All Forum Posts by: Alex Corrion

Hi Whitney, 

Welcome to BP, you are correct that is my goal as well (quite my job that I have a higher ed degree to do). Best advice I got is that you need a "Chuck in the Truck". Go to home depot (or favorite big box store) at 6-7am and look for the guys that are not driving the $70,000 truck but the beat up one and build a relationship with them on one property. The goal would be to get that persons crew working for you essentially full time. Then they will pass on their discounts on products and you can be sure that things are getting done correctly. 

Good luck with everything!

What is the cash on cash return of the property at current market rents?

Hey Nate, 

This would be my advise, it doesn't matter what the price of the house is because your buyers list will be held with buy and hold people and flippers. For flipping sometimes it works in high price neighborhoods and the profits are much better with lower risk. I would use the 70% rule as a rule of thumb. For example, 100k house you need to buy for 70k all in, which means that you need to get that house for 70k - Rehab cost (get to know a good contract with a middle of the road price point so that you are not telling people you can do a whole house for 5 grand) and then subtract the fee that you want to make on the house and that should be the target. Generally that works for most people. I wouldn't touch a flip for less than a 20k profit (even that seems risky depending on the scope of work) so after closing cost (10%) those numbers work (they are at least close). 

On cheaper properties (ARV=60k) you need to be under 70% because the closing cost and stuff like this will not change much. But at ARV=200k there is more meat on the bone etc.

Every house has a price that it is valued at, but some of them are not even worth a dollar in their current state because of what the area can support for an ARV.

Personally I think that this is a good option if you can find a good bank that will give you a good amount of money and make sure that you have the right deal for this. I only worry about it because you are leveraging the whole property so as far as the risk scale goes it is high up on the scale. I got quoted for a 95% LTV at ~5% interest that had interest only payments. So basically you need to roll those numbers into the price of the repair to really analyze the deal.

For example, If you get a $50,000 HELOC and you are using that for the purchase and add it the payments to your carrying cost it can work. However, what happens if you go over budget and cannot refi out all of your money, are you still ok have to pay the HELOC down on your current income. It can be a great tool to get access to quick cash, especially if you did value adds to your residence...

My understanding is that you then have basically purchased the property with cash and therefor you do not need to season the property (i.e. get renters in) once the rehab is finished before pulling out fix debt on the property (obviously credit score and debt to income can be issues here).  

Hey Sean, 

I am also in the Lansing area, I went to MSU for far too long and stuck around the area. Did the house come with a rental license? If it didn't you will have a hard time getting one from the city. East Lansing has strict rules about the number of rental houses in the city, being that you bought the house for 75k I assume that it doesn't have such things. I would say that the 200k estimate is high. IMO houses in that neighborhood the number of bedrooms is not a huge deal, I would stick with 3 in that size of a house. Don't make a weird room that you have to access through another bedroom. Just my thoughts, best of luck with the house and anytime you would want to meet up I am happy to talk RE. 

Best

I didn't read the whole tread, but yes your numbers look decent. If there is that much meat on the bone I would budget more for CapEx because that is what can kill you (new HVAC $10k). You COC return is through the roof because you are putting basically no money into the deal. If you run the same numbers with 20% down that will be much different. That being said, I am not afraid for getting in to deals with low money down but know that if push comes to shove and you have to sell, you may have to bring money to the closing table. It helps to get some more skin in the game because if the market goes into a recession again then you have some equity in the property that may help, if you plan on having this property till retirement then it doesn't matter and just hang out of the big cash flow and buy more non-depreciating assets!

Good luck and don't get stuck in analysis paralysis. 

Hi Sean, 

I don't know that there are a ton of people using companies that are on BP. I rented years ago from Musselman Realty in East Lansing http://www.musselmanrealty.net/ I want to say the property manager was Dave and he does a good job keeping properties up to date and getting rent. What area of town are you looking to invest in?

@Mindy Jensen that is a creative way of paying for the flip, 75% of your monthly income to saving is insane!!! Seems like there may be way, especially right now, to get a cheap line of credit that you can then later refi into the loan or something. Anyone out there get a construction loan? I am interested in what the rates and terms are. 

The question I had while listening to the pod today was this; why are you not buying them and then renovating most of it (lets say kitchen and bath) and then moving in to it after 3-6 months and then finish the rest of the renovation while you are living there for the next 2 years. Does this still qualify for the capitol gains tax break?

2nd, how are you financing the construction cost. I would say I am in the process of this now however I didn't buy a distressed property. Actually it was already flipped, but it wasn't designed correctly, so we have been doing that on our extra savings as we can. More specifically, lets say I can buy a house now and I have the 20% down but am lacking the $100k for the renovation that needs to be done. What is the best way to get access to that money?