All Forum Posts by: Seth M.

@Joshua McMillen, 

Welcome to BP.  I agree with the comments above.  

If I was in your shoes, I would start going through the Biggerpockets podcast and webinar archive and finding episodes that our geared towards beginners and the tips for networking, building a core group of contacts, and learning the fundamentals of finding and analyzing deals.  The links below have a good short list of books to get you going and start narrowing in on your specific interests/strategy. 

At the same time, you can be improving your personal finance position to have a solid foundation for investing and taking calculated risks.  Brandon Turner has a good book on investing with no and low money down, but personally I think it's ideal to have a solid personal savings buffer even if you are creatively financing with other people's money.  For the personal finance angle, I would recommend checking out the BP Money podcast and Scott Trench's "Set for Life" book.  I've also really enjoyed a blog/podcast on personal finance and broader financial independence at  https://www.choosefi.com/

https://www.biggerpockets.com/renewsblog/2015/11/1...

https://www.biggerpockets.com/renewsblog/2013/04/1...

Hi Aram, 

I'm not in your exact circumstance but I did have some refinance concerns before my first couple acquisitions using a BRRR-type approach.

Are you searching in your area or out of state?  My approach initially was to interview several banks and mortgage brokers, share a high level view of our investment approach and personal finance info to effectively pre-qualify for the hypothetical refinance amount. In addition to the relative peace of mind that we would comfortably qualify up to a certain amount (in addition to other exit strategies), some additional benefits included: 

• Evaluated several different refinance loan products and felt very confident about the LTV%/rate/other terms we ended up with
• Found a lender with an appraisal process that I was comfortable with
• Found a lender who was comfortable with our Delayed Financing Exemption approach and we've been able to refinance each property immediately after rehab (instead of standard seasoning. 

All that to say I would put together a summary of what you plan on doing and your relevant personal finance details and starting calling around / meeting in person to help triangulate your best options. 

Good luck!

Hi @Erin Schenk, 

I'm in a similar situation. I live in Los Angeles county and I've been investing out of state in Oklahoma City. There are certainly many advantages for investing in your own backyard in terms of existing relationships, understanding the market and extra peace of mind especially when just starting out.  And if LA made sense for my strategy and goals right now, I would still be investing here.  And if the market conditions change around here again, I'll be ready. 

But with technology today why not take advantage of opportunities in other markets that make more sense for your strategy, goals, available capital etc...  It is very feasible to put together a team and system that would function the same whether you are investing down the street or across the country. You could also make an argument that out of state investing forces you to develop the system and network from Day 1 that will move you closer to passive investing than if you invested down the street. 

I agree with @Naftali Tolibas.  A reasonable compromise is to invest in a good out of state market where you have some existing connections that can help you jump start the networking process. Either way, David Greene's book on long distance real estate is a great starting point to learn more about how to leverage systems, relationships, and technology to allow you to invest wherever the best investment opportunities are. And from there you'll have a pretty good idea if it's within your comfort zone. 

Great thread @Erin Wilging , and I completely agree with you @Carolyn L.. Podcast 233 is a great intro to DFE and @Jerry Padilla has a great overview post from a couple years back that summarizes the requirements and LTV tables based on SFR vs MFR and how many you've done to date. https://www.biggerpockets.com/blogs/5110/42824-all...

The post and the guidelines Carolyn linked to affirm Micheal's point above regarding the limitations of DFE. Regardless of how great a deal you find and the spread you have between you're all in cash vs. ARV, your loan will be capped at your original purchase price + closing costs. So any rehabilitation cost will be money you are leaving in the deal.

My take away from podcast 233 was that @Arianne L was either finding incredible deals that she could refinance at 75% ARV without any rehab or she was simply stating that she was able to get all of our purchase cash back and may or may not have put some money into updating the property.

We are in the middle of a very minor rehab right now and our considering DFE because in this case the benefits for us to get all of our money back now (as opposed to 6 months +) outweigh the cost of leaving a small amount of $ in the deal from the rehab cost. For those who have done DFE before, have you had any difficulties finding a lender who will conduct new appraisal versus basing it on purchase price? 

Thank you very much for the feedback. And for further confirming the unlikelihood that rental income increase would play much of a factor if at all.

