First Investment Strategy

[Alex Kamunyo]

Hello all, I wanted to reach out to possibly get some opinions on my strategy for my first investment property. I am wanting to utilize the BRRRR method for the first property I invest in. The areas I am looking at are the northeast and northwest sides of San Antonio, between Loop 1604 & Loop 410. But I am really open to any single family properties that are between 1604 and 410. I am not particulary attracted to anything inside of 410, but I won't rule out the possibility. I plan on using a hard money loan for the short term loan (12-14 months) to purchase and rehab the property. The reason I say 12-14 months is because I am under the impression that banks/credit unions require a seasoning period from the time you purchase to the time you refinance, typically 12 months to see that the property is profitable. The two extra months would just be a safety time period to make sure that I get the cash of re-fi before the short term note expires. Then I planned on an institutional loan from a local credit union such as RBFCU to do the cash out refinance after about a year. If I'm not able to do this, ideally I'd like to be able to sell the property as if it was a fix & flip. What do you think about this strategy? I’m looking at a two on market properties currently. Property 1: 3BR/2BA 1500 sq ft Asking price = $95,000 Est rehab = $20,000 (could be way off, still working on it) Neighborhood comps = up to $160K (don’t have rental comps at the moment) Property 2: 4BR/2BA 1700 sq ft Asking price = $150,000 Est rehab = $25,000 (again, could be off) Neighborhood comps = up to $200K (don’t have rental comps at the moment) What do you all think about all of this? Are these potentially good deals? Are there any foreseeable problems based of your own experience? I want to know what I should be looking for when I’m analyzing these deals. Of course I plan on running all the numbers and meticulously analyzing all potential deals using the BP BRRR calculator and also another one I have. All feedback is appreciated. I am extemely eager to get started but everytime I think I'm progressing, I see or learn something that makes me more hesitant.

[Jonatan Barbera]

@Alex Kamunyo Have you spoke to some hard money lenders as far their terms and requisites to using their money? I think hard money costs alone will kill both of those deals. Also, keep in mind that when you're selling retail(flipping) there are realtor fees, closing costs, and seller concessions so Using house #1 as an example IF you're in it for $115K and sell for $150K you're not walking away with $35K. It'll be closer to $25K this is still not including money costs and holding costs for utilities and taxes. Buying from the MLS is tough, there is a lot of competition and a lot of people overpaying. I wouldn't use your traditional institutions for refi. Talk to a good mortgage broker that can shop it around. Also, cashout refi come at higher interest rates so make sure the cash flow is there.

You're on the right track, keep asking questions and testing new ideas. Don't rush to buy. Be patient. Real estate isn't going anywhere.