All Forum Posts by: Blake Hrabal

I'm in a very similar situation here in Maryland; I'll continue to monitor this thread to see if someone jumps in with good advice. PA has affordable real estate so atleast you're moving to a good state to get into RE - unless ya looking to invest out of state. I wanna get my feet wet locally first so I can manage to learn the ropes. 

Welcome to BP. 

 I agree here. All the mistakes will be made on the model home. I worked in construction for many years and seen this first hand. Even the most seasoned construction crews hire newbies that need training...they'll throw them on that model home with a few of the experienced guys to start learning the ropes. Tons of these mistakes you'll never see because they've been covered up too. They'll surface between now and the end of the decade. ;)   If your flipping it though, and aesthetically it all looks sound...it won't be your problem by that time. 

Hey BP. 

Pretend this is you,

Your FICO credit score is 707.

Your earned income from your day job is salary 85k yr b4 taxes. 

Saving approx $1.2k per month.

You work a full time job, 7:30am-6pm, flexibility to take lunches whenever you want for however long you want within reason. Same thing goes for taking a morning or evening or work day off if need be. Sometimes work from home. 

You have a family member that wants to be a PML for you, not crazy money but they're willing to put up say 50k-80k, and if you do right by them, they'll put up more money as long as you're making them money. However, you've never borrowed money before and this PML has never been a lender so the structure and legalities are new to you. The potential PML is a construction guru that won't do the work for you, but you have on speed dial to consult on anything related to home building/remodeling if the issue is beyond your own 7 yr home construction knowledge.

You live in Colorado and the market is inflated. Average price for a 2b 1b 1000 sq ft is around $120k-$170k, any homes cheaper than that are typically modular/mobile homes in high crime/drug neighborhoods that'll depreciate and essentially take on problem tenants/neighbors. The idea of 2% rent to PP is fantasy as 200k homes rent for 1500.

You do not need a GC License in the areas of interest; home owners can pull permits and hire licensed subs.

You have no saved up money of your own.

You want to build a REI portfolio that will set you up to become 'financially free' , all while keeping your PML happy and growing too so you both can grow together. All while maintaining your day job.

Your goals: Long term wealth and passive income. Working on my business not IN my business because I already have a day job. Create consistently growing wealth for self and PML.

-----> How would you navigate your start up, and scale? Which strategy/approach would you take and why? BRRRR? Flip? Wholesale? Would you build a team or do it all on your own, maybe start on your own then build the team?

@Evan Polaski i admire that; awesome. It gives me hope that I can manage a BRRRR as a side hustle without too much brain damage lol.

How many homes before you're feeling overwhelmed between day job + side hustle, or if managed correctly, there isn't much feeling of being overwhelmed? 

I have a similar situation at work where I'm salary, and as long as I'm getting my stuff done, helping scale the company, and the facility isn't burning down because preventative maintenance is being executed, I have the freedom to come and go as I please...leave early, show up late, take a longer lunch if needed. It's flexible; love it. I think it's the perfect position to have while trying to get off the ground with a side business/hustle.  (start as a side hustle that can help me exit the rat race eventually.)

@Evan Polaski I have a day job right now 8-6 M-F. So I'm leaning towards BRRRR (rental properties) vs fix n flips. I'm also targeting the long term 10yr + investment. I'm almost 30yrs old, n okay if I'm not seeing huge returns until 40+ The goal is to get started now, while I have a day job and do this on the side until passive income from rental properties > earned income by 1.5x.

 Fix n Flips seem lucrative, and I have 7 years experience in contracting/remodeling residential homes in Colorado, I have access to specific contractors who i've seen their work and worked with, I know I could do it, but I don't think I have the bandwidth to run a flip and work the day job. Can you give me some insight on the experience, how cumbersome, how many late nights and early morning grinding to complete the house? Did you GC it or need to hire a GC?  

I understand the fix n flip strat is to find the worst house in the best neighborhood. And that's strict...that's how you get the biggest return and make it worth while.

Is this is the same strategy for BRRRR? Atleast, for the Rehab step. Are you still scouting for the worst house in the best neighborhood, or there's more wiggle room? I mean, obviously finding the best deal is important...but I feel like BRRRR's gold mine is in the long term investment n cashflow.

What if you bought a house for 200k and only put 20-30k into it fixing up a bathroom n some other things that add value - then rent it out and refinance after 6-12 months - does this mean i'll get a smaller % of proceeds, but  still be able to pay off the loan, get my original investment (DP, CC, SC, etc) have tenants, and maybe just not profit as much off the refinance? 

@Evan Polaski is 75% / 80% common for the amount proceeds you get back after Refinance?   I guess what I'm asking is, when doing the math before you purchase a property, would it be safe to assume Refinancing for 75% of what the property is worth? 

what happens to the remaining 25%? does it stay in the property? 

@Andy Webb@Andrew Postell thanks for taking the time to reply. This was very helpful! 

If you purchase a BRRRR, can you also execute on purchasing(financing) other properties in the mean time if you have the capital to start planting seeds?

and if so, eventually mortgage lenders will begin denying you because of too much debt. At what point is that? x amount of properties...

any way around that; gotta be good friends with an underwriter? Or is it, you have to wait it out til you pay down some debt before you can purchase more. Would they still finance a flip at that point or complete rejection?

And while I'm on the topic, I've read you have to prove you have tenants ready to move into the BRRRR after rehab is complete in order to get approved for the loan....True or False?

@Eric Martel @Evan Polaskihow do you get money out of the refinance to pay back the PML original loan? Can you break down a formula for me?  I understand refinancing at the right time can help lower your monthly payment, but not sure how in the process you get cash back to pay back PML.