All Forum Posts by: Aaron Montague

Hi @Khalil Kelley, welcome to BP.

I see you paying no commission on the sale of this property.  How do you plan on marketing and selling it?

Check out the 70% ARV concept here on BP. It will teach you a great deal the early math on flips.

What is your goal for the flipping business?  If you have the cash to do a deal like this, you might want to look at something cheaper with lower holding costs.

Hi @James Owens IV, welcome to BP :)

Buy it, it looks like a good BRRRR property.

If you numbers are accurate I'd pull the trigger and purchase the place.  The only slight adjustment I'd make is making sure your repairs + Cap Ex are at least $250/month unless this place is newer than the 40k renovation budget leads me to believe it is.

How did you arrive at your 40k renovation number? This is the place that will get you in the most trouble if you screw it up.

@Michael Conte I'm following this to hear what others have to say about the Lease to Own.

However I do recommend that your friend start calling more than 1 or 3 mortgage companies.  Someone out there is going to have a product that will get him a conventional loan with less than the 2 years requirements mentioned above.  A good habit for any investor is to ask questions until you find an answer that helps further your goals.

Simply because 1 or 2 "standard" mortgage companies said "this is the industry standard" doesn't mean that someone out there won't have a loan for this guy.

Yes, house hack Baltimore.

Determine your end goal first @Chris Hijazin. The general goal of house hacking is lowering your monthly housing cost. So if you can do that, you have a successful house hack.

Listen to Podcast 402 here on BP.  David Green talks about his "core four."

"I'm finding an agent to get me deals, I'm finding a property manager to advise me on the markets and what rents for what, where I want to avoid. I'm finding a contractor to get the place ready to go or a handyman to fix up the stuff in the inspection report and I'm asking who knows a lender so that I can get financing. I literally just started repeating that every single time I went to a new market."

So you'll need an agent and a lender as you cover the handyman and property manager roles at the beginning.

Don't forget to think about what you need as a person during a house hack.  Would you give up 2% a month to cut 25 minutes off your commute to work each way?  Details like that are important.

If you want true insight into the rental markets, talk to the property management companies in the areas you are thinking about buying in.  

I'm in New England.  I use $250/month for duplexes up to $400 for giant 4 family places.  Our specialty is 2-4 units dwellings :)

I might throw in another $50-$150 if I know something big is breaking soon.

Hi @Jessie Lopez, welcome to BP :)

Short Version: If your ARV and renovation numbers are accurate, this will be a good purchase for you.

Details:

Time to Refinance: 6 Months - You probably won't need to wait. Most banks will refi after "significant changes/repairs" are made to a building. I would guess you could refi in 4 months, 2 for the flip plus ~2 to refi

Loan Fees: $1,900.00 - This seems REALLY low for a full refi.  We are looking at costs on our refis similar to a new purchase. The only expense we don't need is an inspection. Those are running ~$5000 up this way.

Loan Interest Rate: 5.00% - This strikes me as high, even for a property under 100k.  I would venture you'd probably be looking at 3.75 - 4.25 here.

Post-Refinance Expenses
Repairs $50.00 (5%) + CapEx $50.00 (5%) - These 2 should be at least $250/month.  This place is old, beat up and 17k isn't going to turn it into a freshly built house.
Insurance $40.00 (4%)
Management $100.00 (10%)
P&I $322.09 (32%)
Property Taxes $23.42 (2%) - I believe this it what it is today, though I doubt it will look like this going forward. I just talked to a realtor in OH on 9/28/20 who recommended that I take 2.5% of the purchase, in your case refi, price as the next tax base. I don't know this to be fact though he seemed to know his investments

Utilities ?? - I don't see a utilities bill on this evaluation anywhere. Do your tenants pay all the utilities?

Total $585.51 (59%) - recalculate

@George Allen

Is the rental in the Bahamas a good deal for you at all?

2000 - 450 fees - 1530 mortgage (144k at 5% for 10 years) = not much for you: $20/month  

I didn't throw in taxes or insurance.

Now if your short term rental income promises to be quite a bit higher than the 2000/month, then it could be a better deal.

Did I miss anything?

@Matthew Patton

I wouldn't worry about the rentability at all.  Arrangements like this are quickly becoming the norm as cities work to combat sprawl and increase density of housing.

Several of the BP podcast guests have remarked that many of their excellent deals were SFR on large lots where they could put another apartment behind the main building.

 Which bank was this? I would love to talk with them.

Yes, you can get conventional mortgages for "distressed" properties. However, the phrase "distressed property" conveys a wide possibility of definitions.  The Investopia definition simply states that a distressed property is one that MUST be sold quickly. Most investors automatically assume this property is both unlivable and therefore not subject to conventional loans.

That being said there are several types of loans from conventional lenders that can remedy your issues.  If the place is a tear down, get a construction loan.  If it is livable, use a conventional loan to avoid the aforementioned hard money charges and fees (8-12% + 2-4 points), then use cash to fix it up, and finally refinance into a 30 year.

The decided advantage of hard money is speed, generally.  Especially if you have been working with a particular lender on different deals.