All Forum Posts by: Michael Henry

@Andrew Threet Find someone experienced to partner with. Don't get greedy, your goal is to learn and earn an above-average return with minimal risk of losing your investment. 

@Jimmy Lieu everything you stated about DTI is true but I think you may be missing my point. Let me try to say it in a different way. When you apply for financing they will tell you how much you qualify for (your max purchasing power) this is true for refinance too but with one other conditions limitations i.e. property value. Let's say you own a property and it is worth $500K but your DTI only allows you to pull out $250K you are capped unless you find a commercial loan product or your income increases the next year and which case you can refinance again at a higher amount. If the property value $150K you still have $100K in refinancing price or purchasing power.

The point is, your preapproval will tell you how much refinancing power you are going to have using traditional banks or CUs. If you do not that you are doing your Brrrr blind on one of the most important parts. 

Using an HML will not make sense because you will not have the ability to refinance out once your short term loan is up.

@Paul Giblin a lot of time you can't count the cash flow until you file your taxes. I like to think about it this way. Let us say you go to the bank and get a preapproval for $400K. Out of the preapproval, you use $150K total (during the purchase and after the refinance) which leaves you $250K for your next deal. Your ability to use the reminder $250K will be determined by your ability to come up with a downpayment. The Brrrr only works if you have the income to support the loans for most traditional loan products. This is why many people move into commercial loans because these loans underwriters focus on net worth, cash flow, and the asset itself. In this case, you could use the cash flow to qualify for more buying power if the two factors are equal.  

@Greg Koszkul BP is a good reference point. You have to ask for a lot of referrals and interview those referrals. I remember when I did property management and marketed my services with no clients, even at that point I had references who could speak on my character. I do believe you should always have a third party that you can call on to act as your eyes and ears. Good checks and balances and remember this saying: "hire slow and fire quickly". 

@Alan Hernandez  Go work under the top real estate investor in your area (or move if you have to) for free or pay them if you have to. Your goal is to get specific knowledge on the area you what to focus on. Once you have the resources (money, team, etc) and confidence execute on your own.   

@Mike Zahniser A lot of times newer investors refinance with a commercial loan because they have reached their limit with traditional loans. If you are planning on purchasing more properties this will free up your ability to get more loans traditionally (which you stated).  The only other thing you need to question is the cost of the refinance. 

@Jeff Pollock not all real estate agents are equal. The advice that came second is pretty sound. With the being said everything is up for negotiation at any given time but you will only get what you want if asked at the right time. You are under contract so you don't lose anything by negotiation if the seller says no you can decide to move forward with the transaction or not. With your situation above I would focus on what was not disclosed in the condition report/seller discloser report (if you got one or even have one in your state) and'/or focus on the item that the next buyer might want to be fixed as well and/or things that will prevent you from getting financing. Make sure you take your time during your negotiating, run it all the way to your deadline, and ask for an extension if you have to get some second quotes or opinions on what is wrong with the place.

If the repairs are truly health concerns and safety issues, I think you have some leverage. 

I hope this helps. 

@Ryan Guffey You get it. Flooring, full tile around tub, sick, and glass block window. All things being equal, the bathroom must have a shower over the tub and the tub needs to look new. A lot of times people do spray paint them to save on plumbing cost.  

@Ryan Guffey The market says the kitchen and the bathrooms need to very nice but in terms of cost of material paint is the winner every time. I think you can push the value with tile over laminate no matter where the location of the property is. Things that will not matter are lighting and plumbing fixtures. You would use custom soft-close cabinets in a more expensive place and stock normal-close cabinets for an inexpensive place. These things matter if you are looking to sell the property or push market rents. Not as much if you are looking to get a higher value from an appraiser. They are not walking around opening up the cabinets to check for quality. 

@Ryan Guffey , In general, the two big ones are the kitchen and the bathrooms. Next, come paint and carpet/flooring. I good paint selection and color scheme works wonders. I think the biggest ROI is the latter.

The value you get will depend on the quality of the material and finishes. I think most investors look to double or triple their investment when doing value add improvements.