All Forum Posts by: Benjamin Riehle

Hey @Cody Climp, 

P/I, property tax, insurance is $770 per month. My management company charges 8% of rent plus $25 per month so that is $112 per month. I factor in a vacancy rate of 5% or $60 per month, although with as quickly as this property rented I believe vacancy will not be an issue. Lastly, I run a repair expense of 10% or $120 per month. The property is fully remodeled so there should be minimal expenses, again I like to run safe projections.  

Rent: $1,095

Expenses: $1,062 (Remember these are with vacancy and assumed repairs accounting for $15% of the rent)

Cash-flow: $33 per month (WELL THAT SUCKS! However, there are a few other things to consider)

First, I am paying the principle down on this property starting at $120 per month and will grow over time. Principle paydown is something I believe a lot of newer investors overlook. Additionally, you can ramp up the principle paydown and shave 8+ years off of the mortgage by making one additional mortgage payment per year. By doing this more of your monthly mortgage payment will go to principle and ultimately back into your pocket.

Second, I ran the numbers with a 5% vacancy and 10% repair expense. For the 3 months we have had the property in production we have had no repairs and zero vacancy. As a result we are cash-flowing an additional $164 per month.

Lastly, because we were able to pull our entire investment out to go do other projects we are happy with breaking even, paying down the principle and benefiting from the areas rapid appreciation. This area in Tucson is appreciating at 7+ percent per year. Obviously, this will not continue and can just as easily go the other direction, but for our investment strategy as long as we are breaking even, paying down the principle and able to acquire additional assets we are achieving our goals.

Probably a much longer answer than you were looking for but wanted to take the time to explain my thought process. 

Best,

Hey @Paul Bowers This deal was brought to me by a subcontractor of my construction company. He had a friend that needed to sell and knew we could purchase cash and close in 10 days. I have found my sphere to be one of the best sources to find good deals. Everyone I know is aware that my team acquires rundown and distressed properties. I typically get 3-5 messages a week from people I know telling me about a property they saw or someone they know that needs to sell. From there I had it off to my investment team and they go to work.  

Hey Sean, 

I will shoot you a PM with this info. Every time I have posted anything about my company or what my team does I get flagged by the bigger pockets police and they block my account claiming self promotion.

@David Grabiner Congrats on the deal that is a fantastic return. The 80% LTV is a deal I have worked out with a local bank in Tucson. I have spent the past 6 years building a relationship that started with a simple $60,000 credit line. I now have a large credit line and keep large deposits with the bank, this gives them the security they need to issue a loan like mentioned above for a conventional mortgage. I should have put a disclaimer that the 80% LTV is not very common. I do know there are options with some lenders to get to 80% LTV depending on projects and relationships.

Hey @Bud Dwyer I have to echo what @Cody L. said. Always going to be "What ifs" however, our investment strategy is designed to offer an additional layer of protection if the market does take a turn. 

You are correct property values in Phoenix have drastically appreciated over the last year, Tucson seems to be following a similar trend. I have written a few articles on why I believe this rapid growth in AZ is occurring. 

As for the fear of prices dropping, with a 80% LTV we have 20% equity protection, meaning the market would have to drop more than 20% before we are under water. We invest in under-capitalized neighborhoods that have substantial upside appreciation potential due to attractive locations. As a result, we feel we have an additional layer of protection from a shift in the market given the demand for the areas we are investing and the current under priced micro-market.

As for rent drops, the investment strategy of under capitalized neighborhoods provides that additional layer of protection from drastic rent drops. 

As with any type of investing, there are going to be risks. The key is minimizing the risk by maintaining multiple exit strategies and holding options. 

Feel free to reach out any time to discuss in more detail. Have a great day and thank you for commenting on my post!

Hey @Christian Wathne, I will grab a few before/after photos and post them here. We ran this project pretty fast and I have not gotten all the photos from my marketing guy. 

If you go to my page on BP I have a video of some of our before/after projects if you want to see the type of remodels we do.

