All Forum Posts by: Tchaka Owen

@Robert Fielding - if you want to create long term positive cash flow, read up on BRRRR. The most straight-forward route seems to be to pick up a small multi-unit (ie, duplex, triplex or quad) that needs a little work. Buy it with hard money and use your cash for renovations. Rent the units and refinance out into a lower interest loan. Then you're right where you started but with a property that's being paid for by your tenants. Lots of articles on BP about BRRRR. Good luck!

@Tim Budahov - a few comments:

1. This property has been under contract since July 28th.

2. According to the listing, you're not allowed to lease it the first year.

3. Be aware that it is a manufactured home.

4. It's cash only, so you'll need to change your figures.

5. Raise insurance from $28/mo to $100/mo.

6. Raise taxes from $79/mo to $90/mo.

If you have the cash and don't mind using it for a year before renting, it may be a good deal. Otherwise, move to the next.

@Cody Godfrey - read the lease. Is he in violation of anything in it? That's where you start. Also, when does the lease end?

This was certainly a pleasant surprise! "NSA" and "$200/hr" conjured images of services that aren't notary....

@Wes Barnes - in this situation you want to partner with someone, it's the easiest route to go. Here's what I see as a concern: $14k + 30k puts you at $44k. With closing, etc, etc, let's say you're all in at $47k. How much do you stand to gain upon selling? At $60k, neither you nor the investor will make much. In fact, I'd suggest you pass on the deal. 

If there's a way to get the seller to $10k and you guys can be strict with the budget and get it done for $25k, you're now at $38k. If you sold at closer to $65k, it's a small deal but doable. 

@Wes Barnes - there are some important unknowns.

1. Where is this property?

2. How much money do you have to spend on this project? 

3. What is the ARV?

@Heyward Lovett - you asked, "Why are the closing prices that you're quoting so high?"

They aren't high, they're accurate. I was a loan officer for over a decade and have also purchased at least 20 properties in FL. 

"Everything that I've read expresses a different cost" Are you reading numbers from lender sites?  

Two very common issues when comparing/reading closing costs:

1. Every lender wants your business so they purposely quote low. Sometimes they're even absurdly low.

2. There are hard closing costs as well as prepaids/escrows. While we can break them down, it's important to know that while an escrow isn't a hard cost, it still needs to be paid into up front. 

Let's estimate your WPB closing. How much will your lender charge? Processing fee, underwriting fee and a few small items....are we at $1500? Let's assume there aren't any points being charged. An appraisal for that structure will likely run $600. Settlement company will charge you a fee...maybe $700. Title insurance will be $1000, then you have govt fees (stamps). You will pay based on the purchase price and on the mortgage. Without doing the proper calculations, let's say $1300. We're already at $5100 and haven't added prepaids or escrows. You see how easy it is to go past $8000?

The answer is yes. 

Back in 2011-2013 when I occasionally knocked on doors I was upfront about it. The first question was always "who told you that?". Sometimes I would respond with "it's public record", other times I mentioned the name of the county property appraiser. If they denied it, I create a sense of urgency for them to call their lender because they were about to lose their home unbeknownst to them. If they came clean, I'd tell them I was there to help, then I'd ask to hear what went down. There aren't many questions and either the owner is in denial or s/he will open up. 

 One thing I never did was say "p4c". They'd probably think I wanted to watch them urinate.

@Heyward Lovett - your experience (or lack thereof) matters. There are a lot of things in rehabbing that you simply don't know; that said, don't let it deter you. We all start somewhere. Here's my input on each project:

Crooklyn: that's home for you and your knowledge of the area is a tremendous asset. 

1. Is $2m fair market for that home, given that it needs to be gutted? A good friend owns a similar home on Ellery(?) and the going value of homes is in the $1.5-$1.7m range. I don't know the location of this home, be sure you're not overpaying.

2. I realize that in NYC, people squeeze into small places so this next comment might not ring as true: I would avoid a multi-unit that has 3 1BRs and 3 efficiencies. A 1BR limits the size family living there so if a couple decides to have kids, they'll move before long. Any family with kids will not consider your place. Is that the best use of the house or are you cutting it up in bits in an attempt to maximize income?

3. Though not a tremendous concern, your closing costs will be closer to $20,000. Not $3500. 

WPB: much more palatable rehab, but you're in NY.

1. How do you know the purchase price is competitive? 

2. Do you intend to move down to Florida to oversee the rehab?

3. You mention "triplex" and allude to a main house + 2 units (this makes sense). However, your numbers have income from a main house ($1600) and 3 units ($550+$550+$700). Is this a "quad" or is income $2850/mo?

4. Your other numbers need massaging too. Closing costs will be closer to $8000 or $9000; ARV cannot be $179.9k, otherwise drop this deal immediately. You should be able to find management for 8%.

Although it would be nice to work on a place in your town, I don't like that deal one bit. You're relying on appreciation of the property and hoping all goes well so as to cover the monthly payment(s). Some investors go with that strategy, I don't. Many old school don't either.

The WPB deal is smaller and the property will easily provide positive cash flow. Not only that, I do not believe the rehab will cost $30k. You'll probably get it done for $18-20k. Here's the catch: you need to move down while the work is going on to keep an eye on it. If you're not willing to do that, you might want to skip this. I do have experience in South Florida including WPB....efficiency increases dramatically under the gaze of an owner's eyes.