The Process of BRRR- Do I have this right?

[Daniel Green]

I'm a pretty process oriented person but there are some elements of the BRRR that I'm just not sure about. I was wondering if anyone can correct me here. I'm I getting anything wrong here? BTW- I'm based in NJ and just not sure how the sales contract/escrow would work when dealing directly with a property owner.

IS THIS THE PROCESS EXPERIENCED INVESTORS USE?

IDENTIFY A GOOD INVESTMENT PROPERTY

- Negotiate with seller and agree on a price.

- Send them a contract that includes:

- an out clause for inspection.

- 10 business day close.

- All cash deal

- Stipulation that the Title is clean.

SELLER SIGNS CONTRACT AND THEN:

- I send money to an escrow agent as a deposit? (I'm unsure about this part. Do I have my own escrow agent or does the seller get one? If I have my own, do I send the signed contract with the check as a binder to the escrow agent?)

- Sales contact goes into "Lawyer review" (this is a NJ thing I believe)

- Inspection

- Title search

- Contractors estimate costs

- Hard money application.

- Hard money lender orders an appraisal of the property.

DETERMINE

- Inspection- all good

- Title- is clean

- Repair costs are in-line

- Appraisal is inline with loan to value offered.

AT CLOSING

- Get certified check for 30% of the buy price.

- Check sent to my lawyer from the Hard Money lender for 70% of the buy price.

- Bring proof of insurance.

- Pay Hard Money lender 2 points of the total borrowed amount.

- Likely pay for several months of taxes.

- Likely pay for several months of hard money interest in advance.

- Have insurance on the property.

POST CLOSE

- Get first installment from HML to pay licensed contractors and then other installments as work is conducted.

POST REHAB

- Work with realtor to list rental.

- Go to bank to get a conventional mortgage. Have the property re-appraised to get the after rehab value (ARV).

- Once traditional financing is approved (assume 2 months) pay-off hard money lender. Since appraisal is now higher receive a large bulk of initial cash invested back.

- Rent apartments and receive payments from tenants. Cash flow positive goal is $400-$600 a month assuming all costs mortgage, taxes, insurance, utilities, cleaning services, vacancies, capital expenditures.

- Do it again.