All Forum Posts by: Shawn Ackerman

Hello @KeAnna Dakwa Welcome to BP! Goodluck on your REI Journey.

@Vincent Pflieger I see the wheels turning..... This is where sourcing your own deals off market comes in handy. If you are looking for turnkey properties, buying at or below lender LTV will likely not be possible because you are paying for someone else's value add/profit. but if you are adding value(Buying distressed) and adding your own value, then your possibilities open up tremendously.

The mission is to limit the amount of cash in the deal.  Otherwise your scaling will eventually STOP!

Don't be afraid to walk away from a deal if it does not fit. I do it all the time.  

Hey @Vincent Pflieger I got you. Let say your lender will lend to you at 75% of the After Repair Value(ARV), so property worth $100K, max lender will lend is $75K or 75% Loan To Value(LTV)

Your deal, after purchase and repair should be at or below the lenders LTV. This way on the cash out you can retain as much of the HELOC capital as possible so that you can put those funds back.

Here are some numbers

property value: $100K-ARV

repairs: $20K

Lender LTV 75%

My offer to seller will max out around $50-$55K. with a max offer at $55K you can add the $20K in repairs and be at the lenders LTV threshold thereby getting back the majority of your HELOC money used to purchase and renovate. You still have to account for lender closing costs, title closing costs etc.... but those are the parameters for scaling while minimizing the amount of money you keep in the deal.

Hope that helps!

@Christian Artuso All the best.  Regarding contractors, I've found that the best way to find a contractor is to go through a property management company.  Especially if the manager will manage the property and lease it up after completion.  

To date, I don't prefer to work with contractors directly as an OOS investor.  I prefer to work through a project manager(this can be a property manager or an independent designee).

The role of the project manager is to be your eyes on the project and to be sure everything stays on schedule.  I pay either a flat fee or % of the project to this individual. Not saying you cannot work directly with the contractor but when it comes to pay, deadlines and overall project oversight I'd prefer to have a independent pair of eyes on the deal.

Be well!

@Vincent Pflieger having the capital is only one part of the puzzle. Regardless of what approach you take you must find an avenue that would yield a return greater than the cost of the HELOC.

I've been in this position and chose to buy investment properties in the Milwaukee WI market. As a Ny'er I wanted the ability to buy off market, cash, close quickly, renovate and rent. This was all done while understanding my lenders LTV, DSCR and seasoning requirements.

The puzzle consists of finding deals that you can buy at 75% of ARV minus repairs if your lenders LTV is at 75%. Having a team who can take the deal from the closing table to completion and rent the units. Once completed you need to have a lender at the ready who can delay finance the deal so that you can pull the HELOC funds out and put them back in the HELOC acct.

That is the gist of what I would recommend for your situation.

All the best on your journey!!!

@Christian Artuso I only know OOS investing so cannot speak to investing locally as NYC is not my idea of a cash flow market. With that said I chose Milwaukee. Regarding the BRRR strategy, that is the way I have scaled my portfolio but I also built a direct to seller business which allows me to make offers on property using the following guidelines.

I need to buy at 75% of ARV - Repair-Assignment fee. So $160K valued property needing $30K in repair with a $15K assignment fee, I have to buy the property around $75k.

It is also important to know what your lenders seasoning requirements are as well as their LTV and DSCR.

Delayed financing is an amazing strategy. And when you combine that with buying off market going direct to seller, you can build a real estate empire while being vertically integrated.

All of this aside, whatever market you decide to invest in, please be sure to develop a relationship with a reliable contractor and a project manager.

All the best!!!

 1% will typically allow you to break even.  I'd say 1% deals are going to be more of an appreciation play rather than a 2% deal which will undoubtably cash flow.  I don't look for 1% deals which is why as a NY'er I chose to invest in the Mid-West vs East Coast.

@Jeremy Beland Well said!!!! I've built my entire rental portfolio off of going direct to seller and starting the cycle of 1. sourcing my own deals 2. assigning 3. using assignment fees to build capital to buy more real estate and more marketing.  The mindset of sourcing and buying internally has helped sustain us through the lean times.  This is the real estate cheat code in my opinion.  And you have just laid it out there for the world to see.  I hope this post gets 100K votes!!!!

Thanks man for taking the time to put this post together!

@Josh Feit Hi Josh, have you considered renting on a lease option? I find this strategy to work well in these sort of situations.  upside is you can open up your tenant pool to people who have resources for their own home but may be missing some of the traditional bank qualifications. Also you get a down payment(Option fee), monthly payment(rent) and a lump sum in the future 3,5,7 years.  And you can mark up the price based on what you think the market will do in the future.  Lastly, all of the housing maintenance and responsibility for utilities will be the responsibility of the tenant buyer so you will dramatically reduce your expenses. 

just a thought. All the best. seems like a problem property but may actually be a blessing

Hello @Erik Bayersdorfer welcome to BP. Good luck on your journey!!!