All Forum Posts by: Stephen Richerson

@James D Brown,  the locale neighborhood did affect my decision.  The development is tucked back from some trailer parks and less appealing areas.  We liked the neighborhood.  There are definitely some areas of North Charleston I will not invest in because of safety.  It's not a bad thing to end up with the nicest house in the hood, that's what the rehab is about.  The main risk you might be referring to is what I call "Pioneering" it's the pioneers that sometimes have arrows in their back lying dead on the ground.  

Pioneering is being the first investor to fully rehab a property in the subdivision or area. There are no real comps to go off of. Once another investor has successfully rehabbed a house and raised the ARV $/sft, then it's game on. You have "proof of concept" and can justify investing in that hood. A great strategy that one of my partners on our team has done is acquire all the low end homes in a specific hood and hold them. Allow the area to appreciate, collect the cashflow and after other investors have successfully flipped some homes there, rehab and liquidate.

So to sum it up, be weary of being the pioneer flipper in a hood and trust your gut on the direction of a particular part of town. 

@Roy Ben, Thank you.  We oversaw the project and handled the sub contractors.  I live in the metro.  If you are looking to rehab out of state or remotely, I suggest building a relationship with a home inspector and paying them to inspect the work of your contractors before paying more money. 

@Tony Hill.  Thank you.  The budget I set up with the lender was $40k knowing that my cost would be around $30k which is how I structure deals to be paid overseeing the rehab.  

@Joe P. I have little interest in sfh rentals.  I am working on multi's.  My first buyer's appraisal almost killed that plan and we considered making it a corporate rental which would yield $2500/month and have little impact of the updated asset.  $40k for rehab but my costs were around $30k which is how I structure deals to be paid as a project manager.  Profit plus rehab revenue was around $35-40?? 

@Brian Lops. Auction.com sees hard money as cash. They don't want conventional loans. No, I had the analysis and knew my top dollar. Won the auction, then submitted my deal to Ground Floor Finance who rejected my deal stating that it's ARV would not exceed $141k (I enjoyed proving them wrong). So at the last minute I scrambled to find a local lender who liked the deal.

Payback on the loan.  I requested that he differ interest payments and build it into the loan which was cashflow friendly not having to make monthly payments. 3.5 % points and 12% annual with a 4 month minimum.  

@Randy Coker.  I would say the brick looks different because of the power washing,  color cast light from the time of day, and color corrections from my professional photographer taking the final pics vs. the realtor shooting it with their phone

@Lupe Cartagena Thank you. I was concerned about that with auction.com and it took some investigating to find that when they say cash they mean no conventional bank institution. A HML's money is cash in their eyes. It didn't take much convencing. However I would say that 95% of HMLs do expressly prohibit additional liens. Not my first flip.

@Ray Seaman, great question. The private lender did take a second position via mortgage. HML did not need persuading. I know many lenders will not allow additional liens on the property however I work with some flexible individuals and have structured several deals this way. The current flip that we have on the market is a seller financed deal and my investor created a line of credit w/2nd mortgage which funds the rehab, holding and debt service. That took some convincing for the seller to agree.

@Brad Baker 5 months from close to close.  2.5 months on rehab (crappy painters in this state), first contract fell through from a bad appraisal.  Back on the market and under contract within days. 

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $93,000

Sale price: $181,000

Purchased from online auction. Raised the money for down payment and rehab so $0 out of pocket for this deal. 

How did you find this deal and how did you negotiate it?

auction.com not much room for negotiating.

How did you finance this deal?

Hard money lender, Lending Hq. Private lenders.

How did you add value to the deal?

Either painted or replaced just about everything.

What was the outcome?

Under contract very quickly at asking price. Over $30k in profit.