Renovate To Rent On HGTV

[Chris Bynion]

I'm on vacation this week and caught a new show on HGTV called Renovate To Rent. It's about a couple of young guys, one a RE agent and the other a GC, who buy distressed properties, renovate them to a condition above what I think the average renter would expect and then rents them out. I was curious if anyone else has seen this show and if so, what their thoughts were? They supposedly have in the neighborhood of 50 units and seem to do above average renovations. I think they operate in the Minneapolis area. I'm curious, how could they be funding all this with a buy and hold strategy and what your thoughts are on their strategy in general given the current market conditions? Is it a sign that the end is near because this show is now on HGTV?

[Kane Martin]

Originally posted by @Chris Bynion:

I'm on vacation this week and caught a new show on HGTV called Renovate To Rent. It's about a couple of young guys, one a RE agent and the other a GC, who buy distressed properties, renovate them to a condition above what I think the average renter would expect and then rents them out. I was curious if anyone else has seen this show and if so, what their thoughts were? They supposedly have in the neighborhood of 50 units and seem to do above average renovations. I think they operate in the Minneapolis area. I'm curious, how could they be funding all this with a buy and hold strategy and what your thoughts are on their strategy in general given the current market conditions? Is it a sign that the end is near because this show is now on HGTV?

 I run a pretty similar operation.  Myself, my wife, and another partner have been doing this for 4 years with relatively good results.  5% down payment is all we need for the mortgages because we live in the Renos.  As long as the property is your primary residence, you don't need 20% down.  So the three of us move every 4-6 months.  Our lender provides us with a mortgage +10% for Renos each time.  So if we buy a $450k home, we put down 22.5k split 3 ways, and the bank gives us 495k for the home and Renos.  

So far, the value of the homes have increased by at LEAST 1.5 times the cost of the Renos each time. Especially since we do 100% of the work just the three of us, allincomes have been 100% legal, all permits and inspections in order, the Renos have been done to a really high standard, and the homes have been purchased in prime locations only.

You might ask... What about debt/income ratio right?  With every home we add roughly $400k in debt, and only $3k/month in income...Well, as long as our MTG+prop tax is no more than 80% of our total rent for a property then the lender (First National) considers that as extra income, not debt.  Most major banks wouldn't do this for us.

So $3000 rent on a $2100 MTG+prop tax is looked at like $375/month income straight up instead of $3000 income against a $400k MTG.

For me, saving 7-8k every 4-6 months wasn't all that hard, and is really easy now that I have several income properties.