All Forum Posts by: Michael Woodward

@Henry Cobb, I wish there was a right answer but in my experience, that's one of those questions that you will never know for sure because it will come down to the preference of the person that makes an offer.  One person will want hardwood everywhere (allergies, etc) but others will need carpet (small babies need a soft landing).  I spent a lot of extra money on one of my renovation projects putting drywall on the basement ceiling.  When I sold the property the new owner said, "I wish you wouldn't have put that drywall on the ceiling".  You'll never know for sure what's the best thing.  You might just have to go with your gut.  Good luck!

In my opinion, this is the very best way for someone new to this business to get started in real estate investing. I know people that got started this way and it's the way I got started as well.  

Advantages that come to mind are....

1) Securing funding for a primary residence is usually MUCH easier than for investments

2) You can move as slowly as you need to with the renovations.  

3) Profits are amplified by living in the project because you're saving all the money you would have to pay for other housing.

The one disadvantage that my wife would want me to point out is that you have to live with a house that's in constant change (mess).  She desperately wanted to "nest" but it just wasn't possible.

Regarding the financing..... I would go talk to three or four of your local banks and mortgage providers.  Larger banks could offer the financing you want but local banks and privately owned mortgage providers usually have more options and flexibility.

FIRST...... Do your due diligence and put together a really nice, professional presentation.  You need to understand the numbers and be able to convey them effectively.

Good luck!

You might have already done this but the first thing you need to do is thoroughly analyze the property and put together a very clear and professional report with all of the relevant details.  It needs to have good potential returns and you need to be able to convey that in a convincing way.  Lenders will expect to see that you can demonstrate a very good understanding of the business in general as well as the details of this specific project.  If you have a solid project and a professional delivery of the potential profit, you will have a much greater chance of getting the attention of potential investors than without it.

Good luck!

This is really the same old issue that used car sales have had forever.  There are a lot of good people that put out a really good product (whether cars or houses) but there are always a few that will try to cheat.  Those are the guys that ruin everyone's reputation.  

I don't want to ring my own bell but in order to tell the other side of the story...... I make sure my contractor always does quality work and I always stand behind the finished product.  The result is that we regularly get complements from agents, buyers, and even the home inspectors.  

I encourage all you "flippers" out there to do good work.  You might think it's worth it to cut corners but I promise that it will do more damage in the long run than whatever you think you saved in the short term.

@Clay Smith I don't want to get too fancy with the arrangements.  It needs to be very clean and easy or it will take too much of my time and carry too much risk.  Thanks for your input though.

@Bob E. , I really don't want to carry the note for any period so I'm going to let the buyer try to find something that works.  It looks like she might have found someone that can get it done.  If not, I'll move on to the next buyer.  Thanks!

@Don Konipol 

Thanks for your input. I appreciate it!  I understand why financing regulations tightened but it's a little frustrating to have a solid deal like this fall short because of current rules. My local banker said it was a "lay-up" if it weren't for Dodd-Frank.  Thanks again!

@David Oldenburg 

Thank you also for your reply!  I'm glad to hear that it's an attractive deal.  If I were a lender, I would like it too.  It's just not my business model.  Too bad you aren't in TN!! 

I have a buyer for one of my fully renovated houses that's ready to make an $80k down payment (sale price is $145k) but she can't get her financing approved.  My bank was going to finance the deal but new Dodd-Frank employment history requirements prevented it.  She only needs seven more months of employment to qualify for a mortgage.  After that, she plans to secure a mortgage for the remaining $65k balance. There's virtually no risk with this deal because of the enormous down payment. The worst case scenario would be that the investor would foreclose on the $65k balance and have a recently renovated house worth more than double their investment.  I would be willing to help manage the entire process for out of town investors.  

Here's a few more details.  Let me know if you want to finance the deal or know someone who might.  

Thanks! 

Mike Woodward 865-773-4226

- Address: 3233 Chilhowee Heights Rd, Maryville, TN 37803

- Website with pictures and details: Local MLS listing

- Recently appraised by Renasant bank at $140,000

- Buyer Stats: Currently employed (11 months total, 5 months at current job), Divorced one year ago, Stay at home mom prior, Very little credit history, Father lives with her and is willing to co-sign the note

(keywords: funding, finance, loan, private, portfolio, hard money, soft money, investor)

@Paul Z. I think the answer to your question depends on your experience and level of confidence in your budget numbers.  

If you're new to the business and you have no historical pricing data to work with then you will have to get bids from multiple contractors to figure out what the going rate is. In my experience, the bid amounts fluctuate by how "hungry" the contractors are so bid numbers can change quickly with the market.  You'll have to sort that out as you go.

If you're an experienced investor with lots of historical pricing data to work with then you will pretty much know what the bids are going to (or should) be.  This is a much better position to be in because you can negotiate with the contractors better. 

You will probably run into some "take-it-or-leave-it" contractors but you will also find some that will care about your budget and work toward helping you save money where ever possible. THOSE ARE THE GUYS YOU WANT!!

I've been doing this for quite a while so I'm pretty comfortable that my estimated budget is going to reflect reality.  When I meet with my contractor, I ALWAYS give him a project budget and ask for his help to get it done at that price.  He's great at finding ways to save me money including negotiating with material suppliers for discounts!  When my project succeeds, my contractor benefits so we're both motivated to work in cooperation.

Hope that helps!

I like Jonathan's idea of using the vent-free gas insert. It's minimal expense, attracts buyers/renters, and puts the old chimney to good use. Win-win-win.....

@Mike Watts , Since you plan to rent the house you don't really need to do the repairs because renters don't care about things like that.... unless it interferes with their use of the house ....or if it looks really bad. You should be ok with minor repairs for as long as you are renting it.

I think the risk you're running though is in the event that you decide at some time in the future that you want (or need) to sell it. It sounds like you're already committed to the purchase but in the future, you really should run all the numbers on ALL of your exit scenarios before committing to the purchase.....including the option to sell. If the slab repairs are required to sell the house but the cost proves to be too high, you might find yourself in a very difficult situation. The market has a nasty habit of changing so the more options you have the better! You don't want to do anything that would cut off your exit options.

Good luck!