All Forum Posts by: Nathan Grabau

Are you looking to invest less than 100k or have a total budget for your down payment/ out of pocket costs at under 100k? If you have 100k in dry powder, that can get you a 300-400k budget easily for a BRRRR deal once you leverage.

That being aid I would generally agree with people who say to house hack as much as you can before going to do other deals. 

When I think about CapEx I focus on the age of major things that will go out. These are roofs, HVAC systems, and water heaters primarily. Once a home is 20+ years old, the cycles for these things become almost random because they have been replaced before you purchased the property at least once and many times multiple times. 17.5% for CapEx and maintenance is higher than what I budget for on 100+ year old house conversions so you should be safe at that number.

It is important to remember that a lot of this could be front loaded. People are less likely to sell a property right after doing major repairs. I have consistently had major outages in the first 60 days of purchasing properties, even when inspections are done, but then have had substantially less maintenance/ CapEx after that.

I have been very happy with my investments in the Ames, Iowa area. They all have reasonable cashflow, increasing rents, and I am about to do my first cash out refi after less than a year, where I expect to get more than my full down payment out of the property. I also have a relator who owns property himself and has a management company. If you would like me to get you in touch with him, send me a DM! 

My rental's that are in LLC's have had no impact on 1 refinance and 2 heloc's I have taken on my primary residence. It will be hard to get another low down payment product, but with 20% down this should not be too difficult. I would talk to a mortgage broker about this more, and then double check with the lender that is financing your new build!

Congrats on getting your first deal under contract! I think how good netting 12k on a flip depends on your market. If you make money on your first deal, even if it is not a lot, that is a success! Lessons in the real estate game are not cheap and if you can learn and make money at the same time, you are golden! 

Typically lenders have stricter requirements on lending on land, often 20% down. Lender also tend to have stricter requirements on building because there is more risk for them as well. Is your credit loan because of missed payments or is it low because of a short credit history/ high balances on something like a HELOC. While our scores are a good surface level indicator, banks will look at different things that negatively impact your credit score differently. There is not a ton of information about this for mortgages, but if you Google the "Chase 5/ 24 rule" there is a ton of data about an unwritten rule that Chase will not let people open a new credit card with them if they have opened 5 credit cards with them in the last 24 months. This is not exactly how mortgage lending works, but your ability to get credit comes down to some things a little deeper than the score, especially for higher risk products like constriction and or land loans. Episode 599 of the BP Podcast had a guest that talked about building in opportunity zones and he discussed the new build process more broadly.

You also are allowed to get multiple mortgages. For conventional mortgages, which are what most people to buy their personal residences or a vacation home, you are limited by the Loan to Value and Debt to Income ratio. For commercial products, these lenders tend to substitute your personal debt to income ratio, with a Debt Service Credit Ratio, which essentially is the inverse of the DTI for a property. So a 80% DTI for you personally, would be pretty similar to a 1.25 DSCR. As people's portfolio start to grow, they typically transition away from conventional mortgages towards commercial mortgage products.

You could get an owner financed property on a short term note, and then have them agree to take second place on a lien behind a hard money lender. This is pretty unlike though unless you have a reason for someone to vouch for you with the owner and the hard money lender. 

If you do not do the renovate part of the BRRRR that is where you are adding value, so since you are not creating any value there, there is no way for that created value to be used for the loan value when you refinance.

If you find a cheap enough deal, some hard money lenders would let you take up to 80% of the ARV on a loan, but this almost becomes an ethical issue that you are giving someone so little for their property. It is also difficult to get a hard money loan if you are putting no money down and have not done flips/ BRRRR deals before.

I would encourage you to get the no and low The Book on Investing in Real Estate with No (and Low) Money Down: Real Life Strategies for Investing in Real Estate Using Other People's Money.  

The best way to limit your down payment in today's conditions is to use a 3.5% down FHA loan or a 3% down conventional loan. Both of these products are available for homes that you will use as your primary residence.

I would also encourage you to think from the view of other people, like what would make it so I would be willing to do this deal as a lender or seller. You might actually be able to come up with a creative solution that is not currently widely used. 

The white, black, and gray (with a pop of color see the door) color scheme is trendy right now. I haven't heard of anything that would make me want to read into it more than just people being trendy! 

I think you will have a hard time securing financing for the garage conversion. You probably will not increase the property's value by the cost of the conversion. What is your goal? If it is wealth building house hacking where you are is probably a great way to get more bang for your buck. 

Is it a plumber that you found or one that they found? If your property manager is not going out there because they trust the plumbers that does not seem unreasonable. That being said, my property manager in Iowa would handle and coordinate everything for me with this. Different property management companies have different levels of involvement that they offer and then actually engage. For being out of state, it sounds like you might want to consider trying to find a little more of a hands on property manager. 

I just closed on a HELOC with Quorum Federal Credit Union. They will lend at .99 plus prime interest only up to 90% of the value of your property. 90% is the highest LTV I have been able to find without an astronomical rate.