All Forum Posts by: Chris Boselli

@Doug Ford we recently completed two BRRRR deals in Memphis, one refinanced 4 months and the other just 3 months after initial closing. On the first deal we used the FNME delayed financing exception and it worked but there were a lot of nuances you need to know up front and additional hoops to jump through to make it work. On the most recent deal we utilized a different strategy in which I purchased the house in my name with cash initially ($53.5k), filed a mortgage/deed of trust (depends on state) against the property with my LLC for an amount that included purchase/rehab/holding costs and was about 80% ARV ($85k), and then was able to do a traditional cash-out refinance as soon as the rehab was done. Within the 6 months you are allowed to refinance but it can only be for the amount of any existing loans on the property, which in this case is the lien from your LLC. You technically do not get cash-out from this refinance but the proceeds are paid to your LLC and this way you can ensure that amount covers all of your project costs. As long as the ARV pans out as estimated aka the house appraises well then you will be able to recapture most/all of your initial investment and refinance in less than 6 months. See a more detailed post about this second project here

I have also heard of local community banks offering refinance options with lesser seasoning periods as mentioned by some other here on this forum. My goals are to continue repeating the BRRRR method and scaling up my portfolio quickly so waiting the traditional 6 month period is not in my interest. There are ways to do it, you just have to get creative.
As far as when to start the refinance process with the lender, the earlier the better. As many have mentioned it is useful to know the numbers and have this information sooner than later in the process, and you don’t want to end up waiting another 4-6 weeks on the back end for underwriting if you wait until everything else is already done. Feel free to reach out to me directly with any questions about the above, best of luck with your deal!

@Ali K. sure thing, it was a combination of good due diligence and a bit of luck. Memphis is a primarily cash-dominant market with as-is sales on investment properties such as this one, so you are expected to have all due diligence performed in advance. We had our project manager walk the property, bid out the work to his network, and give us an itemized scope of work before even offering on the property so we knew the numbers worked up front. Then we took this bid and allocated a little extra for unforeseen expenses and overages (as we always do to be conservative) then made our offer. I believe we were originally quoted at 20-22k for the rehab, so we took the 22k and added 10% on top to get our estimate. We were fortunate enough not to run into too many unexpected expenses during the rehab, so the projections with the added cushion was more than enough to cover the work (even with having to buy 2 brand new water heaters a couple weeks apart).

As far as management goes our project manager is an extension of our property management company, so they get a % for managing the work and are equally incentivized to make sure the work is done right as they will also be managing it long term. As an added layer of security our agent works with us to help verify the rehab work as he likes to go back and do "after" pictures/videos of the projects to show to his network of other clients. It is an additional step of checks and balances, and gives us a little extra peace of mind

Hi @Sean Laird I have recently completed two cash-out refinances in Memphis using two different strategies:

1) The delayed financing exception described pretty well by @Stephen Akindona above. This is regulated by Fannie Mae, and you need all purchase and rehab costs due at sale, on the settlement statement, and held in escrow to be paid to the contractors directly. And the catch is, not every lender will know how to properly close a deal like this (and from my research, most don't). We even had a lender (and even a Fannie Mae representative whom they contacted directly during the process!) tell us it was not possible to include the rehab costs in the "initial investment amount," then had a different lender from a personal reference that closed it without issue (rehab costs included). Bottom line is this strategy can work but there are definitely limitations and you need to make sure you are set up with a lender who knows what they are doing (PM me for a reference). For more detailed info, see my project summary post about this experience here

2) The LLC to personal loan strategy. This is the most recent project we just completed and it was a much more intuitive and simple way to get around the seasoning period requirement. High level summary of how it works is buy all cash then put a mortgage/lien against your property for $XX amount (I did purchase + rehab + decent cushion in case of a higher than anticipated appraisal) from your LLC to your personal name. Assuming you are planning for the refinance to be within 6 months, it then just becomes a traditional refinance of the existing loan on your property from your LLC. Refinance cash-out amount cannot exceed the loan amount which is why I usually add a little extra cushion in case of a higher appraisal, then you can actually pocket some cash on the deal on top of getting purchase and rehab costs back if it appraises well. This was much simpler and more intuitive for me, and since the refinance proceeds are non-taxable for your LLC it is kind of a no-brainer. I was up front with my lender before hand about what I was doing as it will definitely make the paperwork less confusing if they know your strategy before hand. For more detailed info, see my project summary post about this experience here

Best of luck!

