2 houses at one time Rehab funding

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Wayne Brooks

Thanks for the input Wayne, that's why I put this scenario out on this forum so I can get the prospective I need from professionals. Once I get a response from the owners I will have a better idea of how close I can come to my numbers and what is any liens are against them. I have been going to the court house researching as much as I can about the properties. I have more time know to get to know the people in the court house and create a relationship with them. This will help me in the future as well. I am actively seeking other deals.

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Hi Michaela
Thank you for that information, that's why I posted...so I can learn something. Do you know what that type of affidavit is called? I have all the heirs addresses, those are the people I am sending those letter to.

Darius Hollis

Atlanta, GA · Member since 2016 · 30 posts · 21 votes

10y

Be careful to consider market trends in the area. Atlanta is a magnet for businesses and people are relocating here consistently; however look at the trends and you'll notice higher concentrations of buyers and renters moving into the heart of the city, into Vinings near the new Braves Stadium or towards the Decatur area, which is quickly growing. Those areas are attracting a large crowd, while many smaller niche markets are declining. Just make sure you look at some comps and check how long they were on the market so that you avoid buying a property that is going to sit vacant and cost you money to hold for a while.

Michaela G.

Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes

10y

Originally posted by @Michael Williams:

Hi Michaela
Thank you for that information, that's why I posted...so I can learn something. Do you know what that type of affidavit is called? I have all the heirs addresses, those are the people I am sending those letter to.

Don't know that there's a particular name for it. But have to be by the heirs, as well as one or 2 people, who knew the family and can confirm that there aren't any additional children. A closing attorney can tell you

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Originally posted by @Darius Hollis:

Hey Darius,
Those are also the most competitive areas on the planet and I don't have the expertise or budget to deal in those areas yet. For these properties my target is 40-50 year old couples relocating to the area and looking to live in a small quiet town outside of Atlanta away from the traffic and big city issues. I stay in a town that matches this description and I love it. Selling the properties is the least of my worries, because I am an internet marketer and know how to sell. I will have them sold before they are finished. Getting the correct info and negotiating the deal is my main priority for these properties. Once I profit from these deals I will have the funding to attack those areas you are talking about by having leveraging power by bringing something to the table if I choose to to so. Plus I have a decent buyers list already from the past year of networking at my local REIA, biggerpockets, and LinkedIn.

Marvin McTaw

Rental Property Investor · Atlanta, GA · Member since 2014 · 807 posts · 274 votes

10y

Hey Michael Williams I applaud you for taking action but don't get too far ahead of yourself. There are a lot of potential problems with your plan which you might not have considered. First off, don't quit your job just yet because you can use your W-2 income to qualify for loans and other financing like lines of credit that might be very useful for you. You're also talking about going up to six months assuming everything goes according to plan with no cash inflows which is another consideration. Second, you don't even have the properties under contract yet. You don't know what the sellers will be willing to sell them for or how long it will take to find the heirs. This can sometimes take months to happen. One way you can solve this is by getting the properties under contract with who you think is responsible (the estate admin) and then starting the process. You may need to engage an attorney to get this done. Third, depending on where the properties are at might mean a lender won't even lend you money for the property. I would suggest you contact a few lenders and see if they even lend in the areas you are looking for. Fourth, If you've not done one deal, you should probably focus on getting one of the rehabs done first or shadowing someone to learn about the rehab process. There is an Atlanta REIA sub-group that does on site construction walk throughout I believe on a weekly (might be monthly) basis. Fifth, if you're planning on using the money from your retirement account to fund the purchase, that generally means the profits would go to your retirement account and not for current use as income. If you tried to use the money you would pay taxes and a penalty for removing the money. The way to solve this is to talk to an accountant or financial advisor to get some more information about how to fund your deal. Depending on the account type, you may be able to borrow against your retirement account to get the cash you need to fund your purchases. For example, you may be able to borrow against your 401k account at your employer (if you're still employed there). Do not do a withdrawal or you will once again have to pay taxes and a penalty against that. I'm sure there's more but those are the things that quickly come to mind. Good luck in your journey.

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Too Late Marvin, turned in the resignation letter today. I've been planning this for 2 years. It's the reason I moved to Atlanta. Plus remaining there was ruining my physical health so I made the best decision for me. I already have pending contracts in another business venture that I can't mention due to non-disclosure agreements, so that and other streams of income make me even more confident. I am taking all of my 401k and pension in one lump sum, I DO NOT trust the state of the economy, not even Roth IRAs. Politicians have mentioned that they are researching ways to get at those funds. That's why my wife and I made the conscious decision for me to quit NOW. If I have to decide on letting strangers manage my money or me managing my money, I chose me. If I lose I can't blame anyone but me.
Back to the deal... I already have the contact information for owners. I have already mail them once, setting up the second mailing next week and going back to court house tomorrow. I know the negotiations could go completely different than I plan but I promise my wife that when I quit I will be aggressive about these properties and all of my RE deals. Judging from the history of the properties and how they became abandoned I am very confident I can get them dirt cheap. If not I will have developed relationships with the courthouse employees and take any failed negotiations as learning experiences. I'm not telling everything about these deals on purpose. I have the up most confidence I can sell once repaired because I have already tested my marketing skills several times with a rehabber that was selling 2 properties and a friend that was selling her house retail. Three quick sales in a roll in a short period of time. Plus if I don't get hard money there are other ways to fund this type of deal. I just wanted to get some opinions here.

I have shadowed a rehab and gone to several of the rehab walk throughs as well. I appreciate the advice and will do my due diligence before committing.

