All Forum Posts by: Alex Saleeby

Yes, it is certainly advisable to talk to HML and conventional or commercial lenders (depends if using LLC or not) ahead of getting into a deal to find out their terms, qualification requirements and the whole lot.

The brrrr is a terrific and seemingly simple concept, but the devil is in the details as they say. 

HML money can be quite expensive so you will need to factor in origination points and loan fees. You'll likely need to make monthly payments along the way. Until you have a track record borrowing from HMLs you'll likely need to invest some some of your own money in the deal to have some skin in the game. Rehab costs can be tough to estimate sometimes and going over budget is not unheard of. So building in some additional buffer is a good idea as well. Another factor to account for is any seasoning requirement that that the conventional lender might have before being able to do the refi which would extend the time of the HML loan. As you learn more you'll be able to add all these variables into the equation as you analyze potential deals.

An alternative source of funding for a deal is private money that you might wish to explore further as well. 

Hello Aaron Millis in the example you gave, the 30% is equity the you have earned yourself from having completed that brrrr. To answer your question about "money in your pocket", suppose you found a lender to give you a loan at 75 or 80% LTV, then the extra 5 or 10% could be cash you pull out of the deal. This doesn't necessarily mean that you should. A lower loan amount should translate to higher cash flow from your rental, so more money you get to keep each month. Also, keeping the 70% used in your example, suppose you did a better job negotiating the purchase price and got the property for $35k, put another $20k in rehab. That's a total of $55k all in. With an ARV of $100k & 70% LTV, you could pull out $15k cash out of the deal. Again, it's up to you to decide if you want to pull this cash out or keep it as equity in the deal. More equity translated to higher net worth. Run your numbers and decide what's best for your situation. Hope the helps and good luck.

Great discussion Raj Pat Definitely a hot topic these days. I'm curious what other market metrics are doing besides price. What about DOM or months inventory? What are those trends like? Bay Area CA is quite large. I imagine that a slow down would manifest itself differently in various cities and price points.

Welcome to BP Dillon Randolph This is a great investor community. Looks like you have a head start compare to typical newbies. Good luck in your investing endeavors.

Good call Jackie Botham If you can't buy it at the right price given the condition, issues and questions surrounding this deal, then it's better to walk. Another deal will come along soon.

In that case you may be looking at using an asset based lender. Terms will not be as good, but still doable. LTV max around 75% and higher interest rate. You might want to find such lenders and find out what sort of deals they do and their terms to take that into consideration in your analysis.

Tony Castronovo first of all, congrats on the three deals. Sounds like you are on a roll. The seasoning requirement depends on the lender you are using and type of loan. For example, the commercial lender I use (for properties and loans under an LLC) does not have any seasoning requirements. For the single-closing HML that automatically converts to a 30-yr fixed, which is a nice option by the way, the loan amount would be based on a % of ARV. Depending on the purchase price, you could potentially get the "cash out" going into the deal to use for needed rehabs and use little or no money out of pocket, which still the BRRRR method, just in a different order. The HML to 30-yr fixed, single close program I'm familiar with has a balloon payment on the 30-yr fixed portion. I believe it is 7 years. If the one you are using doesn't have that, I'd be interested in knowing more about it.

That tax bill is too high for the price. Property tax rate for Klein ISD is just under 3.25% and county appraisal values tend to run below those of the retail market. What does the appraisal district have the property appraisal value at? Could this be a $175000 property that you're picking up for $110000?

Brandon H. Here's the web site www.bblcpa.com Close to Central Mall

Brandon H. I use Nick Gammill @ BBL. He was recommended by a fellow investor and BP member. I've been please so far. Nick is also an investor so he's well versed in real estate related matters.