All Forum Posts by: Corey Smith

@Jeff Ihnen I can tell by the way you've structured your question that you're looking at these deals in the wrong way. ALWAYS, ALWAYS, ALWAYS start with the end in mind first then work backwards. What it sounds like you're doing is working from the beginning forward.

For example:

Your thoughts now: purchase price/offer,rehab, exit strategy

Your thoughts should be: Exit strategy, ARV(After repaired value), rehab, purchase/offer price(based on formula and exit strategy), cash flow (if renting)/Profit Potential (If flipping)

Your exit strategy is important because majority of the time there's less "holding cost" associated with renting, so investors have a higher tolerance for a higher LTV purchase.

For Renting, A great rule of thumb is to always try to get at minimum 100% return on the money you put into the deal with unrealized capital gains. What does that mean?!

Ex. Deal: ARV: $100K Rehab: $10k Purchase: $65k Money in deal: $15k

$65k(Purchase)+$10k(Rehab)=$75k(Project Cost) 

Unrealized Capital Gains Equity= $25k {$100k(ARV)-$75k(Cost of Project)}

The $25k equity gives you an unrealized return of at least your $15k(100%) back and some. Your return becomes "realized" after you sale the home or you refinance to pull your $15k back out of the deal. 

So the long answer to your short question is, no experienced investor can help you evaluate a deal without all the information. That's like trying to put a puzzle together without all the pieces. If you shift the way you evaluate deals, keep it strictly numbers with no emotion, the evaluation process will become tremendously easier. 

Hope this helps!

@Lauren Stamey Typical is so relative when dealing with FHA. Nothing is really "typical". I guess you can say the following criteria, will get you in the door of an FHA loan.

620 Credit Score'
2 Years stable income -w2, self-employed etc. No employment gaps larger than 6 months
56% DTI
Assets to cover: 3.5% + closing cost.
Gift funds are allowed

@Gloria Mirza Your chances of going FHA on the purchase of your next home won't happen, unless you can qualify with both payments. FHA requires at least 25% equity in your departing residence which it doesn't look like you have.

On conventional, it's a little tricky honestly because every bank is different in their guidelines/overlays. Some banks will be okay counting rental income if you have a rental analysis from a licensed appraiser and some banks won't be okay with it. The trick is to find out which bank will be ok with counting rent if an appraiser does an analysis. 

If you don't want to go through the effort of finding that bank, then you'll have to make sure it's rented before you close. You'll need a rent lease and a copy of the deposited checks for rent deposit and first month's rent. Hope this helps....

@Len Roche I agree with @Patsy Waldron. The Fannie Mae Homestyle Renovation program is what you're looking for. It only requires a 15% downpayment from investors, however there's banks out there that have overlays and will require 20-25% down. Just shop around and you should be fine....

@Lauren Stamey This question is a little bit confusing. Can you be a bit more specific on what you're looking for?

Are you talking about credit score? Income? DTI? Etc..

@Jon Quigley 10 is the max however it's not your ceiling for single family property if you have a loan officer that's knowledgeable about how investors structure their loans, your limit is pretty much infinite. I have clients in Texas that's purchased over 30 and 40 single family homes. 

The 6 homes must be a bank overlay. If that's the case, find another one. 

@Jeff Ihnen No deal! I think too many newbie investors make mistakes by trying to make a bad deal, a good deal. Anytime you put $20k into a property, there needs to be equity attached after the rehab. There's tons of deals out there that will provide a good amount of equity for you after rehab. Just get with your local wholesalers, market to homeowners or relentlessly patrol the mls. You'll find a great deal that you won't have to work so hard to make the numbers work. 

@Shawn Crawley Where are you finding these agents? If they are just random agents, most of the time they don't understand what you're trying to do. So they don't see the pot of gold at the end of the rainbow. 

You need to find some local investor meetings in your area and go talk to people that understands your business and what you're trying to accomplish. There are usually a ton of agents there willing to help out and because they understand that their efforts now will bring profits in the future, they're more willing to help.

Secondly, there are software systems here in Texas that non-licensed real estate people can access sold comps. Ask some investors in your area about if they know of any software you can sign-up for and be able to access comps. You might find out that the software will be a lot cheaper than paying an agent on a per CMA basis. You have to always be running numbers and making offers in order to scale your business. You're putting handcuffs on your business being reliant upon someone else to get you comps in a timely manner.

Hope this helps...

@Ken Betza You're absolutely right! Some people don't mind jumping in on the deep side of the pool in the beginning, others prefer to jump in on the shallow end. Bottom line is you have to jump in regardless of where it might be....

@Delmar Bennett The $5k is how much the seller is behind on his payments.

You nor the seller is doing the refinance. It will be the "End Buyer" that does the refinance. Once you close the deal with the seller and the End Buyer, you are now out of the deal. It's the End Buyer that's responsible for the payments and up keep of the property.