All Forum Posts by: Mike K.

Some BRRRR Nuances that can get you in trouble:

It is easy to underestimate your rehab budget.
It is easy to overestimate your ARV.
It is easy to underestimate the timeline.
It is easy to underestimate loan costs.

I'm looking at a sheriff auction property at $140k. ARV is $230k - $240k. Using $230k at 75% gives me a loan amount of $161k which should cover purchase and rehab costs for interior remodel. If the exterior needs work I likely won't buy the property. Rent is $1,600-$1,800/mo. I'm calculating a $100-$200/mo positive cash flow. This is in a single family home development built in the 1960s with a 60% of homes owner occupied. Predominate SP range is $180k-$240k with not a lot of distressed sales. Seems like a good deal for my first investor purchase. Gotta start somewhere.

1 Vote

Columbus, Ohio

Quote from @Jason Allen:

Quote from @Mike K.:

Quote from @Jason Allen:

Quote from @Mike K.:

Quote from @Jason Allen:

Sounds like a legit plan. From what I can tell, it looks like most of the properties go for about 70% of market value at auction. Ideally, you'd want to be all in at 70% ARV(including repairs).

Been looking at a few of the properties listed on the Sheriff's Sale Auction List. Seems like the market value they are using might be low based on the minimum bids listed.

I was looking at a property with a min bid of $35,000. Looking at the comps the property is worth about $100K in decent condition. Not sure how they got to the min bid.

I'm guessing the appraisers for the auction have some sort idea on the condition of the property? Zillow is not always the best indicator of market value.

I suspect they may be purposely setting the appraised value low to make sure there is enough of a discount so they sell at the auction. A lot of risk buying a property without inspecting the interior. By the way, I'm an appraiser. I'm not using the Z-Value.

I'll find out more about how the appraisals are done for the sheriff's auctions. It is also possible to purchase the properties before or after the auction up until the court confirms the foreclosure. This is the property owner's right of redemption, and it typically last no more than 90 days.

Jason, how do find the pre-foreclosure properties? Seems like with the high home prices and higher interest rates right not that finding a property at a discount to market value may be THE KEY to RE Investing. I think I'm gonna try the sheriff's auctions. As an appraiser I can get a more accurate market value than the Z-Estimate and I'm comfortable researching County Records. Does the lender get the homeowner out of the house before it goes to auction typically?

0 Votes

Columbus, Ohio

Quote from @Nicholas L.:

@Jason Allen

that's just PITI though... what about everything else?

I would grant that self managing can be a huge advantage... but OOS investors can't self manage. so your example doesn't cash flow. $4K rent minus $400 for management = $3600. Repairs, vacancy, capex any shared utilities, groundskeeping, PITI, etc. = $0 cash flow.

and again. I'm not saying it's not a great deal. It's probably a great deal! It's just not cash flowing unless you self manage.

From what I'm seeing getting a near neutral cash flow in an A-class area is great right now in the Columbus area. Only positive cash flow deals I can find are in low income neighborhoods or smaller markets outside the Columbus Metro Area, like Marion.

1 Vote

Quote from @Jason Allen:

Quote from @Mike K.:

Quote from @Jason Allen:

Sounds like a legit plan. From what I can tell, it looks like most of the properties go for about 70% of market value at auction. Ideally, you'd want to be all in at 70% ARV(including repairs).

Been looking at a few of the properties listed on the Sheriff's Sale Auction List. Seems like the market value they are using might be low based on the minimum bids listed.

I was looking at a property with a min bid of $35,000. Looking at the comps the property is worth about $100K in decent condition. Not sure how they got to the min bid.

I'm guessing the appraisers for the auction have some sort idea on the condition of the property? Zillow is not always the best indicator of market value.

1 Vote

Columbus, Ohio

Quote from @Jason Allen:

Sounds like a legit plan. From what I can tell, it looks like most of the properties go for about 70% of market value at auction. Ideally, you'd want to be all in at 70% ARV(including repairs).

Been looking at a few of the properties listed on the Sheriff's Sale Auction List. Seems like the market value they are using might be low based on the minimum bids listed.