Hi @Yogev Finegoz, there are a lot of factors that determine where it makes sense to invest. If you are speaking in terms of what city/state to invest in, you must consider the state of the local market you are looking at. Things like steady population growth and steady job increases are good signs as they indicate more people are moving to that particular area and therefore housing demand should increase which drives up purchase/rent cost. Other factors like presence of hospitals and colleges and are strong economic factors that point towards a steady stream of renters for that area. If you are talking about a target city and what zip codes within the city to look at specifically, a good RE agent and PM should be able to help you with these decisions based on your specific strategy and goals. 
These are just a few examples but the main pieces of advice I would give for investing out of your own backyard is to do your research and spend time building a solid team of boots on the ground. I am from the Boston area and invest over 1,300 miles away in Memphis, but I definitely could not have started doing so without my local team in Memphis. A good agent and PM will be able to compensate for lack of local knowledge and should be able to pinpoint some good areas in your target city to invest. Networking with other investors here on BP is also a great way to get some solid information and advice (and for free). 
As far as where specifically to invest, that also depends on your goals. Many including myself like areas in the Midwest such as Memphis, Indianapolis, Little Rock, St Louis, Cleveland, etc because of their great cash flow potential. I am in the long term but and hold game and plan to build my wealth in REal Estate slowly through steady cash flow and loan pay down with any appreciation being a cherry on top. If you share similar goals, start by reaching out to some RE agents in these cities.

Hope this was helpful in some way, best of luck in your investing journey!

I agree with @Sean Tagge, I would wait it out and see if you get a better applicant. Seems like there is solid interest at the current price (3 showings/3 applications), so all you need is the right tenant to come along. If it lasts more than 3-4 weeks and you get a bit more nervous, couldn’t hurt to drop the price. Might be worth it to drop the price straight to $900 instead of going $925 then $900 too, the $25 less per month won’t hurt you as much as an additional 2-3 weeks of vacancy. Best of luck

Hi Dan, always great to hear success stories of other investors utilizing different strategies. I personally use the BRRRR and fix&flip strategies in Memphis from out of state (I am from Boston), but that is only my strategy and it works for me. I like having more of an active role in my projects and while yes this can allow for greater returns, it comes at a different cost in terms of time spent hands-on in these deals and the additional knowledge/experience you need to acquire. It's not for everybody and some people like yourself simply don't have the time necessary to build a team, properly vet each deal, manage the projects, etc. Bottom line is you are still building your portfolio and taking another step toward financial independence with each new passive income stream you generate. Don't listen to the outside noise, and good luck on your next deal!

Hi @Alex Alanis, from my experience Memphis is a largely SFH dominated market and you need to be extra careful with multi-families. Not saying you can't find a good deal worth pursuing, but generally speaking from my experience smaller multi-families can be in not-so-great neighborhoods often surrounded by a lot of other multi family properties which attract the $400-500/month tenants. Again not saying there aren't some good multi family deals in Memphis, but I know it is largely a SFH dominant rental market. Be sure to consult with local agents, PMs, and other experts and do your due diligence!

@Jesse Vasquez we just recently completed our first two BRRRR deals in Memphis (see my profile for links to my posts outlining specifics of each) and both went great. First one we were able to recoup all costs and made almost $1k profit and the second we left about 12k in the deal but it cash flows almost $200/month for a cash-on-cash ROI of ~20% so we are happy with both. Currently on project 3 right now, just started investing in July 2019. We use @Tyler Tapley as our agent, he's awesome!

@Annchen Knodt thank you and thanks for reading! Glad to help inspire fellow out-of-staters and new investors, it is definitely nerve wracking to take those first real steps but 100% worth it. Research and preparation are essential (I spent roughly 18 months being an information sponge while saving up to get started) but nothing beats the true hands-on experience of doing a couple deals. Best of luck to you as well!

@Ryan Gerard Memphis is a great market for affordability and cash flow. Not the best appreciation from what I have seen, but cash flow is more important to me personally as I am focusing on buying and holding long term. The forced equity generation from the BRRRR strategy is also a huge plus. My brother and I are planning a trip to go meet our boots on the ground team members probably in mid-late April as well, maybe we can connect if you are around as well