All Forum Posts by: Matt McGuire

I think you should make the offer. Most people look to be all in for 70-75% of ARV which in this case would be 93,750. But that typically is because they are using private money and want to refinance to pay their lender back. If you are going to use this as a buy and hold rental it makes sense. If you can get it for 60k and spend 30k on the rehab it seems like a good deal. But remember to factor in holding costs for the time it will take to get it rent ready and place a tenant.

If you don't have a contractor use Angie's list or Home Advisor. I had great luck finding a contractor on Home Advisor and now he is my go-to in the Bryan/College Station area. Another idea is drive around the area where this house is, and look for other houses being flipped/worked on. Sometimes you can just stop by and talk to the contractor and he/she will be available for your project.

In reality you only have to pay interest to the hard money lender during the 12 months. Its like an interest only loan with a balloon payment. But I did some more research and you do need a decent amount of cash because they charge points, plus they dont cover closing costs. In the example I looked at from Jet Lending on YouTube, you borrow 100,000 and you need close to 15k at closing plus you need to show you have almost 50k total so that they know you can pay at least 6 months of interest and have money to start the rehab. 

Hard money lenders pay the rehab cost in "draws" which basically means they reimburse you for work thats been done. So in order to get started, you need to be able to front the first construction costs. 

https://www.youtube.com/watch?v=85goWokOAb0&feature=youtu.be 

So for the original loan, I was using the numbers that a hard money lender gave me. Those were his terms. I agree the numbers don't look right. And you should be able to wrap the rehab cost into the loan too. The hard money lender said they would fund 80% of purchase price and 100% of rehab plus 2.5 points and 885 processing fee. The term for that was 12 months with the intent that I would refinance out when the rehab is complete. 

How do you calculate this type of loan?

So I got some more information on the deal. Purchase was 160k with an ARV of around 245k. Only needs about 10k for the rehab. He promised his private lender 12.5% so 20k. The reason he really doesn't want to sell it, is there are new subdivisions going in all around it (David Weekly Homes) and he speculates the land value will increase significantly within a year or 2.

@Caleb Jordan, do you know how many months is typical to be on title before cash out? If we were to form an LLC, how does the bank decide on the cash out? Do they look at both of our debt to income ratios or how does that work?

What do you guys think of these numbers? I'm not real familiar with the BRRR calculator but I plugged in some estimates.

View report

*This link comes directly from our calculators, based on information input by the member who posted.

My friend is picking up steam in his REI career and he called me today. He purchased a house that he used private money to get, and he planned on using the BRRR strategy to get his investor's money back. He hasn't started the rehab yet, and he found out today that he wouldn't be able to do a cash out refinance because he recently quit his job to pursue his real estate career.

So he wanted to know if I wanted to buy it. Currently I am looking for a house to BRRR and I wanted to know from the BP community, what's the smart play here? Is there a way for me to partner with him and use my credit and income in order to do a cash out refi? If I buy it he is going to have to mark it up so he can make some cash and pay back his lender.

I don't know the numbers on the deal yet but I figured this would be a great opportunity to get some input from everyone here. What are your thoughts?

I've looked into this too and the general consensus is to leave them alone. The last FEMA flood plain map was updated in 2004. Odds are, whenever it is updated again, it will include lots of areas in and around Houston that were not previously in flood plains. If you can get a super low ball price it might be worth it but you have to know that it will sit on the market for a long time because people are wary of homes that flooded even if it was just during Harvey.

If you are looking to rent them out then maybe it would make sense but you would definitely want to factor flood insurance into your numbers and have a higher expense/capital expenditure budget. You would also probably want something in your tenant contract that says you are not responsible for loss of their goods if it were to flood again.

Hi I just saw this thread and I have a couple questions. @Aaron Smith, When you ask for a record keeping sample report, what report are you referring to and what are you looking for?

@Paul Timmins, when you ask what are expenses per category per unit, what category do you mean? Also, what are you looking for in a market occupancy rate?

After reading this, I went to the irem.org and narpm.org to search for property managers. Then I just googled a couple of them and the 2 I looked at both had terrible reviews on google and yelp. Do you guys think that the reviews online from the tenants should be taken into account when selecting a property manager?

Thanks for everyone's comments! I love that I have this resource to bounce ideas around. My gut says sell it too. I just thought maybe this would be my opportunity to get a rental. I'll find one soon though.

@Dave Foster, I appreciate the insight. I knew I could do a 1031 exchange and roll the money into the new house, but I didn't know I could keep any of it tax free. That's great information.