All Forum Posts by: Ori Skloot

Hey folks, going to attempt to answer multiple questions here. 

1. Originally posted by @Patrick Philip:

Not my business, but why wouldn't you just flip the thing and put that $130,000 in your pocket? What's $800/month compared to that?

@Patrick Philip   Don't want to pay 50% of my $130,000 gain in ordinary income tax.  I'll hold it as a rental for a couple of years and then if I sell down the road I will pay a lower capital gain taxes.  So long as the market doesn't take a dip in the next year or two, this strategy could be worth about $50,000 in savings (difference between my ordinary income tax and capital gain tax after holding two years).   I'm also not opposed to holding it and letting the tenants pay down my mortgage and then refinance again down the road to pull out the equity.

2.Originally posted by @Tim McGarvey:

Newbie question here. What are the benefits to raising private money to make the initial purchase vs using conventional financing? I guess why wouldn't you have used the same conventional mortgage you refied into to make the initial purchase? I'm assuming that having the full purchase about in cash enabled you to do this deal

@Tim McGarvey  I think @Will Barnard answered this nicely.  The key thing for me was that doing an all cash offer allowed me to then finance for 100% of the purchase price.

3. Originally posted by @Rich Hupper:

@Ori Skloot Great story thank you for sharing. I am currently trying to do this as well I bought the house with cash and fixing it up but I am worried about the LTV when I am finished and getting all my cash out, because this cash is from a heloc and ideally I would be able to pay it all back.

I am also worried about my income. My credit is great however I have been writing off so many expenses the past couple years it doesn't look like I make anything. :(

@Rich Hupper

Questions about the cash out mortgage you got.

What was the loan to value on it?

I think it was 75% LTV, but the appraisal came in so high it didn't really matter. 75% of $400k appraisal = $300k. I was limited by my purchase price of $250k.

What was the interest and terms?

30 year fixed.  5.375% interest rate with lender paying a bunch of my closing costs.

Did they take into consideration the lease or just used your debt to income?

They took into account my lease on the property I was financing.  Had to show them the signed lease and cashed deposit check.

How much in reserves did you need to qualify?

None.  No reserves needed on a residential purchase.

The bank you used for the cash out was it a portfolio lender or some other unique lender?

I used @Chris Mason as my mortgage broker.

4. Originally posted by @Robin Boyer:

great post everyone a lot of us can learn from this. That's what I am wondering can members people make money at this method if you are not a broker and a gc ? I am neither but would like to try this method. 

@Robin Boyer  Short answer is it's a lot more difficult to make the numbers work if you don't have some skills yourself and can save money.  But, that said, if the purchase price is right then yes you could make this work and pay a broker and GC.

5. Originally posted by @Jay Sechowicz:

Sounds like you did an awesome job @Ori Skloot, congrats. I just want to ask a question to clear some of my confusion? After the work was done and you took the $255k loan out to pay back friends and cover costs, you still had your $54k tied up in the property correct? You just wanted to get out before 6 months so you could pay your friends back and stop paying them interest? So after 6 months do you plan to refi again to take all of your rehab costs (the $54k) out of the property and put it back in your pocket?

Sounds like you made a great deal but not too realistic for someone with out a ton of capital if you have to keep the $54k in the house. Would love to hear your thoughts.

@Jay Sechowicz Correct, I still have $54k tied up in the house.  I may refi later and take a $100k out so I can repeat the process.   If I didn't have the $54k myself I could have borrowed that money from friends and then waited 6 months and done my refinance to pull out the full amount to pay everyone back.

6. Originally posted by @Matt Pendleton:

Thanks for sharing @Ori Skloot, and I like your creative use of financing on this deal!

I'm curious about the rebates you got from PG&E and EBMUD. I'm working on a project in Oakland that needs some sewer lateral work in order to get the certification, and I haven't heard of any rebate programs.

For the PG&E rebates, was this through the Advanced Home Upgrade program? If so, was it a pain to qualify? It looks like you have to go through one of PG&E's qualified contractors, and after a quick search it doesn't look like there are too many who are part of the program.

@Matt Pendleton   I glossed over the EBMUD part.  It isn't a rebate, we had to put $4500 into escrow with EBMUD at closing.  I did the work and then got a check back from EBMUD.  For PG&E rebate, yes this was through Energy Upgrade California Advanced Path.  For me it's a pretty smooth process, but I have an edge on this one.  Definitely worth getting a $5000 check back from PG&E after I completed the work.    Ping me and I can give you more info.

@Chris Mason Very well said! 

@Osazee Edebiri the private lending - I did that piece myself.  Got a promissory note and deed of trust template. Signed them, got the deeds notarized, filed the deeds with the country, mailed the promissory notes to my friends.  They wired money into escrow.  Voila!

Hi Folks,

I am representing the owner of an off-market 6-plex building located in an appreciating area of Richmond, CA.  Property is located on 6th street near Ohio Avenue.

Property is fully rented with solid, tenants. Gross rents are $4,250/month. Tenant of 15 years acts as property manager, so this can be a super easy turn-key investment. 

Rents are under-market so lots of upside potential on this property!

Each apartment is around 400 sq. ft. They are each 1 bedroom.

Many updates recently done: new roof, sewer lateral, water heaters, house painting, etc. The deck and stairs need to be painted, we have a bid of $4,000 for this work.

This is a rare opportunity to own a multi-family in the Bay Area at a great value - 6% cap rate.

Asking Price: $525,000

If you are interested please email me with a clear proposal and your offer: [email protected]

P.S. Lots of people are familiar with Oakland but less so with Richmond.  Richmond, has seen steady growth like many other Bay Area cities.  If you are not familiar with the area you should check it out.

@David Faulkner Exactly! Couldn't have said it better myself. It's definitely going to take some creative thinking, skills, gumption, cash to make a good deal happen. Folks who don't have that are just buying off the MLS.

@Justin Young Thanks!  Yes, if I waited 6 months I could finance for the appraised amount.  In that case I could have pulled money out of the deal and be cash flow neutral.   I preferred to have positive cash flow and reduce my costs.

@Jenifer Levini Thanks!  Yes, it would have been a very different deal if I hadn't brokered the deal and needed to hire a GC.  Doing those myself easily saved me $50-60k.   There is a large concrete side yard that has plenty of space for two cars, so the garage could be converted.   I hear you about your reticence to use your personal home as collateral, but if the deal is solid enough then I say go for it.

@Rivy S.  you bring up a good point. This deal wouldn't work for everyone. 

I fixed everything up in the rehab so I don't expect capex expenses anytime soon or much maintenance.  It already had a new roof and the foundation is solid. I did brand new HVAC, water heater, electrical, plumbing, etc.   

Vacancy in Oakland is hardly an issue (I know, never say never). I have a clause in my lease that the tenants have to give 60 days notice if they want to vacate.  Plenty of time to find new tenants.  

Finally, I am managing the property myself as I live in Berkeley which is 20 minutes away. 

@James Free thanks.  Limited to the maximum of the purchase price plus closing costs. I assume if I refinanced after one year that i could refinance at the appraised amount. Yes, I got a conventional mortgage through Chris Mason's company. 

@Robert Marston  @DG A. 

Location of property is near 73rd and Bancroft. Near Eastmont Mall.

@Chris Mason  Thanks for your thoughtful input.  You continue to impress

@Ana Marie B.  Here are some pics.  All my work was on the inside of the house.  Outside still could use some upgrades and new paint.  But that's down the line.

Kitchen Before                                                Kitchen After

Living Room Before                                              Living Room After

Converted Garage                                             New Half Bath

Outside of House