All Forum Posts by: Sean McCluskey

@Ryan Blake

Hi Ryan, it looks like you have a pretty unique skill set, doing both flips and HML!

The $275 fee and the 2 points are the only fees this HML collects, and they place the loan with one of the investors on their marketplace.

I was a day away from closing, with their money already in escrow, before backing out of another deal that would have suddenly cost me a lot more money and not been a good BRRRR or flip. So I've seen them fund a deal already.

I’m accounting for 9 months of interest in my estimate here, to try to be conservative in my timing on the rehab plus sales process.

Have you had any success with deals that have a slim target profit like this, starting at $15k on the low end?

The $15k profit would be the result of the market won’t pay anything for the 4th bedroom conversion. There’s a comp across the street from 1.5 years ago that sold for $210k

@Craig Jeppesen

Hi Craig, thanks for the feedback!

One thing someone mentioned to me is that a flip with a $15-$25k target profit can lose all of that pretty quickly if one bad change order comes up that was unexpected. Have you ever had that happen?

Hey BP!

I am in the middle of my first BRRRR deal, and I think I've found a very low risk cosmetic flip in a nice high end suburb. Very low average days on market, definitely a desirable area to live, A to A- area.

My question is this: would you do this flip? Is this enough margin to account for the risk of getting into a flip?

3 bed 2.5 bath 2000sf 2 story vinyl home, 20 years old.

Purchase price: $150k

Potential rehab: $25k (paint, flooring, power wash, granite countertops for kitchen and 2.5 baths, convert loft to 4th bedroom). I think I’m way high on this estimate.

HML fees: 2 points, $275 application fee

HML funding: 90% of purchase plus rehab, up to 75% of ARV, at 9%, interest only payments, 12 month max term

Estimated total HML cost: $10,000

Commissions: $12000

Holding costs: $3000

ARV: $215-225k

Total profit: $15-25k

Thats 7.5% to 12.5% of total capital deployed ($200k).

But it’s $15/40 =37% to 25/40=62.5% return on my cash invested.

Help me decide!

@Andrew Syrios you’re definitely right, it’s a higher deposit than that level of tenant would normally have to put down. It for sure would slow down the lease up on a unit, at least a bit, if the others aren’t asking for it.

I would be ok with rent $50-75 below market if I could get a 2x deposit and a 2 year lease, though.

Have you ever focused on 2 year leases instead of 1? Jason Hartmann is a big fan...

@Mihir Bhimaraju It’s a small world after all, huh?

What would you say if I said the house would have an ARV of $65k? It's closer to Shadeland and 46th than the high school. Does anyone else have feedback on that area of Indianapolis?

Hey @Mihir Bhimaraju , thanks for jumping in.

The area is actually just to the east of Devington, between Arlington Community High School, E 46th and Shadeland. What do you think about that area? There are a number of rentals currently on the market asking $850-900 and a few asking over $1000, but I'm trying to be conservative on my rent # in my model.

@Andrew Syrios Thanks so much for your reply. It's great to hear that I'm thinking about this the same way.

I was talking with my PM this morning and he even mentioned that they will often require a 1.5-2 month security deposit on the lower priced rentals (based on tenant credit and financial background). So the deposits on the C-class rental can actually be equal to the deposit on a home renting for twice as much.

The lower priced rental will also be a smaller floorplan with tile and laminate flooring instead of carpet, which saves on carpet cleaning and new carpets, and repainting on a pure sf basis.

Hey BP!

I have a question I'm noodling over, and wanted to see what you think.

Do you ever walk away from a deal that you believe you can BRRRR? I'm looking at an REO in Indianapolis, in a solid C-area, that would likely rent quickly for $800 (potentially more with section 8).

I was originally planning to restrict myself to homes that would rent above $1000 at a minimum, to try to minimize turnover costs. My goal is to build a portfolio of 50 SFH rentals so that I can retire early. I have enough cash available to do up to about 5 BRRRR B-class deals at a time, based on the terms I've found with a local HML.

My question is this: If I can own a C-class home with no equity invested, and I'll have reserves for the portfolio, do I really care about the property class being C or C- instead of a B+?  Would you pursue that deal, or walk away to stick with your strategy?

If being a C- class property wouldn't cause you to walk, then what aspects of a potential BRRRR deal would cause you to walk away?

I get access to houses before making offers to wholesalers, because the ones I've dealt with will not accept an option period - the EMD is nonrefundable, with the only exception being clean title.

You should be able to get access to the home before making an offer. The wholesaler doesn't need to be there, just you or your contractor/boots on the ground.

OK great, thanks for the info @Stephanie Medellin!