All Forum Posts by: Brandon Kelly

BP Community,

I am looking at an off-market property that is a SF home, and currently a collegiate rental.  It has been a collegiate rental for MANY years, and the current PM that showed it to me yesterday has been in charge of it since 2018 with no gaps in renters.

This home is in fantastic shape....new services throughout, no exterior issues, nothing.  Sure, a couple of minor 'tweaks' could be done, but as it stands, it's a legal 4BR that brings in $2500/mo.  The lease (with the current college students) was just renewed through their 2025 school year.

I'm trying to figure out how to make this happen with little-to-no money down, as I have other 'irons in the fire' at the moment.

I'm planning to offer $400-450k for the home, and am trying to structure something where a conventional lender would loan an amount that would be covered by the current rental rate (lets just say $300-350k)...   ...then, anything outside of that amount, would be carried by the Seller (for a short while)...   ...Seller financed with a ballon in 5-years?  

Any creative ideas on how to make this happen?

Thanks in advance!!

Brandon

@Sean Wilkinson, do these WW Meetups happen anymore?  If not, maybe they should?  Would love to connect.

BP Pros... ...I have a project (SFR home) that was intended to be a BRRRR, a little too much $$$ went into it (to make it right), and because of that, it's on the market for sale.

This pains me, as it would make a great rental, a worry-free rental, for YEARS to come.

It's a project with my long-time business partner, and in the past, we've done the typical cash-out refi with them - all working out great.  This time, with the $$$ overage in improvements, and current rates, it doesn't work (from a cash-flow positive perspective).

I just pitched the idea (to my partner) about doing "Seller Financing", making the terms work with rental rates (i.e. lower interest rate, longer term, etc.), and he's interested.

Having never structured one before, was hoping someone out there has an easy spreadsheet, or a resource, to run a few scenarios, so that I can present my partner with the terms, amortization schedule, etc.

Thanks in advance!!

Brandon J. Kelly (Architect, Real Estate Broker, Developer & Investor)
 

BP folks, thank you (in advance) for your wisdom. I'm trying to understand how a BRRRR needs to be 'structured' in order to have the income (during the seasoning period) count in my favor (and not against DTI). You see, my business partner & I have a development company (lets just call it "Company A") that focuses on single-family custom homes. Well, "Company A" also serves as the initial purchase & remodel funding for my wife & I's BRRRR transactions. We're at the beginning of this investment strategy, which is why I'm asking these questions. We have a home going on the market for rent in about a month or two. I (obviously) need to line up my lender (for the refi), but we plan to wait the 6-12 month "seasoning period", and then refi the home into our names (paying "Company A" back). QUESTION : Do WE (my wife & I) have to collect the rent during that "seasoning period" for it to count as OUR income (and qualify for the 75% DTI issue)? OR, since I'm a 50% member of "Company A" (but my wife isn't), if "Company A" collects the rent, will that still count as income for my wife & I? I don't want to go through the seasoning period, only to find out that income wasn't calculated the right way, and we have to wait longer. Thanks!!!

Fantastic BP folks! I just acquired a BRRRR property, and utilized my development company ("Company A") as the purchaser, since I was able to go in as 'all cash'. We're obviously going to do a little bit of rehab, then get it rented. After the 6-months-to-a-year seasoning period (depending on the lender), we will refinance the property into my wife & I's names (or LLC, whatever) - making "Company A" whole again.

My question / issue, is that I'm trying to get the home insured, but MY insurance carrier won't do it, because Title is currently in "Company A's" name.  Do I simply continue using my "Company A's" Inland Marine policy (to cover the home until we're able to take it over), or what?

Thanks, and I look forward to hearing from you.

Tricia,

Seattle is very much a Seller's market.  The last stat I got, was that there is only 35-days of inventory.  Buyer's are doing ANYthing and EVERYthing to try to get into homes...   ...waiving inspections, waiving appraisals, buying down appraisals, and escalation contingencies of 100k (or more) above asking.  The housing market here is "stupid crazy", and that is a HUGE understatement.

