All Forum Posts by: Spencer Cornelia

@Hannah Woods welcome to the community!  @Gary Crawford is 25 minutes away in Madison, CT.  I'm doing a lease purchase with him right now.  It's a great way to get in properties if you can't qualify with a traditional mortgage so best of luck reaching your goals by October 25.  !RemindMe 3 months

@Henry Kaldenbaugh absolutely. I'm talking about having someone who does multi-million a year in wholesaling basically give you their system and walk you through exactly how to replicate their success. The ROI would be far greater than a single family rental in Verde Valley, AZ.

@Account Closed I am one who finds these exercises to be fun.

I think there's three semi-realistic paths.

One: you find a volume national wholesaler and find a way to link up with them.  Let's say you can pay them $100k for hands-on training and essentially their system.  If wholesaling aligns with your skillset, hitting $5mm will be guaranteed.

Two: you spend the first 2 months getting your real estate license.  You then team up with a high end wholesaler in your market who knows how to find deals.  You grab properties subject to with minimal cash down in each deal.  They give these to you over others because they know you can handle the payments and can provide some cash at close to the wholesaler.  You ride the equity in these properties for the next 5 years, along with cash flow, and sell all of them right at year 5.

Three: You get your license.  You spend the first 6 months doing your first two flips with low-leveraged hard money and using a lot of cash and selling them yourself.  You turn the $500k into $600k.  But you now have experience.  You use cash to flip and can do $300k flips in 3 months.  With $600k cash, you're able to do 2 flips in months 7-12 (add in time to close).  The deals are profitable due to low expenses, fees, points, and your ability to make 3% of sales price.  You now have $800k.  You have experience, have ironed out your mistakes, and have a couple of contractor teams ready to work.

Year 2: you begin leveraging yourself a little more but get great terms due to experience, reserves, and low LTV. You are able to exit 8 flips @ $40k profit each. Let's use easy numbers and say you're at $1.2mm now.

Year 3: you find private money, have contractor referrals, and have enough experience to manage rehabs really well.  You bring low money to the table when buying flips so you're now able to exit 12 @ $30k profit each (less profit because of more leverage) and $100k from selling as agent.  You're now at $1.7mm now.

Year 4: you now have built up a legit business, you've become the go to buyer for a couple wholesalers, and you have enough contractor teams to grow rapidly.  You're able to exit 30 flips @$30k profit each with another $200k coming from selling.  You're at $3.0mm now.

Year 5: Similar trajectory.  You double your volume which also increases the income earned as an agent.  You do enough deals to hit $2mm in net profit.  $3mm becomes $5mm.

@John McCormick his $1.7mm property is a multi family which means much higher rents than a single family you're looking at.

Houses in A+ neighborhoods, which that price indicates, aren't really viewed as properties that anyone on this forum would buy with the intent of renting out. In every scenario I've seen, rents would not come close to covering PITI on a $1mm+ house.

"if rents don't cover the mortgage, do I just have to leave my working capital in the property? Is BRRRR primarily just a strategy for lower end homes? Am I missing something else?"

Unless you are paying all cash for the rehab, you will be using a hard money loan.  You won't be able to refi out of your hard money loan into a 30 year note for a renter if the rents don't cover the mortgage.  In that scenario, you are in serious trouble.  Unless you can sell.

The trouble with BRRR, I've found, is that many markets don't have rents high enough to justify doing a BRRR. Getting a refi can be expensive and you'll only be able to refi out 75% in many situations meaning your all in cost will need to be less than 75% of ARV. Someone already indicated that some people are buying homes at 85% ARV which means if they wanted to BRRR, then they would need to bring more than 10% of ARV cash to table at close (to get 75% ARV loan + closing costs).

This is why BRRRR are typically seen in smaller markets where the purchase price to rent ratio is still low. There aren't enough buyers to drive the price up and rents can only be so low, so you can buy $90k houses and have $975 in rent (3 bed / 1 bath type houses).

@Wesley Davis That's great to hear as a lot of the rehabs I want to take on will be in the $50k-$75k range.  IMO this is perfect for a company that can move quickly.  I'll overpay ESPECIALLY if they can finish a job like that in 2-3 months.  As most of us probably know, the bigger the rehab, the more profit/spread available.

I use contracts just to save my own butt.  But I also incentivize the contractors with a bonus if they finish in the time they tell me plus 30 days (10% of net profit).  I feel like I'm fair with my contracts.  And I definitely will be using them every time, even if GC's are tentative to sign.  I need a way to make sure I'm not screwed over.

As a first time flipper, this is all still new to me.  So the next phase will be about finding GC's I can grow with.  I'm going to start researching companies to reach out to.  Thank you for your help.

@Luke Dilorenzo It's up to you to share the benefits of seller financing to the seller.  There is an endless amount of paths you can take with offer, terms, rates, etc.

"Like whats in it for them to want to do something like that?"
There are a myriad of reasons - their house isn't selling, they don't need the cash today, they're fine keeping the note in their name and having you make the monthly payments + cash number, they don't want the tax hit if they've seen a lot of appreciation, they don't have the funds to rehab the house so they can't sell the place anyway, I could go on for days.

The reason benefit is the same benefit that you and I are going after: we're trying to do what's best for us.  If you can present a win-win scenario for the seller, then why wouldn't he accept your offer?!?

My first 4plex deal was a seller financed deal found off market.  You can read it here:
https://www.biggerpockets.com/forums/223/topics/646426-how-i-bought-a-seller-financed-4plex-in-las-vegas-part-3

In my case, the seller had taken a year off work or so and wanted the $1,500 in monthly income.  He told me that he doesn't like having a lot of cash on hand, that he would rather have it invested somewhere.  He was excited for 6.5% interest aka rate of return on his money.  And if I stopped paying, he had all of my down payment and monthly payments and the asset back!

@Shannon Ludlow whatever properties you go after, I would highly recommend making sure that a refi or sale is your exit strategy. HELOC's sound great when the funds become available because you feel cash rich and feel like you can grab a lot of properties. But the payments are interest only and you will have 2 mortgages on a single property.

If you're able to buy properties at a massive discount, rehab, and pay for the refi all using the HELOC AND pay off the HELOC in full, then nothing should stop you from growing your portfolio rather quickly.

Is she on board with financial freedom?  Is she willing to compromise in a few areas if it means a better financial future?

If not, then good luck.  You have an anchor that us single guys don't have to deal with.

If this decision means cutting off years towards retirement, then it's up to you to decide.  You only have one life, and many guys have more than one wife :)

@Colten Adams beginners trying to time the market are years away from buying a deal. I've been around enough by now that I'm convicted in that sentiment.

Where we're at in the market probably means buying retail isn't a great strategy. But there are deals everywhere. It's your choice to go find them.

I've also noticed that people waiting on a market correction aren't waiting on a correction, they're just using it as an excuse to not buy a deal today. So my question to you is what's really holding you back?

Hey Narek,

I really like your property at 123 Main Street and am interested in buying it.  What do you think it's worth?

Text/Call My Number
Email: my email

Spencer

This is how I found my first deal, an off-market seller financed 4plex.  I hand wrote all of my letters.  The text/call, email, and return address on the envelope were all stamps.  But everything else was handwritten.

No idea if this was the best strategy but I got my first one!