I'm trying to fast track the subdivision inquiries as much as I can during our contingency window because that's the only scenario where this property will make sense for us.  I spoke with the right contacts from the city today, and they are going to meet with us to confirm that splitting the lot would not be in violation of any setback or subdivision regulations. To your point, they should be able to confirm whether or not this property meets the criteria and is worthy of our time and $ to apply. 

Thanks again

Hi Rocky. Thanks for the feedback!

Yes the proximity to OU is definitely a positive for us. It's about a mile from campus corner. We are going to be marketing for family tenants, but we've considered the pros and cons of student angle. 

Our strategy is to pay cash up front for purchase and any rehab/upgrades and then refinance after a TBD period of seasoning and increasing rental income. We are searching for properties where are all in cash position around 75-80% of ARVs but if our ARV analysis is off or if the market dips before we refinance, we are prepared to leave cash in. Typically we are trying to find distressed below market props where we can force the equity but in this case, the potential to increase the value would be more in the lot splitting.

We are refinancing under an LLC for asset protection reasons, and the best rate we've found so far is 5.5% / 20 year / 5 Year adj. rate.

Thanks again for your feedback

Hi everyone,

I'm currently under contract for 2 SFR units on 1 deed in Norman, Oklahoma and would value your advice as their are a few elements that are new for me.

Analysis snap shot below. Typically we are focused on a more traditional BRRR approach but this one had a unique potential value proposition that we wanted to explore under contract. Underlying principle for our deal analysis is that while we value cash flow to expedite saving for future deals, we are much more weighted towards 1) great deals at purchase, 2) long term appreciation potential, and 3) getting as much of our capital back after refinancing as possible to repeat. The analysis below makes sense from a cash flow perspective (especially given rent potential) but our main concern is tying too much of our capital up if we don't have enough spread between our cash in at the LTV% at refinance.

• Both units have existing tenants. Unit 1 is $625/month with lease locked in till Feb 2018. Unit 2 is $695/month with month to month lease. Market rent potential is conservatively $750 each with much of the neighborhood averaging $850 for similar Bed/Bath sq ft.
• Comp average is dragged down because of two recent large purchases in the area of 20+ duplexes at a time resulting in 4 larger duplexes in the vicinity sold for 119k. But it is R2 zoning with separate utility meters potentially giving the option for subdividing and refinancing as separate SFRs. My current ARV of 130k in the analysis below is almost certainly too high if we can't split it unless I find a lender that places more emphasis on rental income in addition to comps than the current lenders I've spoken with.

Overall thoughts on the analysis below?

Understanding that is very specific to the county where I'm purchasing, any general advice on next steps/contacts for confirming whether this lot can be split?

Thanks!

Hi everyone, 

I'm currently under contract for 2 SFR units on 1 deed in Norman, Oklahoma and would value your advice as their are a few elements that are new for me.

Analysis snap shot below. Typically we are focused on a more traditional BRRR approach but this one had a unique potential value proposition that we wanted to explore under contract. Underlying principle for our deal analysis is that while we value cash flow to expedite saving for future deals, we are much more weighted towards 1) great deals at purchase, 2) long term appreciation potential, and 3) getting as much of our capital back after refinancing as possible to repeat. The analysis below makes sense from a cash flow perspective (especially given rent potential) but our main concern is tying too much of our capital up if we don't have enough spread between our cash in at the LTV% at refinance.

• Both units have existing tenants.  Unit 1 is $625/month with lease locked in till Feb 2018.   Unit 2 is $695/month with month to month lease.  Market rent potential is conservatively $750 each with much of the neighborhood averaging $850 for similar Bed/Bath sq ft.
• Comp average is dragged down because of two recent large purchases in the area of 20+ duplexes at a time resulting in 4 larger duplexes in the vicinity sold for 119k. But it is R2 zoning with separate utility meters potentially giving the option for subdividing and refinancing as separate SFRs. My current ARV of 130k in the analysis below is almost certainly too high if we can't split it unless I find a lender that places more emphasis on rental income in addition to comps than the current lenders I've spoken with.

Overall thoughts on the analysis below? 

Understanding that is very specific to the county where I'm purchasing, any general advice on next steps/contacts for confirming whether this lot can be split?

Thanks!

Hi Judith,

I am actively looking for an Okc CPA referral as well.  I'll keep you posted if I have any leads.

-Seth

Thanks Paul.  My wife and I will be there.