Jarvis Smith

Investor · Seattle, WA · Member since 2015 · 109 posts · 19 votes

10y

you say you have contact info from "sellers", who owns the house is all public record how do you know they are "sellers"?. Don't assume anything. You are on your second mailing which means you did not get a response from your first mailing. I would say get the houses under contract first everything else at this point is irrelevant. Getting the houses under contract is the hardest part. Don't take shortcuts. And again don't assume anything.

Also what poloticians are saying they are finding ways to take your IRA? I'm curious to know. That is one of the most reliable sources of savings one can have.

Robert Mitchell

Contractor · Atlanta, GA · Member since 2014 · 130 posts · 25 votes

10y

Make sure you do the following on the contractor end:

Develop a detailed rehab scope of work when you get the houses under contract
Review the county permit requirements
Architectural drawings and or property survey needed
Get written quotes from GA Licensed and Insured Rehab -General Contractors
Check references and review a few past projects to check for quality and contractor completion history......etc.

Just a few items mentioned....Good Luck! ATM Constructors have provided quality construction services for over 23 years in the Atlanta area and surrounding counties.

Rick H.

Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes

10y

You quit your job? Really? 2007 is calling your name.

The time to eliminate one cash flow stream is when it is costing you money to keep it.

People who wholesale on the side are trying to become rehabbers and rehabbers want to be investors. However, rehabbing is speculation, not investing. Of course, there's money in it, however it ultimately becomes another job.

I would anticipate loan points and fees for separate loans, and as my buddy @Wayne Brooks suggested. I'd expect higher holding costs in addition to fees,

Most HML's write a short term loan but not a LOC, expect to have some reserve cash that is sitting fallow but costing interest. Running short of cash could jeopardize a project completing.

You could structure to have heirs carry a junior mortgage for a short period and give them a piece of the propfit in lieu of interest. This would also reduce the amo if funds required to borrow commercial.

Also, I'd find a local person who you can run your ideas by.

Of course, you don't have a deal yet. Only the gift of desperation (if you're lucky!). I'm rooting for you.

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Originally posted by @Robert Mitchell:

Make sure you do the following on the contractor end:

Develop a detailed rehab scope of work when you get the houses under contract
Review the county permit requirements
Architectural drawings and or property survey needed
Get written quotes from GA Licensed and Insured Rehab -General Contractors
Check references and review a few past projects to check for quality and contractor completion history......etc.

Just a few items mentioned....Good Luck! ATM Constructors have provided quality construction services for over 23 years in the Atlanta area and surrounding counties.

Robert Thanks for that input....that's an important piece of this puzzle. I will contact ATM to introduce myself. Even if I don't get this deal that could well be a vital contact for future deals.

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Originally posted by @Jarvis Smith:

you say you have contact info from "sellers", who owns the house is all public record how do you know they are "sellers"?. Don't assume anything. You are on your second mailing which means you did not get a response from your first mailing. I would say get the houses under contract first everything else at this point is irrelevant. Getting the houses under contract is the hardest part. Don't take shortcuts. And again don't assume anything.

Also what poloticians are saying they are finding ways to take your IRA? I'm curious to know. That is one of the most reliable sources of savings one can have.

Hi Jarvis I know it is a bit premature be the purpose of this post was to get as much insight as possible before the deal. Even if I don't get a response about these properties, or get this deal you guys participating in this post is creating great value for me. I know this way is the opposite of how we, as new investors, are taught but I have done post like this before and was able to get two deals out of it.
About the IRA Question: One of the Gurus I listen to mentioned the advantages of Roth IRAs for investing in real estate, which from the research I've done is a great advantage. I have been following a lot of his teachings and he has mentioned how our broke government has been seeking ways to tape into the trillions of dollars sitting in retirement accounts. Here is one of many articles about how they want your IRA. The same thing they did when they robbed all the pension plans and covered it up with a stock market crash then started 401ks. You government is always after your money.

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Originally posted by @Rick H.:

You quit your job? Really? 2007 is calling your name.

The time to eliminate one cash flow stream is when it is costing you money to keep it.

People who wholesale on the side are trying to become rehabbers and rehabbers want to be investors. However, rehabbing is speculation, not investing. Of course, there's money in it, however it ultimately becomes another job.

I would anticipate loan points and fees for separate loans, and as my buddy @Wayne Brooks suggested. I'd expect higher holding costs in addition to fees,

Most HML's write a short term loan but not a LOC, expect to have some reserve cash that is sitting fallow but costing interest. Running short of cash could jeopardize a project completing.

You could structure to have heirs carry a junior mortgage for a short period and give them a piece of the propfit in lieu of interest. This would also reduce the amo if funds required to borrow commercial.

Also, I'd find a local person who you can run your ideas by.

Of course, you don't have a deal yet. Only the gift of desperation (if you're lucky!). I'm rooting for you.

Rick you response is the most enlightening yet and the most enjoyable. I'm sure my gift of desperation will pay off. I have budgeted for all of my living expenses to be paid for 6 months, both my cars are paid for, I am making some money from internet marketing, I am getting a pretty decent cashflow for a rental property, and no kids in the house. So I got six months to get this real estate thing going. Oh yeah my other company has Tentative contracts with two fortune 500 companies, but the key word is "Tentative", which is coming up in October. Plus being on that job for 28 years along with military service, and years of basketball ruined my knees. Just had an operation on one knee and the other one is going out, so I was forcibly on my way out the door any way. So this was the best move for me and I did it my way. And yes putting in 60 hours at work as opposed to putting in 10 hours in my other business and making more made this move a no-brainier. I've been planning this move for two years. But the biggest hurdle of all has been negotiated....... "The Wife Is On board 100%. I can't lose with that one.
t

OP

Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

10y

Oh yeah Rick, I will run everything by one of my rehab friends.