All Forum Posts by: Sarah Hatton

First, congrats on getting the second project underway!

If you plan to scale your portfolio fix and flip is the way to go. The goal with buy and hold is to build generational wealth - which is the long term goal - and you need a certain amount of capital get there. Taking down one property at a time can slow down the path to scaling substantially. As you learned with your first project, flipping is all about making profit, faster. What you can do it start to hold onto some of the properties you flip, for example for every 10 properties you flip maybe you hold onto 2, or 4. You keep the profit moving for future investments while refinancing and holding onto the best ones. 

Hope this helps!

The time of financing is going to depend on a few things...

1) How do you plan to write your offers? If your marketing strategy is a QUICK close with sellers, you can't go the DSCR route. Best case scenario these loans will close in 20 days (if all the stars align), in reality they average 30 days.

2) I understand the end goal is LTR but if you're calling eviction records, auctions, craigslist, etc chances these homes are going to need a rehab component. Not to say this is always the case, but if someone is being evicted chances are they are not maintaining their home. If you plan to rehab, rent, and refi then a HML or PL (same thing, really) is a good option.

3) The last piece I would mention is to line up your capital now. If you plan to pull on equity, aka HELOC, you're looking at around 30 days. Obviously pulling on the 401k will be faster, but that may come with some tax disadvantages.

The good news is that whether it's DSCR/HML/PL no one should be pulling your credit upfront or taking deposits. You can get a preliminary approval with soft quotes then once you have a property under contract and start the loan process you can approve the credit pull.

Good luck with all of this. Feel free to shoot me a dm with any questions!

Sounds like a great project - cheers to you!

If you are taking on one project at a time and have plenty of liquidity to not only cover closing and rehab, but also rehab contingency for unexpected expenses - go that route. Bring in a hml when you're ready to take on multiple projects at once and scale. 

Hey Shulem, 

Redfin is a great site to find your ARVs. Enter the property address, click on the map and hit 'nearby homes for sale'. From there you can filter by asset type, sold date (try to stay within 3-6 months), square footage, and lot size. The more refined your search parameters are, the better comps you'll find. From the properties listed look at the ones that within the closest distance that have a similar structure (cottage vs brick, one story vs two, etc). Now match with the level of upgrades you are going for and there will be your ARV comps. Use the price per square foot (or maybe a self determined value between the top comps) and multiply by your subjects square footage to calculate your ARV. Hope this helps!

On the hunt for lenders who can handle larger development deals. I have several multifamily construction loan requests ranging from $5m to $20m. If you are or work for a direct lender who can take deals like this down please DM!

**Tagging some keywords to find the right people: Private lender, commercial lender, new construction, construction financing, multifamily development

Nice!

Hey Garrett, 

Does this partner of yours have capital to bring into the project? 

Have you considered taking on smaller projects to have some leftover liquidity after the down payment? 

Hard money sounds like a good option for you as these loans include funds for rehab. LTVs will range anywhere from 75-90% of purchase + 100% of rehab, held back to be released as the work is completed. These reimbursements can happen frequently throughout the life of the project, but that does mean labor and material will need to be fronted in phases (hence the first capital/liquidity question). Another thing to consider is the holding costs (monthly payments) for the loan; hard money comes at a higher interest rate so you want to have a clear path on the rehab timeline and exit strategy. On top of this I recommend borrowers go into a project with some additional 'rainy day' liquidity. You never know when an unexpected cost will come up, or if the market shifts and you have to pay extension fees on the loan. It's always better to be over prepared then under. 

Good luck!

Hey Aaron, 

Just a thought - have you explored opening a no-interest credit card for the window expense? I've had a few borrowers front rehab on CC until they get reimbursed and this was one strategy a borrower shared. 

Hey Brian, 

Each institution will have different ways of calculating rent.Here are just a few of the iterations i've seen: 

- 90% of in place or appraised rents

- Lesser of the in place rents or market rents

- 100% of appraisal rent

- 100% of AirDNA

- 125% of appraisal rent IF in place rents support a higher value.