All Forum Posts by: Christopher Malone

This is my latest rehab that is in the refinance stage of BRRRR. I will begin by stating that the rehab went over budget as I decided to test out more durable materials such as using Life Proof Flooring throughout the entire home excluding the bathroom. Epoxy Grout was used in the bathroom and Kitchen back splash to reduce grout maintenance. A laundry closet was added to remove the washer and dryer from the kitchen, and the entire home was rewired and the electrical service was upgraded as the home seemed to have had the very first breaker box every made. If all goes well with the appraisal during the refinance there will be about $5K left in the investment.

Special thanks to my GC @Robert Leach and his team who did a great job start to finish, and to @Mark Ainley who I can always depend on to help answer the tough questions. 😊 (We had to Killz the ceiling 4 times to stop the tobacco from bleeding through.)

• Single Family
• 3 Beds 1 Bath
• Built on a Slab
• 2 Car Garage
• Short Sale - 2 Months Start to Closing
• Financed with a Hard Money Lender (Lima One Capital)

PURCHASE COSTS:
Purchase Price	$ (46,500.00)
Inspection(s)	$ (400.00)
Appraisal(s)	$ (900.00)
Survey(s)	$ -
Lender Fees/Costs	$ (3,760.90)
Closing Costs	$ (4,204.22)
Other	$ -
Total:	$ (55,765.12)

REHAB COSTS:
Labor (from page 2)	$ (27,400.00)
Materials (from page 2)	$ (17,729.00)
Total:	$ (45,129.00)

Unit Breakdown
Unit 1	$ 1,400

Assuming $125,000 ARV during Refinance

ReFinance Assumptions
LTV	75%
Loan Amt	$93,750
Equity Left	$31,250
Interest Rate	5%
Mortgage (yrs)	30
Mortgage Payment	$ 489.04
Cash Out Refi Return	$ (4,983)

ReFinancing Key Values
Cost/Unit	$ 93,750
Cash On Cash Return	118.31%
Monthly Cash Flow	$ 491
Annual Cash Flow	$ 5,896

Before

After

Thanks for reading, let me know what you

@Ervin Alex where is your project located?

@Nicholas Ostrem

I do not think there is any location in the US that requires a landlord to automatically accept section 8 tenants. In Chicago, applicants with vouchers should be screened the same as any other applicant. If they do not meet your criteria, as you would with any other applicant, say no. I am sure, like in Chicago, it may be illegal to turn away section 8 applicant because they have a voucher. You may want to check your local housing authority or commission for the exact guidelines that govern your area.

Hope this helps!

@Kelly Fitzpatrick

I would also recommend reaching out to @Mark Ainley. Mark knows his stuff and as @Brie Schmidt mentioned, regularly speaks a conferences . 

@Landon Lee

As long as you can prove that that your decision to reject Tenant A is not that of a protected class and is consistent (Meaning you would turn down anyone who has a messy car, wears pajamas to showings, etc.), then I believe you have the right to select whoever you see fit. I would recommend possibly looking beyond Tenant A's car to judge their cleanliness. I personally would visit both of the applicants current residence to see how they cared for the property as a part of my application process before a final decision is made. I do this myself as the final step of my application process. 

@Matt Roberts I recommend reaching out to @Mark Ainley at GC Realty. Their office is in the western suburbs and they manage properties there and in the city. Mark has been on the podcast as well and spoke at the Chicago investors Summit back in May.

@Yuuj V. You can look up your inspection results right now on CHA’s website. You will need the voucher # and last name. Just visit www.chainspections.org.

@Yuuj V. I just don’t see the city spending the money to have professional home inspectors come out and verify local codes. Have you see the official inspection results yourself or are you taking the PMs word for it?

@Yuuj V. I have never heard of or experienced CHA looking at the items you listed as they do not hire professional home inspectors. They contract local vendors that simply check the box on specific items in the home and some exterior features that may be considered hazardous. I uploaded a copy of the CHA inspection guide book in the file place awhile back. Check it out for yourself and you will see all of the items they look for. You'll notice none of the items you mentioned are on there.

@Sharon Evans

1) In this example, the HML is lending 65% of the LTV, not the ARV. So, if the property appraises for $100k, they will loan $65k. Even with an ARV of $150k, they're lending 65% of LTV. This is an actual response I received from one potential HML. I'm not sure I quite understand your question, but maybe you can explain it to me better? This could be an area where I'm missing an important distinction.

If the HML is lending 65K which is 65% of the 100K, most HML will not lend the entire 65K. They will require about 10% down or $6,500 making the loan amount $58,500. 

2) The contingency would already be built in to the $25k at 20%. So, let's hypothesize that the repair is actually $20,000. 

Then the Rehab budget is 25K, not 22K. This should make your purchase price 40K, which should be lower in my opinion if you deduct the holding cost, closing cost, and HML fees, etc.

3) This is where I need insight, so thanks for your elaboration. I've read articles on HML that give scenarios of receiving a percentage of the draw at closing. I need to know if this is practical, or just theoretical. Based on what you say, it must be theoretical. I am curious however because the same HML that told me they only loan on LTV, not ARV, said that this is the reason why there are no draws. I really don't understand WHAT that means exactly. Before I respond, I wanted to get some clarity from the BP community.

I will give you an example. if the HML lends you 65% of the After Repair Value and you have 10% ($6,500) in the deal, your loan amount will be $58,500 that you are paying interest on. You have $25,000 of that $58,500 in escrow for your rehab that will only be paid out in draws as this protects the lender from you taking the funds and moving to Canada or giving a smooth taking GC a $24,999 down payment. You draw from the escrow account as you complete phases of work. (5K after exterior is complete, 5K after Rough Electrical and Plumbing, 5K after flooring, cabinets, etc. 10K at completion) This protects you and the lender from a contractor taking off with your cash and not even hammering a nail at the job site. Keep in mind, with each draw you have to have the funds wired into your account which is typically about $200-$250 per draw in my experience.

4) Can you describe what type of things could go wrong with GC financing? Especially when working with a corporation like Lowes. That info. would be handy, and could get my gears moving into thinking of other solutions :)

1) In my opinion there is a conflict of interest as the contractor that is financing is incentivized to take longer on the project. The longer it takes the more interest they make. 2) You are already paying 11-12% interest on your HML. Why would you want to pay another high interest rate to someone else? 3) Any halfway decent contractor is going to recognize that you are an investor and realize that you are leveraged to your throat in debt. There will be little to no meat on the bone to slap a mechanics lien on the subject property, so they may request that you personally guarantee the loan. I am sure that this has worked out for someone out there, but these are just a few points off the top of my head that stand out.