All Forum Posts by: AJ Exner

Hey Dave,

Building a team is essential to building a portfolio and creating generational wealth, and fortunately there are a lot of great teammates on here willing and able to help you get to where you are hoping to go!

Arti,

Things are looking a little better this week, but with 25% down I'm still seeing around 8% in the Hard Money space. With a buy down in the right area you might be able to get it below that.

 Hey Brian,

Absolutely, there are a TON of people doing this right now as it gives you the ability to still employ a BRRRR-strategy with low cost housing stock, get it rent ready without "too much" rehab (comparatively speaking), and get a stabilized income to rent out in that area.

Highly recommend a PM that is aware of the ups and downs though. The potential for cash flow is certainly there, so you just don't want to get caught up with a bad few. Let the professionals handle that.

The thing to certainly be aware of is, when you are financing, be aware of property price minimums that many lenders might have. If you are working in that space, you might run into loan/property minimums that could slow you down. Make sure that any lender that you might use is aware of your strategy and isn't surprised when you find a good property for less than $50k. 

Hey Sheri,

My clients who are doing this have either had them for a while and have a lower interest rate, or put a little more cash in to reduce the leverage and help keep it cash flowing. 

It is certainly doable to have a STR that cash flows in this market, but the monthly HOA can REALLY carve into the DSCR and keep it from being what it could be. I have also seen some horror stories on rehab being done, or needing to be done, and HOAs giving some trouble there. Familiarizing yourself with the HOA itself would be really helpful before diving in.

I've seen some folks even secure the property with a non-DSCR stabilized bridge loan, where cash flow isn't as big of an issue on the Underwriting while they wait for rates to (hopefully) drop a bit and maybe make it a bit more palatable.

Hey Becca,

Have you looked into Additional Dwelling Units out there? A few of my clients, and even colleagues that I met at BPCon this year who focus in CA are leveraging ADUs to optimize cash flow and grow their equity position out there. 

I will caveat that the ones that I know focus in So Cal, so I'm not sure of the intricacies of the Bay, but I would suspect similar issues. 

Katlynn,

This is where connecting with a local REI group in your area might be able to help. As well, a number of my clients will actually ask their (or other) realtors as they might have good referrals. For many who might not necessarily be "looking" for more work they might not be investing in any kind of marketing and word of mouth is going to be the best way to find them.

But 100% agree with @Corby Goade on this one, treat them like kings and queens because they are DEFINITELY worth their weight in gold. 

Hey Kayla,

Congrats on getting to this step! I always say that the first one is usually the toughest so that all makes sense. 

I would lean on utilizing hard money for something like this, as working with a bank could be tricky given the trade line/credit situation. 

Do you already have a contractor? I think it would take most, if not all, of your funds to purchase the house and it would be tough to even get started on the renovations without something left over to start paying the GC. If you have a GC that understands this, you might be able to purchase and get started, but then will need funds to pay the monthly interest rate.

What are the financials on the deal? Purchase price, estimated rehab, after repair value?

Hey Daniel,

I have found with my clients that it makes the region that they are investing in really important. Finding creative financing is one thing, but if you have properties that you can find properties cheaper, add good value, have a market that sustains and has good ARV comps, and then has good stabilized rents has become pretty difficult.

I'm seeing good work in areas where Section 8 is an option as well. I'm seeing a few more stabilized bridge programs as well to refi and hold for a bit to see what rates do. The issue is not just the rates, but the rates in combination with areas with higher property taxes or in an area where insurance costs are too high (See Florida/The Gulf).

So yeah, more than anything just being aware of the average rent in an area to get an idea of good properties to rehab. It benefits to think backwards in the sense of thinking rent/value first in a good area and then thinking about the purchase/rehab and making that work. 

Hi Nanette,

Usually the lender that you are using has one that you can use, did you fill out a Scope of Work or did they provide you with anything?

 Hey Stephen,

And I would add, if your property is in Louisiana to make sure that whatever lender you speak to can confirm these things:

-Can you, and are you willing, to lend to a 'first-timer', specifically in Louisiana (insurance costs have been tricky as of late and some have pulled out).

-See how, or if, they source funds for closing. Some lenders would be hesitant on HELOC funded closings, or might want to see it seasoned

Hard money is a GREAT solution to get started, and no property is as difficult as the first one. Try to do as much vetting of the lender as you can on the front end to try to reduce surprises down the road. Sounds like a great opportunity!