strip the "dead" equity that is sitting in the property, not making us any interest or cash-flow, with either a refinance or a 1031 tax-deferred exchange. 

3) Appreciation. Likewise, natural appreciation causes us to have equity stuck unused in the home. If this property appreciates 3% a year, then after 10 years we will have over $50,000 "appreciation equity" in the home. You can only realize that equity by refinancing or selling, so our plan is to sell and defer taxes.

Hey Leandro,

The total cost for my partner was $128,000, so he got every dollar back at the refi. 

However theoretically in the future, if my partner was owed $3,000 after the refinance, there are a couple of options we could do the balance the books.

A) He could receive all cash-flow from the property until he recouped his $3,000, and then we would split the cash-flow.

B) I would write him a check for $1,500 (that way we are both "stuck" into the deal for $1,500), and then we just split everything 50/50.

I would choose option B for simplicity's sake, but I would offer both options to the partner in case for some reason he preferred a higher cash-flow rather than maximizing the amount of $ returned.

-James

Hey Adam,

So our strategy with countertops is start with what you have. If you have functional builder-grade linoleum countertops that work but aren't pretty, in our market we can spruce those up cheaply with either Rust-Oleum or a custom-blended product similar to Rust-Oleum (we used the actual product I linked on our first couple and now we are custom-blending our own to give us more color options). Our tenants love the classier look and it has not affected us on rental rates or ARV's during appraisals.

Here are a few photos of the countertops in our last project before we began the transformation. With a small amount of repairs before the product was applied, the product took beautifully to the countertops. 

Here are some photos after the product had applied and dried.

-James

Hey Adam, awesome job in Kansas City, took a look at your profile, -legit-!. 

Equity is precious, and for most of the deals we try to keep equity and instead take on private debt (private/hard $). We usually structure the deal as a short-term loan (6-8 months) at (10%-12% interest, simple, balloon payment at the end of the term) and secure the promissory note with a recorded deed of trust (mortgage). This gives our investors confidence that they are protected, and allows us to keep the equity when the deal is done for the cost of a few thousand dollars in private money.

-James

Hey Jenna!

We have 8 units currently, with 5 more under contract scheduled to close before the end of the year. I'm sorry you had a rough experience on the first duplex, we made a ton of mistakes on our first deal as well. I flew out to Alabama 4 times in the last 14 months, but I am comfortable with the team now that I don't feel the need to fly out there every time we put something under contract, and instead fly out there mostly as a vacation to see friends I have made across this journey. 

Best of luck hitting your goals next year!

-James 

Hey Christy,

For our first couple units, I wrote up a post about our first experiences, I linked it at the very beginning of this post, if you are interested give it a read there were some good discussions that came from it. My partner and I started with just our savings 14 months ago,

-James