All Forum Posts by: Joe P.

Yep, that's very typical for investment properties as they want you to have 25% of the purchase price available to put down. Your skin has to be in the game for these properties.

You could consider some of the ancilary options, but if the numbers are working for you, could your HEL or HELOC your primary to get the cash needed for your next property? I have a duplex with both units rented and I'm looking at a HELOC to fund part of the purchase and all of the rehab on my next unit. My bank offers interest only for 5 years and when I refi, I plan to pay back all of the HELOC line that I end up using. The rates are sometimes more competitive than HML or even conventional mortgages and interest only is brilliant if you're going to BRRRR and refinance the place after rehab/hold.

@Paul Chae I really don't know how else to say it...but one of the top sayings in my industry is "trust, but verify".

I really, strongly, recommend you get yourself on the ground of any deal, or find someone who is 100% in your corner with knowledge and experience in homes, to act on your behalf...ideally both.

You are trusting the opinion of your agent who gets to put food on the table ONLY when this deal is put through. You are trusting the contract assigner who gets to put food on the table ONLY when this deal is put through. If you think these people are acting in your best interest, and being truthful about the information you are getting...my gosh...think it over.

My duplex needed "no work" -- according to both my inspector and the seller. And yet over a year period I spent about 8k in CAPEX and maintenance taking care of deferred maintenance -- bad plumbing sections, new water heater, new oven, new fridge, repair of another oven, two new toilets, two new sinks, replacing the upstairs bath completely...I mean the list goes on and on.

So I plead with you...do something right in this process and get yourself out to this house with a local person who can act in YOUR best interest. And then take whatever they say, e.g. if they are a contractor saying a house needs 20k worth of work, and add 20%. THAT will be the number, roughly.

I didn't read through this, but this is FEMAs guidelines: 

https://www.fema.gov/media-library-data/1428941960043-a8f37b7e3af25f47396bbff04e7bf036/FEMA-HFIAA_ECFActSheet_040715.pdf

I also have a property in a flood zone, no elevation cert. I was with a standard national bank in underwriting which required a 2k+ a year flood policy backed via NFIP. I was buying the property for about 100k; it seemed ridiculous to have such an expensive policy. We didn't know it was needed until I was under contract and in their underwriting phase. It was a little embarrassing and it stalled the deal.

I then found a mortgage-specific lender who only required NCIP-backed policy which was significantly cheaper. If you're in the same boat, feel free to contact me and I can pass along my mortgage guy's info. I can also pass along the company which issued the NCIP policy.

Billionaires don't have to worry about an unexpected medical bill bringing you right past your deductible and out of pocket max in one shot (as we did in JANUARY last year...thanks to a hospital visit. A year's worth of medical payments due 30 days after hospitalization).

Billionaires don't have to worry about a hot water replacement in January, costing you $800. Or needing a new boiler, costing you $3000. Or maybe your car needs repairs or bites the dust, and now you need it.

Billionaires don't have to worry about unexpected corporate turnover, costing you your job.

If billionaires want to go on TV and say cash is stupid, let them. They probably have .01% cash on hand of their networth (if you're a billionaire, 10 million is 1% of your networth).

I take what information I need about billionaires -- they are most likely setting, propping up, or destroying markets. That's the information you need from them.

Otherwise, they're gasbags with too much money trying to tell us peons how to live.

Sure, I'm an investor, I believe in free markets, getting paid what you're worth based on your skills, education is important, everything is a financial decision, etc. But I also hear how like 8000 people have more than 4 billion combined, and that's a world I don't necessarily like or think is very fair. So without getting too political, thank you Warren Buffett, thank you Ray Dalio, but you both and any other billionaire telling me how to live my life, can go pound sand.

@Lien Vuong is correct...you're hedging everything into one property with a lot of open questions. On top of that, I am somewhat familiar with the Boston area market and it is white-hot; dare I say one of the hottest markets in the Northeast. I've seen the changing skyline both in Boston proper and out west thanks to an influx of pharmas (of which are my day job clients) and what its doing to the area.

So take this information -- you're trying to dump a lot of stuff into a home, but what's the return going to be on that? Appreciation? Because cash flows in the area are probably not there unless you have scale (apartment buildings). That would be question number 1 for me; if I put say, 100k cash into a property for purchase or purchase/rehab, financing the rest...what's my monthly and annual cash return for that investment? You can't always count on appreciation; so unless you can show that kind of cash flow, its going to be difficult.

I would look at areas where more companies may be investing and see if there are any properties out there, or house-hacking as others have implied. The issue is the market is white-hot and already has investors, so pickings will be slim or over-priced for a casual investor in that market.

I would focus on your house first...make sure your living expenses are as low as possible, pay down any debts to increase your personal cash flow, and save save save.

Missed you guys last night -- was just too tired getting home from traveling for work all week. Hope it was a good meeting!

@Tara S. do you think your husband would be interested in a chat about the numbers I got from my GC? I'd like to sanity-bounce them off someone and make sure they are in-range.

If it was my first time doing anything, I would double and triple check every aspect of this.

I'd need to see the property and get a feel for the area AM and PM. I'd want to see the work and realistically check to see what needs to be done. The big ticket items are plumbing, electrical, bathrooms/kitchens, utilities (e.g. heating/AC), roofing, siding, and sometimes wall repair/replacement in bigger properties. If you've got a few of those...that can easily equate to 10k or 20k by itself.

I am also looking at a property for my first BRRRR; I live about 20 minutes from the place and I plan to be there quite a bit. My money (and only my money) is on the line; I want to check progress, be on the ground for problems, keep tabs on the GC and any workers, and also show everyone involved that I'm the guy writing the check, and I'm taking it seriously. An out of state (out of their mind and view) investor? Some liberties would be taken.

