All Forum Posts by: Chris Bounds

@Joe Villeneuve, agreed. The BRRR is a pretty straight forward and simple way to effectively design a zero down deal.

I'm not recommending that, but it is what I would do. Do your own Cash-on-Cash returns (CCR) with zero debt and with 70% debt. Compare the two. Then since the 70% debt is now cash in your pocket figure out how many other houses you could finance. Determine the CCR on those properties. Add up the total cash flow and compare it to the cash flow you had with only 1 property.

Ultimately it's a risk vs. reward calculation of opportunity cost.  Of course, your stage of life and financial position does matter with this decision.  

@Account Closed, yes - it's getting a conventional mortgage with better terms to pay off the short-term high interest mortgage (HML).

Make sure you're improving your financial position now though. Secure lines of credit, pay off consumer credit cards, and save cash. Even though HML loan based on the asset (house) they usually still require 6 months of reserves to make sure you can make payments and fund repairs.

@Account Closed,

Depending on how you finance the acquisition the benefits of BRRRR can vary.

Situation 1: Private Lender or Hard Money Lender agrees to fund 70% ARV which is $105k based on your hypothetical. They will withhold the $35k in repairs and release them to you in draws (so make sure you have a line of credit or cash to get work started). After the house is repaired you immediately file your refinance paperwork (I'd have it filed before hand, but the appraisal can't be ordered until the repairs are completed). There is no need to wait 6+ months to refinance. You can typically get up to 75% ARV on the refi. In this situation, other than closing costs, you have very little out of pocket expenses. Your ROI / CCR will be great and your cash flow will jump when you lock in the lower interest rate. I've used this strategy many times!

Situation 2: You do the same as the above except you use cash for the acquisition and repairs.  I have not done this before.  There may be some seasoning required (6-12mths)  before you can do a cash out refinance.  Once you refinance though, you will free up your cash to do other deals.  This may "save" you on costs by not using an acquisitions lender, but you are tying up your cash that potentially could have gone towards other deals (opportunity cost).

Situation 3: Instead of using a PL or HML, find a local portfolio lender. Some will lend 60-70% ARV and hold repair reserves just like a HML. The difference is their rates are usually much better than HML. I did this recently and the loan was about 4% with 1pt. It was much better than 12% with 3pts. Plus, you don't have to pay for two closings. However, many portfolio lenders will want to see skin in the game so you may have to put some cash down regardless of how cheap you buy it. They will also want good credit and experience.

@Candice CuccoWelcome to BP! This is the place to be to learn about REI. To add to what others have said, Be sure to check out some of the many local REI meetings in Houston. Find a few to attend regularly. You'll learn a lot by networking.

@Bryan Monks, to add to what Brandon said - check out the BP podcosts too. They are full of incredibly valuable information and cover all sorts of RE topics. Also, there are a lot of local REI meetings around Houston. Be sure to check them out and find a few to attend regularly. You'll learn a lot by networking.

This really is a question of learning style & your schedule.  I've always disliked traditional classrooms.  Since I'm more of a self-learner the classroom is a waste of time for me.  I did the entire Texas RE license course in 30 days online through Real Estate Express and passed the test on the first try a few weeks later.  It would have been a painful 3 months or so had I gone the classroom route.  However, if you learn better in a classroom it will be worth the extra time.  Some schools offer both online & classroom options.  

Thanks @Russell Brazil, I never order a general inspection for distressed SF properties.  I'll order technical inspections for structural items (foundation, roof), but otherwise I know I'm buying something that needs a lot of work.

There are a lot of local REI meetings in the Houston area. Definitely check them out and find a few to attend regularly. That makes for great networking!

Distressed house buyers, especially in southern regions like Houston - Do you always inspect and/or treat for termites when rehabbing a flip or rental property?

Obviously, if there are signs of termite damage it's a no-brainer.  I'm more wondering if it's done as a general rule since distressed properties have a higher chance of active termites due to neglect.  Or, if there are no signs do you chance it and wait until a problem comes up (buyers inspection, tenant complaints).