All Forum Posts by: Blake Maloney

A partner and I contributed different amounts to a BRRRR deal and we want to distribute our cash out refi in a way that would now make us 50/50 partners. I am a bit confused on the math, so I wanted to see if someone could help me out.

I put in a total of $76,004.00 (47.7%) and my partner put in $83,313.09 (52.3%)

Our cash out refi total back to our bank account is $115,727.68.

How much would each of us get back to then be 50/50 in our business account? 

Thanks a lot!

Most banks count 75% of your rental income as income to qualify for loans. So if you get $1,000 for rent per they will let you claim $750 of it as income. 

Hey Aaron!

I agree with Trenton. LVP or click-and-lock laminate are probably the most suggested and most cost effective way to do a rental. Unless you are putting in high dollar oak flooring you will quickly get scratches and dents from your tenants. Moving furniture, pets and multiple people can wear quickly on the finish of your hardwood. Engineered hardwood is usually difficult to scratch and costs thousands less than real hardwood floors. 

Also, even though hardwood floors can be refinished multiple times, it can cost literally thousands of dollars for a normal SFH. We have actually had instances in our homes where it would cost more to refinish the original hardwood than it would to install brand new engineered hardwood in the entire house.

The general consensus is that you can get 10 conventional loans under your name, but it can change based on the bank you use, your DTI, etc. Since you're working on your first deal, you should be good to keep going for a while before it becomes an issue. Usually, by the time you get close to the limit, you've found some better ways to finance your deals. Good luck!

Hey Andrew! Good questions man. I will give you a little bit of insight from my current cash deal. 

For questions 1 and 4, we only used a home inspection contingency and did a 10 day close. We have a relationship with a home inspector that is also an investor, and he does a great job of getting everything turned around quickly. This is key when you are working in a time crunch. Make sure to get an inspector that will inspect and give you the report same day. If you have put in your earnest money and have an inspection contingency, you can decide after that inspection to back out and get your earnest money back.

For question 2, I would find a good real estate title attorney. We pay between $600-1000 for the attorney we use, which includes a title search where they make sure it is clean and there are no outstanding liens on the property. They also make sure our contract is solid and they prepare all of the closing docs for the deal so that both parties are covered on all bases. Just do a quick call to title companies around you and ask for a fee sheet to gauge how much it may cost. 

Question 3 can be up to you. For us, we are buying non-owner occupied houses and negotiate them way way under the market rate for homes in that area, so we don't do appraisals. They are expensive, and if you're doing the other things for due diligence you should be able to know if you're getting a good deal or not. If the house is occupied and you are new at this though, it can be wise to get an appraisal. Again, hopefully you're buying a deal good enough to be under market rates, but it can go either way. 

Good luck!

Hey everyone! My partner and I just purchased a 3/2 that has two living spaces. One of them is the perfect place to create an extra bedroom, but we need to build a closet and close in a wall to make it able to be used as a bedroom. 

My questions:

-Does this usually require a permit?

-What is typically the smallest size closet that I can build to be considered a bedroom?

-Last, and most important, how do I make sure that it gets appraised as a 4/2 when we decide to cash out? (This is a BRRRR deal that we paid cash for, so we want to make sure to get the most that we can out)

Thanks a ton!

Thank you for your response! The CU that I am using for my heloc isn't doing investment property loans currently, so underwriting both at the same place isn't possible unfortunately. If I am not pulling anything off of the heloc it shouldn't change my DTI right? I just want to make sure I don't need to ask for an extension on the closing date for the house if I don't need it.

Hey everyone! I need some help.

I currently have a HELOC application that is pending and will close in the next few weeks. Well, today my offer was accepted on a property and I am planning on using a conventional mortgage. Am I able to close on both, or will banks require me to finish the entire HELOC process before doing the underwriting and closing on the new mortgage? I have reached out to some lenders today, but none have responded yet.

There is a home listed FSBO with the option for owner financing near me. The owner bought it for $68k as a foreclosure and rented it for four years for $1,200 a month (she provided lease records). She didn't put any work into it after buying it and it is now listed for $115k and worth about $125k in its current state. She mentioned that there are cosmetic fixes to bring it up to the standard of other houses in the area, which is why she has discounted it the $10k below market value. It had some water damage near the chimney flashing on the inside and outside, a water leak somewhere in the roof that was repaired cheaply, and old aluminum windows that are in need of replacement (home was built in 1965).

So, I offered $85k, either in cash or financed, hoping to give myself a little wiggle room with the repairs. It was contingent on inspection with a 30 day escrow. I have not had a contractor check it out, but estimate that the repairs and minor updating (paint/carpet) will take ~$15-20k. Once it is all the same color and the issues are fixed it could rent for $1,300 in this area with the potential of renting for up to $1,500. Appreciation in this area is on par with inflation, so it's unlikely that the house will all of a sudden double in value or anything like that. 

The seller would not take my offer of $85k, but did offer owner financing with the following terms:

$25k down, $80k note at 7.75% for 15 years. Payment to seller: $753 per month. 

How would you respond? Does it still turn out to be a good deal? What might your counter offer be? I am not sure where to go from here, if I should just drop it, or if we might be getting close to a deal where I can still make it work. 

@Justin B. I’d be interested in info about your apartment complex as well if it’s still something you are thinking about selling. 

@Colin Leach I am in Madison as well. Small world.