All Forum Posts by: Dale Miller

@Dale Miller, the best way is to know your market. The more transactions in your area the better, and easier it is to determine your ARV.

One thing you need to be wary of with a BRRRR in particular: since your capital event is a refi, without an arms length transaction, you can expect your refi appraisal to come in lower than what I would call a "true" ARV. In my experience, I feel like my refi appraisal comes in about 90% of my ARV if I were to actually sell the property.

To answer your original question: I have never had an issue on an appraisal on a flip.  But I have had a flip that went over timeline and the market shifted pretty dramatically on in that time causing me to lose money, so in that sense, yes I have had a rehab that didn't price out where I thought it should.

I operate in an area where the vast majority of sales are distressed property and fully rehabbed homes are rented out. Since yours will be a fully rehabbed home at the time of appraisal it can be hard to find good comps. It helps raise your appraised value if you can supply the appraiser with comparable sales of turnkey homes as these will be the best comps with brrrr homes in my view.

You always run the risk that a BRRRR won't appraise for the value you were hoping at the beginning of the project. That said, this can be mitigated a few ways:

- Make sure that you talk to your planned refi lender *before* your purchase, to ensure that you understand their requirements, timelines and appetite for refinance;

- Get an appraisal for the future value of the property from either your refi bank or an independent appraiser. While the appraiser can't give you an exact ARV (lots of things can change), they can use the information you provide on how you plan to renovate to determine a reasonably close ARV;

- Talk to a local real estate agent or PM company to get an accurate assessment of after-renovation market rent for the property;

- Be prepared to refinance as quickly as your bank will allow to reduce the risk of changing market conditions affecting your refi.

@J Scott That was very interesting. I like the experiences that you shared. Never thought of talking it over with the lender beforehand.

@Dale Miller I don't any state has a law requiring any type of response to an offer. Your agent should be contacting the sellers agent before even sending an offer. Then contact them again after sending to verify receipt. I have sent offers that received no response and in my opinion is it is rude and unprofessional. 

Just saw where you are from 

I lived in Albion and Medina a long time ago  

IMO the Buffalo area is going to boom over the next few years.   What do you think?

If anything, the eviction moratorium has made me put all tenants going forward on a M2M lease.  I'll reconsider long term leases after this whole pandemic mess is over.

That said, in my experience tenants usually don't care about the lease.  They will move out whenever they want.  It is always better to establish a good relationship with the tenant.  This way, they are less unpredictable.

Month-to-month leases gives you the ability to remove the Tenant or change the lease terms for any reason with short notice (typically 30 days). This is valuable if you're in a heavily regulated state like New York, California, certain parts of Washington, etc. On the negative side, you are always wondering how long the tenant will stay and never able to predict vacancies and turnovers.

A one-year lease provides more stability and you're better able to predict vacancies and turnovers. With just a few rentals, this is probably less important than it is to someone like me managing 400 rentals. It's usually harder to get rid of a difficult tenant under a one-year lease, but it can be done if you have experience and good policies and procedures. The last time I had to formally evict a renter that I placed was in 2014, so there are other methods. Another benefit is that I can make more money when a tenant decides to terminate and leave early. This takes some good policies and procedures but works like a charm for me.

No lease means anything unless the tenant you are renting to has something to lose if they do not live up to their end of the agreement. 

I like m2m for anyone who doesn't have a strong 700+ credit score to protect.

When we had renters in California they were on annual leases sometimes even 2 years. Then we bought rentals in Wa State where most have MTM leases. Largely it helps to offer your tenants what the market is offering. The differences sound like a bigger deal that they actually are. Tenants go when they go regardless of the lease duration. We have tenants in our building who have been there for 20+years on MTM leases.

We are comfortable offering MTM leases and we like how they favor the LL, at any time you can issue a 30 day notice of non-renewal, raise rents any time and we still get first and last months rent and a security deposit equal to one month's rent at lease signing.