All Forum Posts by: Michael Pearse

@Taylor Renee Noll I recommend writing down the team of people you would like to have (realtor, contractor, wholesaler, etc). Then start networking to find people that are the right match for the area of real estate you are looking for. You don't have to wait for everything to be perfect before starting. A lot of the business requires taking action and just figuring it out as you go. You will be taking risk when you make an investment, whether that be through time networking, or purchasing a duplex. As you build experience you will learn ways to minimize the risk and increase profit. This applies in the beginning as well. You will meet a lot of great people, but only a few will work for your team.

I was in a similar scenario as yourself about a year ago, where no friends and family are involved with real estate. But now that I have done a few deals and network in my area, friends and family are always asking me how my real estate is coming along. Stay motivated and remember why you are doing it (for anything in life). 

Cheers!

@Eva Brock I would walk through the property with several contractors to get an accurate estimate to complete the rehab. Once you have received several bids, calculate if you project a good ROI is possible for this home. If that is the case, figure out a way to finance the project and get things going. Create a scope of work, set deadlines, calculate holding costs, expected rent rate/sell value, etc.

Best of luck!

@Stephanie Barton Yes you can negotiate the appraisal value. What you will need to do is contact the bank with reasons why you believe the appraisal came in lower than expected.

I would recommend creating a word document of every large investment you made to improve the home, just as you listed here. Indicate the year and cost of when those projects were complete. A strategy I also recommend is to write on the top of the word document the expected value you see the home capable of selling for. This will create a mental anchor while the bank and appraiser read through your list of home improvements. Therefore increasing the likelihood of your home appraisal coming in closer to what you would like.  

Cheers!

@Eric Martin I understand the challenges of finding a bank that will go through the motions of completing a 203K loan, as I was in the same position about a year ago. I would recommend looking into conventional loans with a rehab budget included in the loan. This is essentially a 203K loan, except the bank and yourself don't have to jump through all the paperwork to follow the lengthy process of using a 203K loan.

Talk to small local banks in your area and ask about conventional loans with the rehab budget tacked on. They have a better understanding of your real estate market and are more open to risk than large traditional banks. 

Cheers!

@Ani Simmons Create a well outlined Scope of Work (SOW) and have the contractor aware of any penalties for not meeting deadlines (fees for significant schedule slip, etc). Once this is written, walk through the document with your contractors and collect signatures of agreement. 

If you are working on the rehab yourself and see the project starting to take longer than projected, you can hire out additional labor to help with the process. I would suggest obtaining several quotes to get an assessment of what is a fair market price for the tasks you are asking to be completed.

Best of luck! 

@Alice M. Obtaining a HELOC is an excellent option as long as the ROI from the projected investment looks good. To get a HELOC your bank will request another appraisal to be done. They will likely loan out 70%-80% Loan to Value, which can be a decent amount of money to get started depending on the appraisal and cost of real estate property you are looking into.

As far as getting another loan to invest in real estate, this will depend on your risk tolerance. If you are confident in your numbers and know the range of return on investment, your risk will be reduced. If you are unsure of how to complete investment calculations, I would recommend finding an experienced investor who is willing to guide you through the process. Attending a local real estate social is a great way to build connections and finding a mentor. 

Best of luck!

@Matthew P. I understand what you are going through and am experiencing the same situation you are in. Something to keep in mind as a skilled and hungry real estate investor is that patience is also an important trait. I have been analyzing deals and see numerous examples where it does not make since to move forward on purchases, but somehow people are still making excessive offers. I recommend sitting back (crunching numbers along the way of course) and letting others ride the wave of low returns as you build up reserves. When the time is right, you will see the deals you are looking for and have the funds available to make several successful moves. Stay patient and make smart, calculated investment moves. Keep emotion out of the numbers and you will do well.

Hope that helps! 

@Paul C. You can do any of the scenarios you described in the last sentence. I would recommend crunching the numbers with both scenarios to give you better clarity on the outcome. A less risky approach would be to use the cash you have and the HELOC for the down payment.

With the amount of HELOC funds you have available, I would recommend using this resource to fund the next deal. This is because you will be using reserves from your own pool of money versus a hard money lender. Where if the project goes longer than anticipated you will be paying a high interest rate for a longer period of time due to using a hard money lender.

Hard money lenders look at your track record and want to understand your experience level. If you demonstrate that you are willing to take risk with your own skin in the game (HELOC), they are more likely to loan money to you, and at a lower interest rate than someone who has no experience.

Hope that helps!

@Daniel Rivera Before doing anything with the equity I would get educated in a specific area of investments that interests you. I would recommend understanding the market you plan to invest in (if you choose RE), and connect with the local market to get feedback on what people find are good areas with whatever niche you decide on (Flips, BRRRR, turnkey, ect).

Best of luck!

@Account Closed Leverage essentially means not using your own money to make an investment. For example, when using an FHA loan to purchase a single family home for 3.5% down, you are using the bank as leverage to cover the other 96.5% of the loan to complete the transaction. Putting less money in the deal, rather than more of your own hard cash is known as using more leverage. Typically being more leveraged results in less cash flow. Though results will vary depending on what you are exactly doing on a deal.

Hope that helps!