All Forum Posts by: Chase Whitney

sorry for the long delay! but to answer your question, there are a few different loan types you can utilize depending on what investment strategy you are using in your market. For example, if you served in the military you can use the VA loan and put no money down. you can utilize the 20k cash to pay for renovation and house hack, since the va loan can only be used to purchase homes you plan on living in. Another strategy you can use is purchase the property using a hard money lender. They will pay for 80% of the property and 100% of the renovation cost. Whats great about hard money lenders is that they dont care what the house condition is and there are far less red tape and hoops you have to jump through to close. Some will say that hard money loans would be considered a cash purchase which is a huge deal to sellers, because that means quick closing. The bad thing about hardmoney loans is that their monthly interest rate is high and their monthly payments are high, but thats because the loan generally amortizes in 12 months. You can use the 20k to pay for the holding cost. Hardmoney lenders are a great tool to use for the BRRRR strategy. Also they dont really care about your credit history. Another strategy you can use is to find a partner thats willing to put their own skin into the property. All you would have to do is manage the renovation and ensure that the budget isnt going to be blown out of the water and in return you give them 50% of the net profit after refinancing.

what sort of loan did you have in mind? there are a ton of different amortizing loans. How much capital do you have in this scenario? when using the BRRRR method to invest you have to have money to pay holding costs.

if you have enough capital, you could use a hard money lender. they will give you a loan to purchase the property and to rehab the property. However holding costs are costly since its a short term loan (by short term i mean the loan is amortize for a maximum of 12 months.). once you are done rehabing the property you can refinance for 30 years for a much much cheaper mortgage rate. So in conclusion, you should use the BRRRR method as youll be able to purchase more properties creating a higher cash flow.

If this is a single family home, tenets are the ones to normally pay the water, gas, electrical, garbage, and lawn care (unless thats your incentive for them renting out the property.) so you should leave these values $0.  The amortization period is how long you have the loan for. When you refinance the normal amortization period is 30 years for conventional mortgage, 1 year if you use a hard money lender. You wont be able to find a good property management for 6%, decent property managers will charge a minimum of 10%. For the acquisition portion, you'll normally have to pay 20% down payment, there are ways to avoid taking any money out of your pocket by using gap financing. If you are purchasing the property with 100% cash, then the down payment will be will be 100% of the property amount and the loan will be $0 with 0 years on the amortization period and 0% interest rate. When you refinance, you can refinance with 75%-80% loan to value (Make sure you get a loan to value and NOT a loan to cost, cash out refinance). Generally a good deal is if you have a minimum $200 cash flow with a high COCROI. But in your case I would make an exception on the low cash flow since you were able to get back all of your intial investment from the refinance (hence the inf% cocroi). You should also assume that expenses, income, and property value should increase or decrease 2% each year to be conservative. property sales should be around 9%. 

@Jaron Walling 

you can use GAP financing. However from my understanding, its only worth to use gap financing if you plan on renovating the property so that the equity value increases. So when you refinance you can pay off the gap financing as well as the initial mortgage. This is the classic approach of using O.P.M (Other Peoples Money).

When you buy a property to rent out and you paid the down payment with a loan because you have little to no capital except for 2 credit cards, what are some strategies to pay the holding costs?

correction instead of investing out of state its "Long-Distance real estate investing"

@Ronnie Allison Go Read "Buy, Rehab, Rent, Repeat". Also read "investing out of state", "miracle morning millionaires", "The hands off investor", and "raising private capital".

Find your niche, study your niche and analyze 100 deals.

There's also one more thing that I forgot to mention about using a hard miney lender, THEY REQUIRE NO PROOF OF INCOME. No W2? No worries. As long as you can show them the the house you are investing in is at least lucrative for them, they will lend to you. 

@Jeremy Davis maybe look in to hard money lending. They are more understanding then bankers, plus if you ever do go into default your property that you purchased to renovate will be seized. Are you looking into flipping? Or buy and hold? Hard money lenders are a great asset to use if used as a short term money lender. When you're finished with your renovation you can either refinance or sell, payoff the hard money lender and either rent out the property, house hack, or live in it. The skys the limit. Happy investing!