Brandon

Josh (and all),

I (too) am an architect here in Seattle, with my own practice, and do all sorts of project types...   ...remodels, additions (both outward & upward), and new construction.  I am also a consistently prepared applicant with the city of Seattle (DPD), as well as other jurisdictions - meaning that I consistently submit "code-compliant" drawings that isn't a waste of their time, therefore gets through the process quicker.

No, this wasn't meant to be a marketing post.

My point, is that architects (like me) bring a lot to the table, and are a valuable asset to have on your team.  Do you "need" an architect (for Single Family Residential here in Seattle)?  No.  "Stamped drawings" are not required.  BUT, you will need a contractor who has the drafting abilities (on staff) and the code knowledge, or like someone else said, YOU figure that all out, then hire a drafter to draw things up.  

It ALL comes down to how "involved" you're looking to be - as with everything.  Pay an architect and have them coordinate everything, to eliminate code & construction issues down the line (i.e. pay the money up front), or hire a contractor & drafter to figure everything out "on the fly", with change orders, delays, re-inspections, etc. (i.e. paying MORE money later).

It's always better to "have a plan" before you start.  Unless you're the type that thrives on "diving right in, and seeing how it goes" - then more power to you.

Regarding the main question of your post...   ...fee...   ...yes, that amount is COMPLETELY in line with the scope you describe.  Architects can charge a variety of ways - fixed fee, percentage of construction cost, or hourly.  Personally, I HATE the "percentage of construction cost" approach, because it's a moving target.  I charge "fixed fee", so that you know EXACTLY how much to budget for, and won't hesitate to pick up the phone (if there are problems)...   ...which is the issue with "hourly" architects, where you hesitate to reach out with design problems, because that clock starts ticking (like an attorney).  The ONLY time I use hourly, is during the construction process, because I have no idea how picky/needy the homewoner or contractor is going to be.  And regarding my fixed fee structure, I've done enough projects now that I know how much of my time will be needed.  I structure it accordingly, back-check the fee a few different ways (yes, also using the 5-15% of construction cost as an analysis), and provide the proposal.

As with everything, "economy of scale" should factor in.  Design fees on a bathroom are going to be near the 15% range, whereas a complete house design is going to be in the 5-10% range...   ...unless you're having a high-end custom home built, then figure 15% (or more) for an architect.

Anyways, I hope this helped.

Brandon

Well @Roman Gwin and @Account Closed , after reaching out to them (to explain our intent to sell), they WOULD like to discuss buying it from us.  We'll see how it goes.

BP,

We are looking to sell one of our rental properties, which is currently occupied with some of the best tenants EVER, whose lease doesn't run out until the end-of-July.  (FYI, this is their first year of tenancy.)

We'd LIKE to place the home on the market (vacant, which is easier for agents to show/sell) sooner than August 1st (or so), in order to take advantage of the summer "buzz".

My question for you, is how would YOU go about "breaking the ice" to them?  Offer to pay an amount towards their moving costs?  Give them a month free rent? 

FYI - not that it factors into the above, but we are selling the rental because it is a negative cash-flowing property, and the proceeds we'll get from the sale will be used to buy positive cash-flowing properties.

Thanks (in advance)!!!

Brandon

@Jered Sturm 

Looking at the local Cincinnati REIA, I see only two (2) property managers who are taking advantage of being a "preferred vendor"... ...a Berkshire Hathaway Commercial PM, and Weybridge PM Services (www.presrents.com). Have you reached out to Weybridge?

@Ben Leybovich 

I agree that no one handles PM better than the owner themselves...   ...which is why I manage my own here in Seattle...   ...but from afar, I'd have a tough time justifying that headache.  Your opinion is that Cincinnati PM's won't really do any justice (or protect owners' best interest) until I bring them a portfolio of 100+ doors?

Thanks guys!!!