All Forum Posts by: Brian Fiorillo

@Loren Souers thank you for sharing! I'll be sure to give him a call.

I've done a handful of flips in the Grand Rapids area but have spent the last several months researching Kalamazoo. I really like the Portage market because of the job growth companies like Stryker and Pfizer are bringing to the area. The property I am currently working on is a single family, which I originally intended to flip but have ultimately decided to hold as a rental. 

Curious who you used to paint the property? I have a rental in Kalamazoo also in need of painting.

Thanks!

@Ratan Khatri does this strategy work if you have an employer funded HSA?

@Isa G. congrats on making steps forward in your REI career. I see you're an out of state investor. I find the Trulia crime index tool to be of value when initially vetting an area but I think most can agree boots on the ground are best. There are a lot of people actively investing in west Michigan on this forum, myself included, whom I'm sure would be happy to give you some feedback on the location. Kalamazoo is a great market but depending on your investment strategy, there are pockets you may want to avoid. If you're willing to share the neighborhood or cross roads, I'm happy to contribute my two cents.

All the best,

Brian

@John Teachout the current owner has actually done well with capital expenditures. The roof and windows are less than 10 years old. Wiring and electrical boxes are updated. Water heaters and one furnace are brand new. However, not vetting tenants was his downfall. All units need new flooring, cabinets/countertops, bothrooms, doors, trim and a lot of drywall repair. All together, I'm estimating $40k-$50k in rehab. The property is in a bit of a rural location but not a bad area. About 15 minutes outside of Lansing, MI.

The property was at one point three units but he converted it to two unit because he was having a hard time managing three tenants. Good news is all I would have to do to convert it back to three units is put up a single wall he tore out. Unit one has its own gas and electric meter. Units two and three share an electric meter but have their own gas meters. All three units are on the same water meter.

After the $45k-$50k rehab, rents are as follows:

• Unit 1: 3/1 - $750/mo
• Unit 2: 1/1 - $550/mo
• Unit 3: 1/1 - $550/mo
• Total: $1,850/mo

I plan on using the BRRRR strategy but the numbers simply don't work if I have to purchase the property for $65,000. If I can get the property for closer to $40k, this is how the financials play out:

• Purchase price: $40,000
• Closing costs: $2,500
• Rehab: $50,000
• ARV: $120,000
• Refi amount (70%): $84,000
  

• Expenses
• Vacancy: $55/mo
• Cap Ex: $55/mo
• Repairs: $92/mo
• Water/Sewer: $100/mo
• Garbage: $75/mo
• Property Management: $185/mo
• P&I + Taxes + Insurance = $741/mo
• Total: $1,303
• $1,850 - $1,303 = $547 monthly cashflow

If everything works out according to the numbers above, I'll end up leaving around $8,500 in the deal, which I should make back in roughly 15 months. 

I would probably manage this property myself but I want to include the property management fees in my initial evaluation should I decide to hire it out later. I did not include other utilities, with the exception of water and sewer, because my rehab cost includes the price to add the additional electric meter for the third unit. This of course could all be moot if I can't figure out how to close the delta between the value and current loan amount.

All the best,

Brian Fiorillo

@Cameron Tope does being upside down $20,000 compared to $40,000-$50,000 make things any different? I'm with you, some properties just arent a deal. I think this place has a lot of potential but I'm not willing to lose money over it. 

@Erik W. for someone who has never personally gone through this approach, you sure do a great job explaining the process. The example you provided makes a lot of sense. I do however have a couple follow-up questions:

• What protects you against the current owner taking the $600 monthly payment and pocketing the cash instead of paying down the mortgage? If I'm understanding the process correctly, the mortgage stays in his name so in theory, I will never see a statement from the bank unless requested.

• What are the chances the bank catches on to the fact the deed transfer has taken place?

I want to be fully transparent with the guy on the other side of the deal. Not necessarily explaining what I plan to do with the property, but outlining the risks to both of us. He seems like a stand up guy so the last thing I would want to do is not fully explain the process and take the chance of him getting stuck with a $65,000 bill. He's running out of money and is borderline desperate to get rid of the place.

Thank you again for your response!

Hey All,

A bit of a newbie here, but I came across a multifamily deal where the current investor is upside down in the mortgage. He purchased the property in 2004 for $95,000 and currently owes roughly $65,000. From a landlord perspective, he seems to have made several mistakes from not vetting his tenants and not requiring security deposits. Consequently, the place is trashed and will need substantial rehab. Based on the numbers I have run, the property is worth $40,000 at most in its current condition.

Has anyone ever worked out an agreement with an owner that owes more than the property is worth? It sounds like a longshot but if someone has a creative approach to these types of situations, I would love to hear it.

All the best,

Brian Fiorillo

Hi Brad,

Sent you a PM. Would certainly be interested in speaking to you further about this opportunity.

All the best,

Good Morning,

I'm new to BP and in a similar boat to Andrew. My REI journey began about two years ago when I house hacked my first home in Zeeland, MI. Since then, I've used the same approach to flip two more houses in the GR area and am currently doing the same with my fourth house on Gun Lake.

Up until this point, house flipping was more of a hobby and means to make extra money. However, I'm ready to turn this into a scalable business by implementing the BRRRR strategy and moving into rentals.

Though I'm not confined to a single city, Kalamazoo is my current target area so I would be interested in hearing what a seasoned investor has to say about neighborhoods to pursue and visa versa with areas to avoid.

Sorry, Andrew. I Don't mean to hijack your post but I figured any responses had the potential to benefit both of us. 

All the best,