All Forum Posts by: Bart Modzelewski

@John Leavelle Looks like you have the idea of BRRRR down! Congrats on your 3 properties!

I forgot about rent-o-meter for rental rates. I use Redfin sales history (past 3 or 6 month) to get a good idea of sales comps in the individual neighborhoods. 

Why do you say that the 2 appraisals may mess up the BRRRR process? I'll have to check with my lender to see if the same bank can be used to refi.

I appreciate you taking the time to respond so thoroughly. You bring up several things that I either didn't know or did not think of.

@Tim Jacob Why do you find the way I came up with it questionable? Am I missing something other than what was mentioned above? 

What neighborhood or street did you sell the one for 1400 if you don't mind me asking? Was it sec 8? I am new to this and the idea of placing a tenant slightly worries me. What do you mean by the rental co inspection that is needed there? And thank you for your insight and response.

@Chris Seveney Thank you for your reply! 

It is an approx 1,000 sq ft townhouse. You are correct that I would not be replacing the roof and HVAC at this time. What would you suggest I increase the capex to?

I have considered vacancy and utility while it is under renovation but I did not include it in my equation, I guess I should!

Snow removal from walkways and parking, as well as lawn maintenance would be the responsibility of the renter (which is very common for this area).

Thank you for your suggestions and pointing out some things that I may not have otherwise considered.

@John Leavelle Thank you for your detailed analysis of this BRRRR.

You are correct that I would try getting a conventional bank loan for this property. The property is "livable" but I'm not sure that anyone would want to live there in its current state. I was not sure if this would be a problem for the bank loan or not. It seems you see this as a problem - I should look into this. Thank you for calling attention to it.

I will start using the 3.5% you mentioned as my baseline for closing!

I am seeing comps selling (and sold) from $135,000 to $145,000, so I feel that the ARV should be just below $140,00.

I try to stay conservative on the numbers so that there aren't many disappointments when things do come up. However, I did not consider legal, accounting, marketing, and evictions. Would you say you include these in your 55%?

As far as property is concerned, it is an approx 1,000 sq ft townhouse. 60-70 years old.
3/1 which would be renovated to a 3/2. It is not rented but rent estimates for the area/similar homes vary from $1,200 - $1,500. To determine rent, I have been using Trulia and Zillow. Is there a better way to get an accurate idea of actual rent in the area or would this be the best bet for now?

I feel pretty confident that I am $5,000 within the reno budget ($30-35k) as long as nothing major pops up in the process.

Regarding the pre-qualifying of the cash-out refi. I did not know that would be possible without actually owning and renovating the property. Is this a standard practice that bank will understand and easily be able to help with?

John, thank you again for your detailed look at this. I really appreciate your insight and informing me of things I did not know about previously.

@Brent Coombs Thank you for your input. It is always helpful to hear the additional feedback.

Hello BP, I have a property or two picked out that interested in BRRRing but before jumping in, I would like to run the numbers by you to see if there is anything I am missing. The numbers have been pulled from MLS and standard online mortgage calculators.

I have not included either of the closing costs. How much would that effect all of the numbers? What number should I use for standard closing costs (initial purchase and refi)?

Original Purchase Price - $66,400
Down Payment (20%) - $13,280
Remainder of Loan - $53,120

Initial Monthly Payment - Approx. $408

Renovation Cost - $30,000

Cash out of Pocket (down payment + renovation cost) - $43,280

_________

Need to Refinance $96,400 (remainder of the loan + cash out of pocket)

ARV would need to be $137,700 (since %70 of this amount is the $96,400 I need to pull back out)

After Refinance New Payment - $604

_________

Now as for cash flow...

Expenses:

Mortgage (includes P&I, taxes, insurance) - $604

Property Management 10% (even thought this will be self managed) - $60

Vacancy (10%) - $60

Repairs (10%) - $60

Cap Ex - $100

TOTAL Expenses - $884

EXPECTED average rent for the area - $1300

Cash flow/month - $416

_________

With your expertise, how does everything look? 

Would the BRRRR work?

Does the cash flow look good?

Do you have any additional information that I may be overlooking?

Thank you in advance!

Welcome to the forum neighbor!

@Account Closed

Are these also pretty standard terms when using a private money lender or do the terms differ a bit?

Who would be a go to person to create a legally binding contract between a private money lender and the borrower? Would most real estate attorneys already have type of contract on file?

@Joseph England The after photos look great. Very nice work making these properties shine!

I have a few questions if you don't mind answering them:

These home typically have plaster walls - do you tear everything down to the studs and then sheetrock it or just leave the plaster walls?

How much does staging run for a property this size? Or does it depend on other factors?

Hey Joe, We're practically neighbors. Welcome to BP.

@Guy Harriss

Nice to see another person from Middle River on here. Good luck on the search for your first property. Keep us posted on your progress.