All Forum Posts by: Amos Raymond

Hey Bigger Pockets Fam!

My partner and I have successfully used the BRRRR method gaining us 5 doors in the last 5 years. However, last project (3BR-2BA, 1700 sq ft) has posed a dilemma. In short, we went over budget on the rehab and the proposed interest rate is ~8.75% if we move forward with refinancing. We used our own cash to buy (tax sale) and fully renovate as the property required going down to the studs. Our forecasted rental income of ~$2145/m and cash flow of ~$200/m was based on interest rates as high as 8%. Additionally, going a little over budget with a higher interest rate at 8.75% made us pause to reconsider other options. We are totally against paralysis in analysis so we need your help.

Could or should we consider delaying the refinance for at least another year, if we can likely get cash from other sources for the next rehab which is currently in the demo stage? What would be the implications, good or bad in regards to taxes, cash-on-cash return or anything else? Mind you, my partner and I have decided against personal financing at ~7.65% as we prefer not to risk our other assets.

My partner and I are new REI's since 2018 who have employed the principles of the BRRRR method commanding 5 doors valued about $750k plus one door with projected ARV of about $250k by '23Q1 and one other door bought in a tax sale but currently locked in litigation. All of these properties were purchased using out own funds. We want to continue with our pace but we've safely tapped out. So, (1) What are the current hard money and/or line of credit rates (12/27/22) ? (2) Besides the hard money lenders Bigger Pockets has listed on this platform for Tennessee, are there other companies that come recommended? (3) Lastly, are there other recommendations from the BP brain-trust that are all welcomed and thanks in advance?

How much should one overpay (price per sq. ft) for a property potentially bringing in a generous return? Is cash flow so important that you overpay though asset appreciation is likely in a rising real estate market?

At what point does the rental income become more important that appraisal value of property?

Facts:

Duplex in good structural condition (electrical, plumbing, foundation) but would need possibly $50k in cosmetics & updating if we were to rent out to average renter as opposed to steady stream of college students for the past 10 years.

1. Unit 1: 3 BR, 1 BA. Unit 2: 2 BR, 1 BA
2. Asking price $329,000 ($150 sq-ft) with other duplexes in the area are going for $120 sq-ft
3. Property has been rented out to local college students who pay individually generating rental revenue of $3,000 monthly
4. If partner and I could purchase and not upgrade/rehab, renting to same college students then estimated monthly cost with debt service (assuming 4.5% interest rate & 25% down) is roughly a few dollars shy of $2k leaving a net profit of about $1k
5. Concern is for CoVID and schools moving to an on-line model and force the $50k rehab/upgrade and possibly only brining in $2700 monthly which would only bring about 6.6% cash return ($78K down payment + $50k rehab cost)
6. Real estate market in Memphis is rapidly progressing now as it is following Nashville’s lead

What are the pros and cons in leaving utilities in landlord’s name in the interest of keeping services like security monitoring uninterrupted?

Found a single family that was converted into a two unit home years ago. The seller’s agent presented the property as such but all comps were amongst other single family units which are doing great in this up & coming neighborhood. My math was based on that but later found out comps would truly be amongst other duplexes which aren’t as plentiful & valuable. I’d be overpaying and with rehab, $60k more comparatively. I didn’t have an agent and trusted the seller’s agent’s bad intel. I’m trying to back out. No contingency as it was “as is” and I was going in with cash so no financing. My partners have backed out and I’m in the hook. 

I need sage advise. Otherwise, I’m waiting to see if seller will be amenable with clearing me from the contract, renegotiate or face being sued for breech. 

Help!

FYI: Lesson learned: Always put a contingency even if you don’t need it until you do need it.