All Forum Posts by: Mike Berkaw

Hi @Erik Estrada

I have not. I am normally a buy and hold person. The only sale I have done was a 1031 exchange, so this one is new to me. I have done BRRR but in those instances I was the owner doing a refinance.

It was suggested by my lender to do a private sale using an Escrow and Title company and once that is complete he can do a regular refinance loan (no cash out) and I would get my cash back. I just know there will be thousands of dollars in extra fees going this route. 

Hi Everyone,

Here's my scenario. I purchased a house cash that needed major rehab for 343k. My friend and I did all the work, he paid for most of the materials and based on comps it should come in at a little over 500k.

I am looking to sell it to my friend for what I have into it and the goal was that the difference in purchase price / equity he would not need to put a cash down payment. (355 purchase / 500k equity). After talking with a lender they are saying regardless of the equity he would still need to put down 20% of the purchase price or get stuck paying PMI. This doesn't make sense to me as I thought PMI was to cover the missing equity in a loan.

Does this sound right? If so, what is the best way to sell the house to him?

I'm in Prescott and can answer many questions you may have. I am currently working on my second BRRRR house which wasn't easy to find even with the current market. Send me a DM and we can run through your concerns.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Huntsville.

Purchase price: $180,000
Cash invested: $25,000

6 bedroom / 4 bath duplex that needed a landlord that cared about the property. Rehabbed both units after purchase and increased the rent to market rate.

How did you find this deal and how did you negotiate it?

Local realtor

How did you finance this deal?

1031 exchange

How did you add value to the deal?

This duplex was a bit run down. It needed rehab in both units which allowed me to raise the rent by 40 percent on each side.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Dena Puliatti with Weichert Realtors / The Space Place helped me spend my 1031 funds on good properties with a decent price to rent ratio.

@Lilly Tureaud I have dealt with two realtors, but I wasn't super impressed with either one. I had to do most of the leg work and they just facilitated the transactions. There is a local RE investor group on MeetUp, but I haven't been to any of their meetings yet.

I'm doing the BRRR as well and can tell you that all the contractors that I have met with are very busy and their prices reflect that. Fortunately I am able to do a lot of the work myself, otherwise I would be upside down on my current project.

@Lilly Tureaud It is do-able for a temporary housing option. My friend is getting 1800 a month on a 1100 sqf house, less than a mile from downtown, until the tenant finds a house to purchase themselves. He also has a 2 month payment clause if they leave before the 8 months is up.

Prescott is tough for investing. The prices here are skyrocketing due to all the people moving into the area. 3 years ago in Prescott Valley you could pick up a duplex for around 200k and now they are 300k+ but the rent hasn't increased enough to make the numbers work.

We have a friend that is looking to move here and they cannot find a house because they are selling to fast. One place had 10 offers on the first day and offers only accepted after you see the house in person. Another friend here rented his VRBO to someone for 8 months while they try to find a house to buy. Its crazy. 

Houses around here are selling fast, so I don't think you would be able to get the house price down that low. I'm a bit surprised that it's been for sale that long.

It's just down the street from the heart of the town which is nice. It is also next to a major street so it can be a bit noisy. 2k rent might be a little high. I would think more along the lines of 1,800 would be more appropriate.

Property tax is fairly low. I pay about .5% on my houses here.

What repairs do you think will need to be done? Contractors here are not cheap and it can be hard to find a good one. 

@Alan Grobmeier Sun City is a 55+ neighborhood so its not an equity play. Just a quick zillow search shows about a $200 HOA and rents from 1,100 - 2,300 depending on the size of the house. Since im starting out im focusing on BRRR so I need my properties to be close to home

Also, my RE agent suggested that I look in the Sun City retirement community. A regular 2/1 is around 130k and rents average around 1,250 so it's close to the 1% rule. She said once it's rented they don't typically move out, so it is very low maintenance for her. She has 3 in that area but lives up here full time.