Best,

@Robin Boyer there are a lot of variables that go into hard money lending. Depending on your level of experience (Ie previous projects you have done), relationship with the lender, type of property you are purchasing, ect. 80-90% is possible, however there are typically high loan origination costs that may or may not be a deal breaker. Would love to connect with you and learn about what you are doing in So Cal. Happy to help any way I can with your BRRR deal.

As for how we were able to get the full investment back, this was possible because we were able to substantially increase the property value through forced appreciation. The property appraised for $138,000 and we used an institutional lender to do the cash-out refinance. I have also been very successful using local banks and structuring credit lines that allow us to pull capital when needed without having the fixed interest costs. 

Feel free to reach out any time to discuss in more detail. 

Best, 

Hey Bigger Pockets! Just wanted to share a recent remodel project we completed and how the numbers worked out for us!

The appraisal just came in for a recent BRRR we undertook. The property was valued at $138k.

We began this project back in March of this year, purchasing a run down home in Tucson’s Barrio Hollywood neighborhood for $60k cash. We poured $53k in the project, carrying out a 3-month remodel, and arrived at an updated 4B/2BA, 1296 sqft home. The place was rented out within the first week at $1,100/month! That comes out to a cap rate of nearly 8.2%.

And yet, as we know, with the BRRR strategy our primary concern is the ability to return our capital and minimize our total capital outlay and maximize our equity gains.The fact that we have such great rental return is just icing on the cake!

After rehabbing and renting, our next step is to refinance. We will refinance with a conventional mortgage at 80% LTV (loan to value), putting $110,500 back into our pocket.

Herein lies the compounding potential of the BRRR strategy. After putting $113k in, we are getting the $110.5k back, nearly negating the amount of capital tied up in the project. Now the property is cash-flowing, we have $25k equity in the property, and we have the refinanced sum of $110.5k to go repeat the process. Gotta love BRRR!

If you haven't already, go read Brandon Turner's comprehensive blog post on the BRRR strategy:

https://www.biggerpockets.com/renewsblog/2015/04/2...

Hope everyone has a great weekend!

Congrats @Justin Owens! Keep me posted on the project, great to hear you got something! 

There is a common belief among investors that it is impossible to find good deals on the MLS. If you want a good deal you have to find it off market. I strongly disagree with this statement, and below I am going to explain why. 

Now, I recognize that every MLS is different, and I am speaking particularly about the Southern Arizona (Tucson) MLS, however I believe most MLS's offer similar opportunity.

Of course, great deals are found off market, but that does not mean there is not opportunity for investors on the MLS. The key is being able to navigate quickly and look where others are not.

First, to be successful with off market deals you have to be quick. I have purchased numerous deals by submitting offers within the first hour of the property being on the MLS and allowing the seller minimal response time. Speed wins the day, you have to be able to get an offer submitted immediately after a potential deal is identified.

Second, figure out the sellers motivation and be creative. I regularly run searches for properties that have been listed for 100+ days and when I identify a property that has potential I try to create win-wins for myself and the seller. Calling and speaking to the listing agent can provide valuable insight into what will motivate the seller. If the deal is listed for sell then the seller has some level of motivation, creativity can go a long way. 

Third, look where others are not. When I say look where others are not, what I mean is you have to look at deals through a different lens. One recent example of this that allowed my team to identify a home-run deal is looking at properties where potential lot splits are available. In Tucson, if you have a lot of 10,000 sqft you can split the lot. The property we purchased had been on the MLS for 80 days and on the surface appeared to be overpriced. The MLS had the property SqFt incorrectly listed. The only reason we caught it was because one of my team members happened to drive by and saw a huge lot and it triggered him to do more research.

Regardless of how you locate investment deals, you have to be willing to work hard to find them. Unfortunately, there is no workaround for hard work. Hopefully though, this post provides some value to individuals who have written off the MLS and gives them another resource to locate deals.

Disclaimer* I am a licensed agent and have MLS access, for individuals who do not have a licenses, I recommend you build a relationship with a local realtor who can set you up on a full market search to allow you to look for hidden gems on the MLS.

Good luck and happy hunting!

BAR