All Forum Posts by: Tim Delaney

Are you a licensed and insured contractor?

If you have good full time jobs I’d highly recommend saving a lot more than $10k for your first flip. Put yourself in a lenders shoes - why should they trust you when you have no experience flipping and no money in the deal yourself. What if things go bad? What is the collateral? A half finished house that’s worth a fraction of their loan.

I get 100% purchase and rehab financed by a private lender, but my partner is a full time GC and we have flipped and BRRRRed dozens of homes. Our first couple were mostly financed with my lines of credit on other businesses and my home.

Back to your $10k - budgets can easily get blown or ARVs can shift or unexpected issues can extend timelines and cause loses. Despite all our experience we lost over $100k on two flips that went bad in the last year - luckily I had the cash to make my lender whole immediately.

There is a lot of talk about investing with no and low money down - it is possible and that is what I do, but I have built up the reserves and lines of credit to cover situations gone bad.

Have you considered looking for a partner?

Those are all pretty vague questions. How long has it been on the market, what condition is it in, what do the numbers say? Why not work with an agent to craft a strong offer if it’s a good deal, don’t just lowball for the sake of lowballing. As for the loan since you already have rentals, you will probably be fine with a conventional.

Personally I have not had much luck with seller financing when there are agents involved - most don’t understand it and think it just makes the deal more complicated.

Did you check with your bank to see if they will mind you having a second loan on the property? Sometimes they don’t like that because you don’t have skin in the game.

As for advantages to the seller - are you going to pay them more for the property, that would be a perk that I offer in addition to making a little extra on interest for the duration of the loan. Remember they are going to be in a second position so they should be getting a good rate. As for taxes, they only delay capital gains, not reduce them entirely. And if you only talking $1-200k it is not a massive initial reduction depending on their basis. I probably wouldn’t mention your third point - it makes it sound like you expect them to hold this note forever and I’m not very certain, but I’m guessing there isn’t a huge market for $100k secondary notes.

Have you considered asking them to finance 90-100% for a short period of time so you can rehab and refi at a higher valuation?

Sorry to be so negative, just wanted to point out some of the drawbacks of what you are proposing, I hope it is at least a little helpful.

I’m not sure what you mean by “look consistent to the renters and accountants”?

I raise my rent every year by 1-5% at least based on current market rents. Why wait five years to reassess market rates? I let tenants know that rent goes up every year but I do not give them any fixed amount until a few months before the end of their lease.

It sounds like a more personal decision based on your goals. The quicker cash flow may allow you to scale quicker if that is what you want while the better appreciation could increase your net worth more over time. How certain of the appreciation are you would also play into that question.

Run some scenarios on what you could do with the extra cash vs what you stand to gain from the appreciation play and decide based on that and your goals.

What is the rate and term of the personal loan? You will probably be better off focusing on paying that off as quickly as possible rather than putting money in a HYSA and definitely more so than putting it in a Roth. If the rate is reasonable then it may make sense to try to save fast to get to the 3.5% down payment on a double or triple - househacking may allow you to increase your savings rate and pay down that loan even faster.

As for estimating costs, closing in NY factor at least 1% of the mortgage amount for tax, plus $1500-2000 for lawyer, title and fees, then the amount required by the bank for escrow will depend on the actual property taxes and insurance. Those two items will vary quite a bit depending on the house. The best thing to do is look up property taxes on county/town websites to get an idea for specific properties. Also talk with an insurance broker and be upfront with them and ask for quotes on a couple on the market deals that would be similar to what you want. As for other ongoing expenses that will really vary by property age and condition. Lawn cutting/snow removal you can get quotes for, plan for some vacancy, property management software if you will use any.

Hope this helps.

Yes, it is possible. Pay all your bills on time, don’t apply for too many new things in short periods of time, keep debt under 30% on each card/loc (or even better, just pay them off), don’t close old lines of credit.

I’d talk to some other lenders. The fact that you have built custom homes together with your general construction experience should be enough. My partner (a GC) and I built two spec homes over the past year. We had no experience building a house from scratch but I did have a bank willing to lend to us. We ultimately went with a private lender because it was easier.

If you want to scale then you'll need systems and processes so that you don't feel so overwhelmed. Most people that scale also choose one strategy to start with and scale in. It is easier to train assistants and staff if you are only doing STR or LTR. You will also need different levels of staffing to support the various strategies as you are already realizing.