All Forum Posts by: Stephen Chittenden

Originally posted by @Justin B.:

@Joe Villeneuve I would love to adopt your model! I assume you have to take on credit partners who is comfortable with leverage and have the available loans in order to keep that train rolling. 

For those of us wondering, how would it affect your strategy if the initial purchase was a loan? I assume there's the extra closing costs and one would need two available loans; one acquisition, one for refi. 

 I'm not Joe, but I think one issue may be that a bank may not be willing to finance the acquisition of the property based on its pre-rehab condition.  Closing costs is a big extra cost.

@Daniel Levine

 We just used this strategy for the first time.  We were able to refinance on the new appraised value at less than one year.  The rehab took more than six months, so I don't know if we could have done it in less than six months.  The loan was from a credit union @ 4.75% fixed for 30 years.  Our project was pricier than @Joe Villeneuve's purchases, and it took us a long time to complete the rehab.  We went way over budget on the rehab because of unforeseen problems with just about every part of the house we purchased.  Despite creating nearly $40k in equity doing the rehab, we will end up with some cash trapped in the house, so it was not a total success.

In any event, you can see more about it here...

http://www.biggerpockets.com/forums/223/topics/206...

Originally posted by @Larry Turowski:

@Stephen Chittenden nice job on the rehab.  And you definitely purchased right if you could go over rehab budget by 70% and still have a lot of equity when you were done. 

What will your cash flow be?  Do you expect appreciation?  Why not sell?

Cash flow will be about $100 per month after PITI, management, and reserves for vacancy, maintenance, and cap ex. We've been a little aggressive with our cap ex reserve on this house as we replaced all of the systems, so there shouldn't be any major expenses for a number of years.

I will say, we were pretty nervous waiting for the appraisal. The rehab was painful with some new, unexpected problem everyone we turned around. We had planned about 20% for contingency, but blew through that. 

Our strategy is to generate significant long-term cash flow and worth by generating equity in each renovation so that we can cash out as much as possible from each unit and use it to purchase other properties. To that end, our strategy is for each rehab to generate 25% equity. That will allow us to finance at 75% LTV. We didn't quite make it at this one, but we'd be pretty close if not for the high closing costs on the loan. We were able to get a credit union to finance at 75% LTV on the appraised value with 4.75% fixed for 30 years. I suspect our ability to get those terms will be somewhat limited going forward, as this loan already required extra review because the two LLC members on the note already had 4 properties between them and this was number five.

They wouldn't satisfy my rent and income standards. We owned a house that we let my parents live in rent-free. We just had them pay us $400 per month for utilities (electric, water, gas, sewer, phone, Internet, and cable). Even that was sometimes late. It's not worth it.

Mark Brogan Thanks!

Haasim Grant Thanks!

Mar Tell Dennis thanks. We got quotes from a few. The one we ended up using was affiliated with our property manager. Another we considered does flips with a friend of mine.

Jason Yarusi thanks!

Originally posted by @Ramon Jenkins:

congrats

 Thanks!

A positive is that you know where he works, so getting a garnishment order should be fairly straightforward.