All Forum Posts by: Michael Doherty

@Eric McCarty Your money... whether bank money or personal money is going to be tied up for 6 month seasoning require to refinance. You can still get a great deal by buying 'cash'. Hard money or private money is a decent way to get started using Other people money. When you make your offer with a hard money lender it is essentially 'cash'. They close quick and make it pretty painless. There are less hoops to jump through for both the seller and buyer. But it isn't cheap. Typically any hard money lender depending on your experience is going to charge 10-12% interest only and 2-3 points. 

@Eric McCarty I don't know if I necessary agree with that statement 'funding the entire deal with cash'. There are a lot of investors, myself included that never would have gotten started if we didn't use debt to fund deals. Debt/leverage used in a responsible and prudent way, is one of the most powerful tools to growing your business. 

The Dave Ramsey school of thought would tell you not to take on any debt. However, some of the most successful people in real estate and other fields started off with debt and using other peoples money. Should you leverage yourself 100%... NO. But if you are short on cash and try to keep saving to fund a deal 100% cash, you may never get started. 

Think about it like this: If I gave you a 100k loan at 5% to fund your deal and you knew you were going to make 10% on the backend would you do it? You essentially just make 5% net profit without touching your own bank account. Even if I had the funds to purchase and rehab 100% cash, I still wouldn't. You pigeonhole yourself to that one deal. What if during the middle of that deal, you get presented a different deal with fantastic numbers. All your capital would be tied up and you would have to pass.  

@Keegan Dsouza I wouldn't get too caught up on 'what strategy fits each market' because many people on here, myself included could probably argue you can make any strategy work in any market. People don't stop flipping/BRRRR'ing, buying tax liens, buying raw land, building storage units ect because of a certain market. With that said, the barriers to entry are certainly harder per market... for example, flipping a house in San Francisco is going to require a lot more capital than flipping a house in Manchester, NH.

I would first decide which strategy you want to pursue. Then research the market and ask yourself why you like it. Do you like it because of growth, gentrification, appreciation? Then try to apply your favorite strategy there. 

@Shushruma Ekbote Hi Shushruma, congrats on your recent house hack! When looking for a BRRRR I would advise to start backwards and run your numbers like you are going to flip the property. Simply said.... what ever you think the ARV will be multiply that by .75. Then take that number and subtract out your estimated rehab costs. What ever that final number is should be your maximum allowable offer. I provided an example below.

200k(ARV) x.75= 150k. 150k- 50k (projected rehab costs)= 100k. So in this scenario your maximum allowable offer should be 100k or less.

These are very loose numbers, there is certainly a lot more that goes into it but this should get you started when analyzing deals. Please keep in mind both sets of closing costs. You are going to incur closing costs to acquire the property and very similar closing costs when you refinance with a new bank. Please be sure to factor these costs into your numbers. Bigger Pockets has a great BRRRR calculator. I would suggest using this and analyze as many deals as you can.

@Alan Carranza Just compare what closing costs, debt service and interest rate would be if you did a cash out refinance. If you can do a Cash out refinance and pay 4% interest rate, cash flow and use that cash to make more than 4% then its a no brainer. If that doesn't seem possible just do a HELOC and tap into the funds when you want.

@Joe M. what LTV can you get the HELOC for? If they are willing to give you 75% or greater LTV then do the HELOC. Closing costs can add up for a cash out refi. So just do the math out... how much money would you be spending in interest on the money you tap into with the HELOC vs closing costs to pull out the same amount. I like the idea of only tapping into and paying interest on the monies I need... like a very large bank account.

@Jessica Heyse congrats, those are awesome numbers! Onto the next one. Let me know if you have any questions as you embark on getting your real estate license. 

@Caitlyn Richardson as someone around your age my advice is to find out what your good at/like to do and find out what your not good at and don't like to do. Maybe your really good at analyzing deals and bookkeeping given your background. But you hate the Property management side and dealing with tenants/negotiating terms. So you would seek out an agent/ property manager to go 50/50 on a deal. Or maybe you are really good at raising money but cant find a deal. Partner with a wholesaler who is great at marketing and finding deals. All of which you can find here on BP. But first figure out what value you can bring to the table, then figure out what kind of partner you are looking for. I would be hyper-focused on finding the right partner, it will save you time and money. 

It sounds like you want experience in the commercial world but have no background investing there. Offer to take a couple brokers out to lunch or coffee and pick their brain. Or find an experienced broker and offer to pay him X amount per hour for his time to just ask questions. Your best bet is to follow the Commercial Real estate forums and keyword alerts on here and read as much as you can (free). 

@Robert Duncan Just counter back. Offer cash, quick close, ease of sale ect ect. He may be using it to offset taxes and a place to park cash... who knows. The fact that he responded you know he's interested in selling. Even at 85k-100k you would still make money. 

@Tom Rattigan Hey Tom, what numbers are you looking for in COC, ROI, cap rate, Cash Flow Ect? There are some good opportunities in Hartford, New Britain, Middletown, Bristol for larger Multi Family with decent return.

Certainly there are markets down south that can provide great returns as well. Just curious what metrics you are using.