All Forum Posts by: Bryce Richards

@Chris Seveney @Scott Wolf @Jake Yuskaitis @Nick Belsky I am picking up the duplex for $54k and doing $36k in renovations (In Milwaukee, WI), for a total loan of $90k. We had a subject to appraisal done that put the house at $135k. We plan to complete the construction in 6 months and refi out then. $90k @ 20% for 6 months = $9,000. Putting us at the 75% ARV LTV. It is a duplex that rents out at $800 each side and this will be a buy and hold. If this was for a personal loan, yes I believe the cap is 12% for most states, however this is a business loan, and those laws wont apply here, but I am not sure about other states. Note, this lender doesn't require much background check, ie reserve funds, credit check, etc. They just look at the deal and see if it makes sense and then they fund it, and funding can happen in 24 hours.

@H. Jack Miller that is our thought as well. Most lenders are in the 10-12% apr but with 2-3% in points and other fees. So a 6 month deal makes those range from 14%-18% plus fees, as I double the points and lump them into the APR. With a deal of $90k, just $1k in fees bumps this thing 2% on a 6month loan term. Then not needing to bring any money to the table does make this different then most loans. I think if we brought 5-10% to the table we would ask to be in the 16-18% range. Being at 16% the interest is $7,200, so an $1,800 difference, so that might make it worth bringing and tying up $9k with 10% down.

Thoughts on this hard money lender deal...

Will finance 100% of the purchase price and construction.

6-12 month terms

No points or any other fees (origination etc)

20% apy

75% APV needed on deal

Thoughts on this deal for a hard money lender?

Josh, I totally was random.  Called a Property Manager in the area to get some information on a house I was looking at, and he mentioned this deal and sent it over.  Just power of networking I guess.  I only ever bought 1 house at a time, so this 4 house package completely off market is new to me.  Hoping to get them under contract this week and move into due diligence next week.   It is one of those feelings of... I know my numbers... they are working out... but it is such a big jump from what I had been doing I definitely wanted to get a different set up eyes on it.

I like your approach, and agreed that time will tell with this market and interest rates.

Thanks man!

I wanted to ask, as this is a bigger deal for me than I have done before and would love a second, third, fourth.... opinion.

4 houses - 3Bed 2Bath 1,895sf - 3Bed 2Bath 2,088sf - 3Bed 2Bath 1,913sf - 4Bed 2Bath 2,362sf
$750,000 for all 4 homes - $91 per sf
Homes have month to month leases at $1,450 each or $5,800 total
To bring them up to market conditions to sell would require $25,000 each (mix of HVAC, roof, paint, flooring, etc)

Average price per sf in the area is $135.
After renovations $750,000+$100,000 = $850,000 with market value of 8,258sf x $135 = $1,114,830... so potential profit $1,114,830 - $850,000 = $264,000 (less agent and government fees)

After $50k renovation, I could lease them at $1,700-1750 each or $6,800 total

Mortgage P&I at 6% with 25% down ($187,500) will be $3,372 a month.

Insurance is $4,800 a year of all 4 houses

Property Tax is $13,800 a year for all 4 houses

Monthly revenue - (not including maintenance or vacancy costs)

$5,800 - ($3,372+$400+$1,150) = $878 - $522 (PM fees) = $356 ($4,272 yearly)

After 50k in renovations to get them rental ready

$6,800 - ($3,372+$400+$1,150) = $1,878 - $612(PM Fees) = $1,266 ($15,192 yearly)

So, what would you do?

1) Buy them and don't touch them until the renters move out and fix them up then.

2) Buy them and flip them as each tenant moves out and sell them.

3) Buy them, fix them up for rental condition, and rent them at the higher rate.

4) Walk away

No issues with an LLC vs your name.  As you sign your name for your LLC.  They will just need to line up the same with the title of the house.

Thanks
Bryce

Investment Info:

Single-family residence hard money loan investment in Milwaukee.

Purchase price: $150,087
Cash invested: $150,087
Sale price: $157,652

Hard Money Loan at 20%, no other fees or points.

The house will have to be in your name (the recorded title with the government) to get the HELOC, after that, if the numbers work for the bank on the house, that wont be an issue.  If you have a side deal with that family member and they don't have a 1st position lien against it, you can get more capital out of the house... though I would advise them to get a 1st position lien against it, but that's just me.

Just tell the bank you are doing home improvements to that house, once you have the line of credit... you can do whatever you want with it.  I could go the line of credit route, as it will be easier to access the capital later and you can draw from it whenever you want or keep the balance at $0.