All Forum Posts by: Aaron Signer

I bought an office building that I am converting into an event space with seller financing. I have until the end of the year to refi it out into my name and am currently in the renovation process. Who do you recommend as a good lender and what kind of terms should I be pushing for?

Thanks in advance!

Hey-o! Thanks for taking the time to read.

I am in the process of buying a commercial space in Indiana (Broad Ripple area for those familiar with Indianapolis) and am looking for recommendations for lenders who can fund these types of deals. Given the 3 week closing window, I know I am probably looking at hard money but I plan to refi as soon as possible so all lenders welcome.

Thanks for your help BP!

Looking at getting into the Air B and B market in Indy now that the vaccine is opening the area up. I would love any and all advice as this will be my first foray outside of just SFR rentals.

The property is just north of the Broad Ripple Strip and would have 2 beds and 2 baths separated by a shared kitchen. It is currently zoned as a commercial property so permits are my initial concern.

I have been giving a new PM in Indy a try for the last 3 months for the final unit of my triplex. It is my CF unit so I was a bit more lax on the timeline than I should have been. He threw it up on the traditional sites: Zillow, Rent.com, Trulia and showed it once in those 3 months.

Yesterday I gave Ed Klasky, a member of CIREIA (Central Indiana Real Estate Investors Association), the details of the unit once I released the other PM. I have already received 7 applications and Ed is showing the unit tomorrow to 2 of them.
7 APPLICATIONS AND 2 SHOWINGS SCHEDULED IN 24 HOURS!

You'd better believe that I will be hitting him up again the next vacancy I have. Would strongly recommend!

Please message me for his contact information. I will gladly give it to you.

@Nicole Petrey Congrats on gearing up to make your first purchase!

If you are planning on living in the home for a year, there is a Home Style loan that I'd recommend looking into; think 204K FHA loan but as a conventional loan instead. This allows you to put only 5% down, have your rehab costs covered as a part of the loan, and not need to refi down the road to get away from PMI when you cross the 20% equity threshold.

HEADS UP!

I would certainly make sure that I held cash reserves to be able to pay any contractors promptly because the draw system here takes longer than most (comparing against hard money lenders), and your contractors want to be paid. The lender will give you the option to pay the contractor directly but this is going to be a headache in itself as they have to conform to the lender's payment request system and timing. SO MUCH easier if the lender is just set to pay you back for work completed.

Side note: you say this is your first property so I'll remind you that the only leverage you really have at the end of the day with most contractors is the amount of money that you have not paid them yet. Make sure that there is a sizeable payout for them AFTER completion.

A lot of people are very happy to get between a 5-7% return on their money. 

I break down how the bank's leverage + tenant loan paydown + appreciation exceeds the 5-7%. If I am ever asked about the Cash Flow, I cite that is for my ongoing management (even though they are aware that I will be hiring a PM).

Show them the numbers and tell them it as a story. Powerful combination.

@Andrew Tonkin

When I have approached investors for BRRRR opportunities, I give them 2 choices:

1) I'll treat them straight as private money at a fixed rate for a fixed period of time (2 years), at which point I would have completed the BRRRR. What I find is that they typically like knowing that they are getting their money to grow for longer periods.

2) I give them equity in the house, 50/50 and we hold the property until it doubles in value. They get no Cash Flow.

Hope that helps

@Jorge Avitia

What's your goal when it comes to this property? Is it just the short term cash flow or are you looking to expand your portfolio of properties?

$1700 in that area is very reasonable rent and should fill up quickly with young professionals. Don't forget to factor in the property manager fee and the initial tenant placement fee though. Also, make sure your insurance agent knows what you're doing to update the policy.

If it were me, I'd shop around options for a HELOC (2ndary loan on the house, not a refinance) so you have a ready source of funds you can tap to invest in other properties while you rent it. Definitely get it reappraised as part of the HELOC application, not before (don't double pay) but most HELOCs will allow you to borrow up to 60% of the home's value less any existing loans/liens.

* @Zachary Rymarcsuk

@Samuel Huang

Take this with whatever grains of salt necessary but I would absolutely secure the HELOC again. Having ready access to funds is always important and most HELOCs won't charge you more than an annual fee (nominal) to simply have them open.

In my conversations with loan officers, until the line is being used, it isn't a factor when they look at new mortgages. Now that you're saving $700 a month, your DTI should be more appealing. If you have the ability to fund the down payment from a different source initially (self directed IRA, savings, etc.) and then simply reimburse yourself from the HELOC, the lender has no need to be concerned.

As for where to put your money, @Zach Rymarcsuk invests in that part of NC and might be able to give you insight there. Cost of entry to Austin precludes a lot of CF options but I still like the market here if you can find a good deal.