I was looking at a property with a min bid of $35,000. Looking at the comps the property is worth about $100K in decent condition. Not sure how they got to the min bid.

0 Votes

Columbus, Ohio

Quote from @Marcus Auerbach:

I don't know your market but I just pulled numbers for Columbus; 249k median, 102% sale to list price and 19 DOM - that's pretty similar to what we have here in Milwaukee. If you can afford it I would buy a house just above median in already move in condition. You should be able to break even on mortgage payments. Or you buy try to buy the equivalent house distressed and do the work to get it to median.

This is certainly a delayed gratification strategy. If you run numbers through the BP calculator you'll see that cash flow will turn positive in a few years. Your ROI is mostly from loan paydown and from appreciation. My point is that over 5 or 10 years this type of investment will outperfrom a cash flow property in the hood by a wide margin.

You can only buy the best deal the market will allow you at any given time. And you are lucky to be in one the THE best markets in the US for investors. You want to buy as much cash flow as you can possibly get, but you should not compromise the quality of the location and the structure. (Don't buy a weird house nobody wants just because its cheap!!) It is a balancing act, but your future self will thank you.

PS maybe try to seperate your equity investment from your cash flow investment: there are other ways to build a couple hundred $ in passive income and then you can focus your REI on long term goals.

I'm not looking for a pure +Cash Flow property in a bad area. Also not looking for a property that's -$600 monthly cashflow and counting on appreciation moving forward. Looking for more of a close to neutral cash flow property in a decent neighborhood with good appreciation. Having a hard time finding those properties.

0 Votes

Milwaukee, Wisconsin

Quote from @AJ Exner:

Mike,

Sounds pretty close, but I maybe add a tweak. With that kind of acquisition strategy, it might benefit to utilized a delayed purchase because most lenders struggle to underwrite deals in the span it takes for the auction to close.

If you do it delayed, you can stay mostly liquid, then follow up the purchase with essentially a cash out refinance of the purchase price with rehab funds being put into an escrow account as well.
Would be happy to explain further, but my clients that operate that way tend to prefer that method to keep getting their cash tied up too much.

Plan would be to purchase with HELOC funds, rehab, refi conventional, rent, repeat. HELOC funds are available immediately.

0 Votes

Columbus, Ohio

I'm financially stable with good income, low debt, and good credit score. I'm in my upper 50s and would like to retire in 8-10 years with $3000 in passive income from RE investments. I have about $250k available through a HELOC. Seems to be a shortage of positive cash flow properties available on the local MLS here in central Ohio. Thinking about purchasing foreclosed properties at auction using HELOC funds for the purchase and renovation costs, then refinancing into a 80% LTV conventional loan to pay back HELOC, and renting property long term. Is anyone using this method? How many properties do you purchase in a year? Are there any risk factors to this approach, beyond typical BRRRR?

2 Votes

Columbus, Ohio

Quote from @Zac Mckenzie:

Hey Avi, I own a four plex in Newark and have been happy with the area. You can certainly execute the BRRR strategy in this area, like any other area you need to buy right and have the right information on the specific location. There are other areas in town that may offer more opportunities like the ones listed above but that doesn't mean you can't make that strategy a success outside of them.

With Intel plant there are a lot of people coming into the area involved with the construction of the plant. The 161 corridor between Columbus and Newark should see an increasing rental demand.

1 Vote

Columbus, Ohio

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @Engelo Rumora:

Quote from @V.G Jason:

Quote from @Engelo Rumora:

Quote from @Carlos Ptriawan:

Quote from @Engelo Rumora:

In REI it's similar, but a little different due to the fact it's where you live. The primo of primo of areas will go up due to scarcity and it's where you raise your family, the gutter areas will dip. The net maybe unch due to the varying differences at both. When rates go down, you'll see some divestment from high(er) quality REI into other asset forms. And you'll see less total investment into REI(not as low as the last 15 months, but less than pre-2022).

if we are looking at redfin, actually the non-quality housing like in Ohio is having the largest demand compared to the "quality" housing. Many business is also moving to the "non-quality" neighborhood as money is flowing to the cheaper place.

