All Forum Posts by: Bryan H.

I haven't used the Homestyle product yet, but hoping to soon. It was introduced to us at a local REIA by the Bank of NC as a tool for flips. While it does have some red tape, it seems like a viable option for financing flips and much cheaper than HML.

How long do you want their money? My first thought was 8% no equity. If you can get long term money for 6%, I'd take it.

You will need to ask the people on your buyers list what price range they want to purchase. No sense in looking at 500k homes if they want to buy 50k homes.

Connect with a realtor and get a list of sold properties. What you are looking for is 'days on market' and number of homes sold. You want to find areas where DOM is low and # of homes is high. As a flipper I'm looking to buy in an area where I can unload a house quickly and a lot of comps will give me confidence in my asking price.

Now if you are selling to buy & hold investors, then you want to research rent rates in neighborhoods. You need to compare the rents to the price of the home. Many people on here talk about the 2% rule. Which means the house will rent for 2% of the price of the home. $100k home rents for $2k. That's tough to do, so if you can get in the 1-1.5% range, you may find a property a buy and hold investor would consider.

Good luck

Most fake it and do a poor job of estimating. Then they try to sell a home with an unreasonable ARV and rehab estimate and wonder why they can't sell their 'deal'.

One way to get better is to get a rehabber to come with you to estimate the job. Maybe you can pay a small fee to get estimates. That would go a long way in earning my business as a flipper. If you have a legit quote from a contractor, I'd have much more confidence in you and your deals. I may even use that contractor for the job. That is the model that Larry Goins uses. (you can google him)

Another way is to learn how to estimate for yourself. I haven't read the book but this was written by @jscott http://www.biggerpockets.com/flippingbook He seems to be pretty successful flipping homes.

Good luck

I've used Erika Weichel at http://www.mycoordinatorllc.com/. She is used to working with investors.

Homepath is only available for certain Fannie Mae homes. Ii recently was introduced to the HomeStyles loan. Its a Fannie Mae product, can be used on just about any home and is available to investors.
https://www.fanniemae.com/content/fact_sheet/homestyle-renovation-factsheet.pdf

I believe this will suit your needs.

Durham is tough to figure out. I just moved to the area and still trying to find the 'good' areas of Durham. There are some, but there are a lot of bad areas too, especially in the $30k range.

Want to know where to invest?
Talk to a realtor
Talk to a property management company
Talk to people at a local REIA

I'm still looking at purchasing in Durham, but I check city-data.com, drive by, and ask people I trust at the TREIA group.

Jon Holdman, since the property is 'free', couldn't you say Eric M. is paying $80k for something worth $190k? $80k is his debt that needs to be paid off before the mortgage is even, so that is his 'contribution' and the rest was the gift?

I realize the mortgage is based on the $270k, but if it cash flows and he can wait he may have an asset worth something down the road.

The deal you are talking about doing with your father is a sub2 or 'subject to' the existing mortgage. They are not uncommon and are a great strategy for under water properties. Search on here for sub2 and I'm sure you will find plenty of info.

Kenneth Estes is referring to the 'due on sale' clause. Its a clause that if the property is transferred/sold the bank 'may, at their option' call the loan due on sale. I know of many people doing sub2 deals and I don't know of anyone where the bank called the loan due. As the property is $70k underwater, if the bank did elect to call the loan due, there is no way you could refinance it. I'm assuming you don't have the cash to make up the difference. Therefore, the bank would either have to accept a short sale or foreclose. After all the banks have been through, I don't think they want to force foreclosures. Especially if they are still receiving payments. So, look up 'due on sale' clause for more info.

Now what you need to look at is, does the property cash flow? You should research the 50% rule. Basically in the long run, 50% of rents will go to expenses (all expenses, not just PITI). Then subtract debt payment and that equals your cash flow. Many people on here look for an average of $100/door per month, so $200 after expenses and mortgage is paid.

Of the $2000 monthly payment, how much is just the mortgage?
Take $1500+$850 (rents)= $2350 x 50% = $1175 - mortgage = Cash flow. What is that number?

What could you get for the 1/1 if grandma moved out? Re-figure your cash flow with the new numbers. Is it now $200? I know grandma is emotionally tied to the property but if she moves out to a place with the same payment, maybe you get to keep the property in the family for another 30 years.

The good thing about the property now is you are 9 years into the mortgage. With amortization, the longer you own it, the principal pay down increases.

So now you need to look at your goals. What is the goal for owning this property? If you want a long term hold and are willing to wait on good profits, then it may make sense.

You will have to look at the competition in the area. If you want to maximize rents you need to meet or slightly exceed what the market offers. Because the location of the house will pretty much determine the rent range, you don't want to over improve for the area.

So depending on where this is, I could recommend give it a good cleaning, fix anything broken and put up a sign. Another area I'd say remove wall paper, replace cabinets, install granite etc.

Look to the market to tell you what tenants will want/expect.