All Forum Posts by: Pat Lulewicz

Careful with definitions. I just read an article recently that noted "Avg Profits For Flipped Homes" of $80,000, however when you dig into the article and their sources, "Profit" is simply Sale Price - Purchase Price...so it doesn't consider renovation costs, holding costs, financing costs, etc. When you think about it, only the flipper will know the expenses (not generally public record) so analysts or data aggregators can only go off publically available data. So your $300k number might be what the flipper sold the final product for, less what they purchased it for.

Lot of people excluding the most important R that differentiates a flip from a rental - the RENT part...financing generally changes if you don't have a tenant or lease. So consider how long the lease-up will take:

Is there so much rental demand that you can show it during the late stages of reno and get a lease signed? This will help start the refi process

Renter timeline for move-in matters: Good renters give 60+ days notice to their current landlord. If you have a finished product, they won't move in for 60 days but your lender requires signed lease and/or move-in for refi...this will delay your refi.

Based on location and some rough math, he's definitely looking for market value (stabilized asset) vs the current condition. So he wants all the upside (fully occupied and cash flowing) without any of the work (rehab and lease-up).

Like @Tyler Watts said, the math wont work. You'd probably have to get this seller carried w/o interest, but then you'll have to figure out where to get the rehab capital. The location you're referencing will likely require substantial rehab capital.

There may be some out of state investor who hears NC and throws their money at a portfolio, but this feels like it'd need to be cash transaction.

How much SHF RE do you currently have? What's your equity position? How much does the current portfolio generate? Do you have additional capital to add?

Lastly - why?

There's definitely a lot of merit to transition over especially when you're at the size/scale you currently appear to be. However some of the "easy parts" of residential change like financing and the term of the note. NC is a great market for your goals, however it will be challenging to find inventory that has much cash flow; many people who toss money into multifamily here do it to avoid the tax bill + take the 10 year runway of growth.

Percents and "doubles" are useful pieces of information, but what is the net amount we're talking about? $1,000 v $2,000 or $20,000 v $40,000. The latter is something I would personally wait for. The power of leverage is one of the main benefits that distinguishes RE from other investment choices, and the refi is where real wealth is made. Does the property still cash flow well at 80%? If it's tight or you're uncomfortable with the tenant you have in there from a confidence perspective, especially if this is a first deal, maybe meet in the middle and get a lender at 75% or 77% (doesn't HAVE to be at 5% increments) that wont make you season, and leave a bit more money in the deal, but sleep better.

Overall, if I cash flow well, have/keep reserves, and am comfortable I fixed everything in the house, I like to max out the LTV on refi.

Evictions follow the same process from county to county in NC, however some counties are slightly more challenging than others. With e-filing systems in most county courts, you can DIY file and complete evictions relatively easily, especially if tenant doesn't show up. The first and most important step is to post the 10 day demand for rent letter to get the clock started. So for example, rent is due 12/1, considered past due 12/6...post that letter on their door on 12/6. PM me and I can send you my template for this.

Before I started handling these myself, I used: George Gibbs who's based in Charlotte but works state wide from what I understand. BP wont let me include contact info so you can PM me for that as well.

Luke - as an active investor and Realtor in mid-sized NC cities, getting 5% with today's home prices and interest rates is impressive in areas that aren't D or even C class assets/areas. Remember that comparison is the thief of joy - maybe they buy in very rough areas. Perhaps you don't want your strategy to resemble that.

1. Yes - include ALL expenses in your math, including reserves for repairs/maint, capex, turnover, etc. That includes property insurance and property taxes. Its extremely important when running tighter margins like what you're talking about to focus on age of HVAC, water heater, appliances, roof, etc. Any of those can range from $500 - $5,000+ and will blow your CoC out of the water.

2. CoC is an, all things being equal, comparison tool between properties. Cash flow is the metric that can move the needle. If you're only making $1k on a $100k investment, a 1% CoC is probably below what you could find in other investment strategies and your 1% is very high risk because 1 water heater gets you negative. Equity/appreciation (and tax benefits) are important, but you need enough cash flow to be able to stay in the game.

3. Recognize that going out of state will come with a lot of learning and education; there's a cost for that of your time and if its better served educating out of state or spending it on the property. Example - 10-20 hours this year managing your local rental vs 30 hours this year learning about other markets and finding third parties you can trust. Its a more comprehensive view especially early in your investing journey unless $ isn't a factor.

I think you're less likely to focus on state, and much more important to focus on city. For example, as someone to lives and invests in NC, there's only a handful of larger cities where you'll be able to buy anything worthwhile for $350k. Raleigh, Durham, and Charlotte are likely priced out for you. After that, you should do more research on lifestyle vs what your family is looking for.

@Stuart Udis no need to call people out for their suggestions when "based on the numbers [she shared]" good-ole, 4th-grade math says there's margin; make your point in a more worthwhile way...on Tgiving nonetheless.

If those are real numbers - flip it! You're probably in for $180k - $185k. After closing costs, you're probably netting $21k - $26k...if you're newer and this is a deal in your hands, I'd run with it all day.