All Forum Posts by: Timothy Howdeshell

@James Sullivan if this is something you're unfamiliar or not confident with it can be worth it to get a realtor to complete the paperwork and discuss options between the 2 parties. Money and business can ruin a friendship, even a close family friend. There are many good options above about how to reduce cost on this. 

That being said, there is absolutely no need to do this. The best thing is to get a copy of the state approved purchase and sale contracts. Your title company can likely assist with this and it is free. 

I have bought and sold several properties off of a 1 page purchase and sale contract. I'm not advising this, just stating that it is very possible. The state approved contracts have sections covering 95% of routine purchase considerations though and as long as you're diligent, upfront and honest in creating these, you should have no trouble. 

I've wondered the same thing! I think it shouldn't be an issue, but it would be best to speak with a hard money lender to confirm. 

I have done this on BRRRRs wherein I refinanced with a conventional investment property loan under my personal name after the rehab due to the better terms. I simply had to quit claim from my single member LLC into personal prior to the refinance. I don't see why it would be any different refinancing into a personal loan.

A couple of watch outs though:

1. Conventional loans often have seasoning periods for cash out refi. If you were thinking to be all in for 80% of ARV and then refi using 95% LTV loan you'll likely need to have owned the property for at least 6 months.

2. You'll need to have your current primary rented out or sold prior to getting new primary loan most likely due to DTI restrictions.

Good luck! 

Professional management is not a cure-all, and has it's own costs, but I've found that they can shine in situations like this. Let the professionals run coverage for you while you focus on expanding the business. We've all been there! 

Love what @Jim K. said. I've been where you are @Justin Dziedzic thinking that this would be the thing that bankrupts me! 

Once the anxiety settles (and it will) you'll remember that there are solutions to every problem and usually the worst case scenario is also the least likely. Houses are like legos, built up little by little meaning that while the finished product can be complex, they are simple systems built up around each other and each one can be fixed. 

You can also try to view this as a learning opportunity (which it is) that will serve to make your future investing endeavors that much easier. Every serious investor has come across a little mold and much worse. In fact I got a call a few months ago that I had to get all new electrical service in one of my properties (so long $7k). In the beginning this would have crushed me, now it was more of okay, let's get it done quickly and move on. As you grow, so will the problems. Same stuff really, just more zeros. But this is progress. 

You've got this! 

Seconded @Robin Simon. Lots of great BRRRR markets, but the common demoninator is that you're going to need to get a great deal and be able to recognize it as such.

BRRRRs and flips are made much easier in a rising market, so consider population trends if looking at multiple cities. The south-east seems pretty popular these days. 

You've received a lot of great advice here already. My 2 cents:

1. You should know your exit strategy before you purchase, ideally multiple exits. In this case you may have run out of investible capital. No worries. I've done it as I'm sure we all have at one point. In the future though this could have been avoided by purchasing with a rehab or bridge loan initially and then refinancing into a long term loan (such as DSCR). This works great for rehabs and BRRRRs.

2. Check on the prepayment penalty for your current property. You may just need to wait. 

3. Consider learning about raisins private capital for future deals. We don't know all of the #s on this property, but it looks like you may have created some equity via the rehab and if you can do this consistently and pull out all of your capital, you're in a great position to borrow others' money for this process. 

4. Pull a HELOC on your primary and use that as the source of funds for the next project. Just make sure you can refinance the home as above and/or pay off the HELOC. You don't want to get trapped in a debt spiral borrowing money to pay for more borrowed money.

Good job and good luck! 

This is a major reason why I have avoided working in those class D areas in my market! No % return on investment is worth your life. It has also been exceedingly difficult to find reliable contractors and other vendors to work on your home in those places. And insurance tends to run pretty high in high crime areas. 

Funny story, when I was first getting into investing in Kansas City I took a trip out there to meet some boots on the ground, fellow investors, contractors, wholesalers, etc. One of the wholesalers picked me up in his car and we drove around neighborhoods to get a feel for where to invest. I remember that after I had gotten in his car he asked me, "Tim, do you know where you're staying?" I said "yes, right there." and pointed to my AirBnb where I had rented a room. He said, "you are right in the heart of the hood hood of KC. There's the hood, and then there's the hood-hood. You'll be alright, just stay inside at night." He was right and all was fine, but I'll never forget the terror when I realized what he was saying and where I was. 

Know your market, and if you don't, ask for some help! Also, stay away from class D. There are easier ways to make a buck. 

@Bien Nguyen

yeah totally get that! And don't feel bad. That's very normal.

it's important to realize though that there's always doom and gloom. There have been naysayers for the last decade and probably longer. Things like interest rates and the overall direction of the economy are important considerations, but they are only that considerations. They are challenges that need to be addressed in order to move forward but they are not impediments. There's always a way to move forward and there are always deals happening. Right now is undoubtedly a tough time in the market, but that doesn't mean you can't have success.

Analysis paralysis is real. But it is the enemy. No one has ever analyzed their way to success.

here are some things that might help you move forward. First consider having different exit strategies for your property. This is always a good idea, but if you know that you can move into the property as your primary or rent it out as a long-term rental, then the downside risk is greatly reduced. Next, consider buying a property that needs a bit of work or buying one from an off market distressed seller. These deals are harder to come by and you can't just pick one off of the MLS, but in this market you may need to do a little more work to find the right property. By doing some rehab, you can force appreciation and therefore give yourself an equity buffer. Worst case you can sell and hopefully break even or only lose a little bit of money.

lastly, consider finding somebody local to you that is already buying short-term rentals currently. pay them for their time if you have to, but get some outside experience, opinion and help by relying on their expertise, you don't need to be the expert to get started and that should improve your confidence in moving forward.

Believe in yourself and your potential. Everyone in this platform wants you to be successful.

@Bien Nguyen

I suspect that this is very individual, but most buy properties close to where they live at first. My first purchase was a primary residence where I obviously lived in the area and property.

All of my subsequent purchases have been sight unseen out of state (no STR though).

The most important thing is to get into the game though and start owning rather than planning. You want to do that in a way that 1. Doesn't make you hate real estate and 2. Doesn't take you out of the game financially.

Therefore I recommend starting with something close that you can touch, get eyes on. It's not that you can't do things from a distance. But this may be the confidence booster that gets you into the game. You can optimize and solve for higher returns later.

@Mike T.

You probably won't cash flow in this scenario. The idea is that the would be cash flow will now be used to pay off the HELOC. Once that loan is repeated your cash flow will "appear".

HELOCs are great for short term use. You buy the property and then force appreciation, or simply wait for the market to go up (speculation).

It may be better to not get a mortgage and put 100% down on the rentals using the heloc. Should be able to beat an 8% return (unless you get hit with early CAPEX). Then when/if rates go down you can put long term debt on it.

First option is much better. Use HELOC to BRRRR.