And you're right--Cleveland, Columbus, Detroit have been the most in "demand" by closed deals. But the output is sometimes agnostic to these inputs. We don't see how many offers there are? Deals are going that direction, but that's not entirely synonymous with demand.

I had this discussion with a strong RE company. Sitting on the buy & sell side of some primo markets. I had technically 21 offers for my Miami place, I say less because I use the cash offers as real offers. This in less than 2 days. In Manhattan beach, I beat out 16 other offers so 17 total were made. YoY I think MB is down 15%.

In the Rockies, I beat out 7 other offers. In REI markets, Raleigh earlier in 2023 I was constantly facing 5 offers or more on houses and Nashville, too. Raleigh is slightly negative Yoy price wise. Park City is a great example, YoY it's down 30%+ but you'll still get multiple offers.

In those aforementioned cities, are we seeing double digit offers or high single offers? I'm inclined to think not. So just because the deals have closed and has made it a statistic, it's not necessarily indicating where the true demand has been. I am shopping in Hawaii and can't even get a breath in there's just a ton taken up immediately. I can go to Columbus, Detroit, Cleveland right now and get a deal done by Friday, I can't say the same for Hawaii.

Lets do this objectively using data with same set of indicator, lets compre Raleigh vs Columbus.

Lets use the "Offer above asking" Percentage from Redfin data.

https://www.redfin.com/city/35711/NC/Raleigh/housing-market#...

So Raleigh is siting at 19% and Columbus at 31% , there's greater demand in Columbus.

That more or less goes with my point of it being an accounted for statistic--an output. We can't see the inputs. Whose to say there weren't 30 offers at 15% over, versus 10 offers at 31% offer. what would constitute greater demand--the % above asking or the amount of offers?

Given house prices differ from each city, the % is skewed and I'd assume the latter. Which is hard to find data on, can we find that on Redfin?

We do agree though-- Columbus, Cleveland, and Detroit were the most accounted for demand wise. I just am not sure that paints the full picture.

We could see the result of bidding process by using average median price, so we have this data from ZHI:

Columbus OH average price
2023-03 220k
2024-01 233k

13k over 9 months

Raleigh

2023-03 414k
2024-01 427k

13k over 9 months

well, as we can see the appreciation rate in Columbus is double than the Raleigh because they're cheaper.

....But the winner is still...

San Jose from 1.226 to 1.35k or 125k over 9 months.

This is what I've been telling folks to just invest in bay area lol

But.....You are looking at historic appreciation rates. I'm in Columbus market and I can't find a property even approaching a positive cash flow, unless it's in the low income neighborhoods. I'm not comfortable buying a property with a negative $500 cash flow hoping future appreciation will cover the loss. I think a crash is not likely, but a correction is probable in the next 24 months in most markets.

2 Votes

All Forum Posts by: Mike K.

Mike K. has started 5 posts and replied 82 times.

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: If you had $300k liquid how would you start RIGHT NOW?

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: Newbies: investing is not rocket science - don't let the gurus tell you otherwise

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRR in Columbus Ohio area

Post: Will housing crash in 2026 or has it already crashed? Expert called last two crashes.

Mike K. has started 5 posts and replied 82 times.

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: If you had $300k liquid how would you start RIGHT NOW?

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: Newbies: investing is not rocket science - don't let the gurus tell you otherwise

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: BRRRR using Sheriff Sale purchases and HELOC

Biggerpockets Logo Post: BRRR in Columbus Ohio area

Biggerpockets Logo Post: Will housing crash in 2026 or has it already crashed? Expert called last two crashes.

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: If you had $300k liquid how would you start RIGHT NOW?

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: Newbies: investing is not rocket science - don't let the gurus tell you otherwise

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRRR using Sheriff Sale purchases and HELOC

Post: BRRR in Columbus Ohio area

Post: Will housing crash in 2026 or has it already crashed? Expert called last two crashes.