I would try and make friends with a handy person or someone in the trades to come out and see this property with you. Pay them for their time to walk through and make estimates of the work needing to be done.

One thing I've learned with my duplex is that it either needs on the ground management for most of the beginning, or it needs someone managing it for you. If you don't plan on doing either, you're already in trouble.

@Daniel Kent hey bud, I think I remember you from the last meetup. Hoping I can answer your questions:

Without knowing how HMLs are typically structured, my plan was to take care of 25% of the home purchase and closing costs (est about 13k cash) and then HML the remainder. I don't think I accounted for HML holding costs, but I'm going to assume if its interest only on loan in the 70k range, I'm probably in the 5-7k range? Not sure. All costs were inclusive of the basic estimate I got from my GC, and I added some buffer on his.

I am familiar with the CO guidelines, I just went through a few things on my duplex. It stinks the city makes you get a tenant BEFORE you CO inspect. But I have a PM familiar with the CO needs of the city and a GC who works/lives in the city, so they'll keep me on track.

Great point about the appraisal -- I'm going to ask around on recent flips/buy and holds. There's no point in doing this if appraisal comes in at 80k. I need it to be over 100k to make it worth my while regardless of buy/hold or if it should be a flip.

@Michael Anderson thanks for running those -- I see something similar. The bill back of water makes sense and adds $100 CF into my pocket, which is great. I do get worried, even with a good rehab, of low CAPEX/maintenance percentages, especially on a SFH. $130 per month is $1560 per year. Doesn't take long for that cash to be snapped up -- lets say an appliance unexpectedly goes, that could be 500-700 on the spot. Or lets say a tenant causes some damage beyond their security deposit. A bad drywall spot repair and paint could be a couple of hundred dollars. OR, one of my favorites -- a new roof is needed. Well your CAPEX for several years is snapped up in one fell swoop. Its a dangerous game to play and it could put pressure on you and your other investments...or worse...your personal life. All told this makes me wonder if this house would serve a better purpose as a flip if I'm all in for 80k and can sell for 110k, versus holding for $1200 cash flow per year. This is an affordable suburb from Philly, and even modest raises of rent would take a long time to get me to 25-30k in profit. I'm usually a big believer of BRRRR versus flipping, but you and I arrived at a very similar net cash flow analysis and I am just not sure this one works as a BRRRR.

Hi guys, thanks for the info. I posted a link from my google docs (https://drive.google.com/open?...) after I uploaded the PDF there, I'm not sure why the link isn't working. I'm going to break down the numbers below though.

@Jaleel Phillips thanks for reaching out -- with the numbers below it should bring it into focus @Richie Thomas thanks for that info -- I actually own a duplex in town so I'm familiar with the area. It's a super blue collar area and certain pockets are great for American Joe and Jane, and some pockets are not so great. The beauty in this town is getting great returns when you buy well, but taxes are indeed high (see below). Hi @Tara S., we've actually met when we toured Lauren's BRRRR on Powell St over the summer. I'm working with an agent and one of the contractors who came to our event, but if you want to review below (I'll breakdown some of the rehab costs) that would be helpful!

---Purchase Info---

• Price - $45,000
• Closing Costs - Assuming $2,000 (don't know if this is accurate)
• Rehab - $30,000
• All-in - $77,000 (getting a HML), my cash in will be 25% of home purchase and closing - $13,250
• ARV - $110,000

---Refinance---

• 70% of ARV for cashout - 77,000
• Interest rate - 5.625%
• Mortgage Payment - $443

Property Details

• Income - $1300 per month

• Expenses
  • Mortgage - $443
  • Taxes - $300 (approx 3600 annually)
  • Insurance - $70 (not in a flood zone)
  • Property Management - $75 (confirmed value with my PM)
  • Vacancy - $108.33 (1300/12)
  • Maintenance - $130 (10%)
  • CAPEX - $65 (5% - we would be replacing most of the mechanicals, electric, plumbing)
  • Water - $100 (considering billing back to tenant)
• Cash Flow - $18.98per month...ew. (1.72% COCR). If I bill back water, it goes up to 10.78 COCR.

This is where I get concerned, because I don't think I'm being too conservative with my expense estimates, and a 3/1 in this town can usually rent for $1200-$1400, so I went with $1300 to be safe.

I've never done a BRRRR before, so I want to see if I'm conservative enough, or too conservative, and if these are the numbers people typically look for or are OK with undertaking a BRRRR.

Finally, for rehab, I had a contractor walk through. He said 25k, I'm saying 30k, the estimates are a mix of his walkthrough values and my values. Would love to know if these are realistic or not.

• Replace most of the plumbing ($2,000)
• Some electrical work (assuming about $6,000)
• New heater ($3,500)
• Rental grade bath ($3,500)
• Rental grade kitchen ($2,500)
• Multiple spots of sheetrock repair, skim coat, painting ($5,000)
• Flooring on 1st floor ($2,500)
• Carpet on steps and 2nd floor ($2,000)
• Add W+D hookup ($1,000)
• Appliances included in rehab cost (rental grade - $2,000)
• Total - $30,000

Thanks everyone for viewing -- I'm just worried about the realism of the rehab and then the operating numbers.

Hi all - hoping to have some feedback on this deal for Gloucester City, NJ

https://www.biggerpockets.com/brrrr-calc/1408045

This house is a 3/1 and I'm looking to purchase for $45,000, rehab for approximately $30,000, and refinance at an ARV of $110,000 (70% LTV - $77,000), which would cover purchase/rehab.

I'm worried its a bit tight with the cash flow, but I tried to be as conservative as possible with all estimates including growth of rents/area.

Would appreciate feedback!