All Forum Posts by: Kyle McCorkel

@Claire Austil

The cashout experience was very similar to the 4 single family that I did in 2018. But I’m sure that will vary based on the lender.

For me it was easy because the lender had worked with me on 4 deals already, now we were just dealing with a bigger property and larger loan amount.

Portfolio lender means they do not sell the loans to Fannie/Freddie.  The bank instead keeps the loan on their books (i.e. they hold it in their own portfolio).  These lenders are absolute gold mines because they don't have to adhere to the ever changing Fannie/Freddie guidelines.  It is much more relationship/track record based.

 You're absolutely right.  I am a big believer in stretching yourself.  My dad always said "one man's ceiling is another man's floor".  I think the only way to reach the next level is by taking on projects that are ALMOST too challenging and forcing yourself through it.

What's next? More multi-unit BRRRR's. I've acquired and am working on two 2-units with a partner, and we are getting in contact with owners of larger properties (for example, we've had some real good talks with the owners of a 6 unit).

 Fantastic question! Quick math: $500/month X 12 = $6K/yr.  I was left with about $36k in the deal.  That's a 17.6% cash on cash return.

Was it worth it? Yes, for the learning experience. Would I seek that kind of return in the future on this kind of project? Absolutely not. With the amount of work you need to put into a BRRRR, I always want to shoot to get all my money back on the refinance for infinite returns.

Here's another way to look at it though: if this property was listed as a turnkey rental (post rehab) on the MLS in this crazy market, it would sell for $300K. Someone would put (best case) a 20% down payment plus closing costs into this property, which would amount to lets say $75k. That's more than double the cash that I have in the deal, for only a 8% cash on cash return. So, for all that work, I got the property for 50% off. Plus, I have built in equity.

 See above post, portfolio loans are the way to go!

The gigantic "H" - :) 

There were a few H's in the house, the previous family was "Horgan", so I think that had something to do with it!

I found a local portfolio lender that does 80% LTV loans at 30 yr amortization. Fixed for 10 years, then the rate adjusts. I have 4.25% locked for 10 years. No seasoning period and they lend to LLC's. This was a huge find and an absolute game changer in my opinion!

For the appraisal: cap rate doesn't matter on 1-4 units.  Sure as investors we like to throw around cap rates.  But it just doesn't matter on the appraisal for 1-4 units.  I have found that appraisers kind of have no idea how to get good comps for 2-4 unit properties so they just use the 1% rule and massage their adjustments to make the numbers work.  So, my gross rents were $3,000 and property appraised for $306,000.  Suspiciously close to the 1% rule! (they use Gross Rent Multiplier on their appraisal form, but same difference)

Thanks! My GC had a guy come in who sprayed some crazy epoxy paint on the tile.  The grout was in decent shape and didn't have to be replaced.

I found my 4 BRRR's from: MLS, word of mouth (neighbor), direct mail, and pocket listing from agent.

It's so hard to find deals...probably the hardest part of the process.  The rest is just execution.  I feel like you find good deals by doing deals.  Momentum is so huge.  Once you start to get some wins, people talk, and then word of mouth takes it from there.  The beginning is the hardest part...you almost have to do a couple mediocre deals just to get people talking and build up your network.

@Natasha Berkheimer

Thanks! This one is on Market Street in New Cumberland.  The entire West Shore is an awesome rental area!

@Deanna Opgenort

Only the top unit. There was a tenant in there paying $300/month

I probably could have gotten $600-$700 for that unit as-is. But that’s just not how I want to run my business. I want all my units to be updated and commanding market rents or higher. Bottom line I want them to be a nice place to rent.

@Keeshaun King

Thanks everyone!

Mistakes made:

Majorly underestimating ARV - it's so hard to get good comps for multifamily 2-4 units, so I think I was overly conservative in order to compensate for lack of certainty. Going forward, I've found that appraisals will typically come in at or around the 1% rule on 2-4 unit properties. For this 3 unit, gross rents are $3000/month and the appraisal came in at $306,000...very close to that 1% rule.

Majorly underestimating rehab - need a checklist to inspect all major mechanical items such as roof, HVAC, electrical and plumbing. These items alone totaled over $50k and my allowance for these expenses were initially much lower. There were certain items that I overlooked entirely such as gutters.

Majorly underestimating rents - not sure what I could’ve done differently here. The rental market has just really picked up here! I will say that tenants will pay a premium for a nicely updated unit with central air.

Going with the cheapest contractor - took a risk on a contractor who was by far the cheapest but ended up being a complete deadbeat *facepalm*