All Forum Posts by: Andres Aguirre

Hi All,

I recently came across a property I like that has now been foreclosed on as of two weeks ago and is now owned by the original lending bank. It did not sell on auction. What are my options now for submitting an offer on this property? Do I need to wait until the property is listed for sale by the bank or is there a way that I can submit an offer prior to it being listed?

Andres

Hi everyone,

Wondering what would be a reasonable ballpark estimate for a full renovation on a 1,400 sq ft. 3BD/2BTH single family home in Bridgeport, CT? House has good hardwood floors. Would be looking for moderate cosmetic repairs such as new appliances, basic kitchen rehab (cabinets, backsplash), new vanities in the bathrooms, paint (interior and exterior), and if the budget allows some basic landscaping to give the house some curb appeal.

Also, if you're able to recommend some good contractors in Bridgeport I would greatly appreciate it.

-Andres

@Frankie Woods @John Leavelle Thanks for your responses! I understand the risk with the HELOC and that it is a more short term option, but what about a home equity loan? Those can have a term of up to 25 years I believe so would be almost the same as a new mortgage and you can get an LTV of up to 95% which means you would be able to take out more money than with a cash-out refi.

One example would be the following: I purchase a $100,000 property with a 20% downpayment and a conventional 30-year mortgage at 5%. I use an additional $20,000 for rehab costs (private money or additional savings). So my total initial investment = $40,000. The ARV on the property is $145,000. When it comes time to refinance, a cash-out refinance would only be good for a 70% LTV which would be equal to $101,500. This is enough to payoff the initial mortgage and recoup your downpayment. You would still have $19,500 of your initial investment left in the deal. On the other hand, you could take out an HEL for an LTV of up to 95% equal to $57,750 ($137,500 - $80,000) which is enough to recoup your entire initial investment and then some. Even if 95% LTV is not achievable, the norm which is 80%, would still allow you to recoup most of your initial investment. I get that interest rates are typically higher on a HEL than on a cash-out refi and that could be one drawback, but if you workout the numbers and you don't intend to hold long term I could see the benefit of having more cash available to invest immediately in other deals outweighing the cost of the additional interest. Another drawback I can see with the HEL is having an additional lien on the property which limits drawing on the property in the future. Again, perhaps I am missing something here, but would appreciate your guidance.

Andres

Hi @John Leavelle 

I guess my confusion lies in trying to figure out why a cash-out refinance is the go-to option when executing the refinancing step of the BRRRR... Am I wrong in thinking that a HEL or HELOC, both of which have lower closing costs and offer higher LTVs, would be more beneficial for pulling out cash out of a deal than the cash-out refinance? I am likely missing something in my thinking... Is it perhaps that the cash-out refinance gives you more flexibility later down the road since you're not placing additional liens on the property?

I agree with @Michael Cavicchi . You have to wonder that at some point worrying too much about finding a great deal will result in paralysis. I am not saying that one shouldn't try their best to find a good deal, but if the numbers work on something you might find on the MLS and the property will yield positive cash flow shouldn't that be enough to get a new investor started? I understand that finding good deals is essential to the flipping business model, but I think there are enough properties even on the MLS that are rehab candidates and priced appropriately that will yield a positive return.

Base hits win ball games and I think it is important to not focus all of your attention on finding that home run deal. With experience, I am sure the home runs will come. I suggest listening to the podcast with Charles Roberts on the "boring" path to real estate success. It has really changed my outlook on real estate investing and given me that extra motivation and reassurance I think is needed to make that first leap.

Andres

Thank you all for the extremely helpful tips. Look forward to practicing on a few properties and hopefully come across a good deal along the way and be one step closer to closing on my first property.

Hi everyone,

Today I was exploring how to pull some cash out of the equity on my current residential property and came across two popular options: a home equity line of credit (HELOC) and a home equity loan (HEL). These seem to have some advantages over a cash-out refinance such as lower closing costs and, in the case of HELs, being able to borrow up to 95 percent of your home's value in some cases. My question today is twofold: 1) can you execute a BRRRR strategy using a HELOC or HEL as opposed to a cash-out refinance? and 2) what are the advantages and disadvantages of doing so?

Andres

Hi everyone,

New prospective investor here with TONS of questions and couldn't have found a better place to come searching for some answers :) Rather than post a very long list of questions, I thought it would be best and most beneficial for everyone for me to post one question at a time in the most clear and concise way possible (for which I will try my best!).

I've been immersing myself in books and podcasts over the past several weeks and have been particularly intrigued by the BRRRR strategy. It seems to be a very successful strategy and one that can result in rapid growth. After repair value (ARV) seems to be the biggest factor that can make or break your deal, especially if you are relying on short term financing for the downpayment/rehab and can't afford to leave any money in the deal. So my question is, how can I come up with a good estimate of the ARV when analyzing a deal and have some level of assurance that a bank would be willing to refinance for that amount?

Andres

That's great info guys. Thank you. It seems that condos are rarely mentioned in comparison to single and multi family homes but I can see how the numbers might make sense in our area. The biggest risk I see are HOA fees. I own a condo myself which I purchased five years ago as my principal residence and the HOA fees are on their way to almost doubling due to special assessments.

Hi everyone,

New potential investor located in Stamford, CT. Ideally, I would like to purchase my first investment property somewhere in my local market. Anyone have any success stories they can share in Fairfield County? At first glance, there doesn't seem to be too much out there and everything priced too high for any positive cash flow but this is coming from someone with an untrained eye of course. Would love to hear your thoughts. - Andres