All Forum Posts by: Mason Liu

I like to think of it as the seller being willing to pay a certain cost for the ease of transaction / solving of their issues. Now, it certainly can still be unethical if the wholesaler spreads false information in the hopes of coercing a seller to sell the property, regardless of price. However, if the seller understands why the wholesaler is offering the price he/she is offering and accepts the discount in exchange for the ease of transaction, I think a case can be made where it is indeed a ethical practice.

I think it is also relevant to know that most sales channels that are not Direct to Consumer/Business will have a wholesale component to it, where the middleman and the dealer negotiate a price to transact on where the middleman will make a premium by selling to the end consumer.

Hey Jingmin,

In regards to Buy and Hold, I believe you would have to look at location from the state/city/zip code/actual street level. From the state and city level, look at population flows, what type of businesses are moving in/out of the state/city, rent growth historicals, price appreciation historicals etc. From the micro level, look at what the neighborhood looks like (does it favor retirees? Families?), safety, what type of school zone it is in if it is a family neighborhood, is the property neighboring major roads etc. How I personally would start is on the macro level, and from there do a bit of leg work and start analyzing specific areas within the city that you want to invest in. I will say if you want to really hone in on a specific market, it would be useful to visit the actual city and drive around the zip codes you want to invest in, network with professionals in the area (agent/investors etc), and really get a feel for it.

If you're remote, you probably can get away with self managing if you develop systems on what happens if there is a repair needed, tenant disputes, turnovers etc. If you have multiple, you probably need to develop a relationship with a PM. For reference, I own a rental property 4 hours north of me which I am currently self managing, but I am very familiar with the area and have a network of handyman/sub-contractors for repairs, and am easily able to put in a new tenant at a short notice.

Can't really comment on 3.

Hope this helps!

Hey Wendy,

I think ultimately it will depend on the financing terms between if you were to do a cash-out refi or HELOC on your property versus the mortgage you would qualify for on the investment property. If your DTI is good after pulling equity out of your current home and you qualify for a conventional product for the investment home, it may be relatively similar in terms of interest expense. However, if you are going to need to use a non-QM product for the investment home if you only take out some equity from the house, it may be a lot more costly. Hope this makes sense!

Hey Christopher,

Just some ideas, besides looking at comparative rents on FurnishedFinder or other sites for mid term rentals, you can also look up facebook groups in Maryland that are catered towards rentals for traveling nurses/traveling workers/remote workers and find some real time data on mid term stays. Another idea is looking on airbnb and screening for properties that are offering multi month long stays and seeing how much they are charging.

I just have to say that is a beautiful cabin!

Hey Murray, congrats on getting close to purchasing your first deal! If it is a turnkey rental, I assume that means there isn't much (if any) deferred maintenance or repairs needed on the home. Depending on the age and condition of the home and the main CAPEX items (HVAC/Roof/Electrical/Plumbing), that Capex/Repair amount could vary. I think overall those numbers are still good general rules of thumbs to use, and as long as you have a good reserve fund you can tap into for large upfront CAPEX items you should be just fine.

Hey Matthew,

First off, good job on taking action! Couple of questions though...do you believe this property is in an area of growth? Do you for any reason want to own this property long term for any other reason besides a LTR?

Assuming no for both questions above, the margins might be a bit too slim for this to be a good deal. 6% COC returns is a pretty small return percentage. In addition, all it would take is one large CAPEX event in the early years to wipe out over a year of returns since your monthly cash flow is at roughly $150/month. In addition, I see you don't have property management calculated as an expense. Nothing wrong with that, but if you are needing to self manage just to produce a return, it just seems way too tight.

Hopefully this helps!

I agree with you that it would be more appropriate to include closing costs as the all-in costs to purchase a home. Typically the emergency fund and rehab costs are separate, as it varies upon property and can be financed in different ways (IE credit card 0% APR for renovations vs cash).

Depending on the extent of rehab (sounds like it is pretty turnkey and mostly just cosmetic renovations needed), I do think you have budgeted well for the property.

Hey Devin,

Short answer, it depends. Different lenders will allow you to pull out different amounts of equity from a deal. For example, if a lender allows you to pull out 30% of the appraised value at the refinance and the appraisal comes in at $72,000, you would be able to take out $50,400 (assuming no closing costs which is unlikely).

A HELOC is a line of credit, so it is on top of your existing loan.

Hey Katie. Firstly, congratulations on finding what looks to be a potential good deal! 

Everyone's criteria for what is a "reasonable deal" for a BRRR will be different, especially with different underlying assumptions on appreciation and rent growth of the property since every market and every property is different. The first step would be to determine whether the property is something you want to hold long term (which in this case since you are going for a BRRR I assume the answer is yes) and what COC% return you are looking for.

For the tool, you will need to know your cost of debt. Say for example if you are bundling the rehab with the mortgage into one loan, there will just be one interest rate for that entire product. In the second step of the tool "Purchase Loan details", you will enter the relevant information for the loan, as well as how many months you plan on holding that loan before refinancing. Right underneath that is the "Refinance" area where you will enter in the refinance information. I would recommend you solidify your cost of debt on both the first loan + rehab as well as the refinance (know how much equity you will be able to pull out and at what terms), so you aren't left with any variables. If your all in cost does come out to 145k + 100k = 245k for all closing costs/rehab/holding costs etc, and you are able to pull out 70% of 340k = 238k, you only have 7k tied up in the deal for 30% of equity, checks off the first box of a successful BRRR in my opinion as long as you can afford to keep that 7k tied up.

I would also look to firm up the exit strategy in terms of renting out (LTR vs MTR/STR). Assuming the monthly LTR rate is $2200 and you don't pay utilities etc and you pull out 70% on the refinance, your loan balance is 238k. Assuming a 6.5% interest rate on a 30Y fixed mortgage, $3000 in annual prop taxes and $1000 in home insurance (i don't know what market you are in so both these numbers are placeholders), you are looking at a $1837/month PITI payment. Adding in CAPEX/maintenance reserves and any additional costs like lawn/trash etc, and you can see the cash flow isn't too great. It will ultimately be dependent on whether you want to keep that property long term (assuming MTR/STR numbers aren't drastically better).

Hope this helps!