All Forum Posts by: Neil Sinha

@Ben Wilkins, @Christopher Phillips: Does the 10% allowance for capex change if you're doing a BRRRR with front-end rehab? I can imagine needing a bigger buffer for CapEx if the purchase is a lipstick fix with paint and flooring versus a major overhaul where components are getting replaced up front with HM and then refinanced after the tenant is placed. Just trying to figure out cashflow analysis when there are so many variables involved. And the capex, repair and vacancy allowances seem the biggest unknowns that make almost no deal cash flow if they're set too high. All of them are not hard expenses until the event (breakdown, service call or turnover) happens, so they'll seem like cashflow at the time, so I don't want to start off on the wrong foot with a bad estimate.

I'm a newbie here in San Antonio, too. I've interviewed a few attorneys and retained one to get my LLC formed and review any contracts when I need it. Did you already have an attorney and need a different one for this specific issue? What kind of skillset do you think you need?

@Kevin Kelliher I know of Dodson Home Movers down here in San Antonio.  Going through their website, I found the following resources:

Texas Association of Structural Movers - Central Texas Registry:  http://www.texashousemovers.com/centraltexas.html

River City Structural Movers there in Austin:

http://www.rcsmllc.com/index.html

@Jill DeWit - When you say you send specific offers with price, you're using a fully executed sales contract?  Or just throwing a number out there?  What kind of letter or greeting do you include to introduce yourself as a buyer?  What types of criteria do you use to qualify something as a "situation?"

Correct.  And since you have a tenant, doing the deal right would mean your rent minus the payment on the $800 mortgage, minus taxes, insurance, maintenance, capital expenses, property management fees, vacancy allowance and all other factors reducing your gross income still results in positive income.  If you have positive cashflow but walk away from the refinance table with nearly all your original outlay recouped, your profit margin approaches infinity.  As fast as you can negotiate selling prices, acquisition financing and holding refinance that makes all of those calculations work, the faster you can build your income stream.  That's the core of the strategy as I understand it (keep in mind, I'm learning, too.  I just think I wrapped my head around it a little further so I was sharing my understanding).

They're not. I'm using this as a comparison on where that remaining 20% in the 80/20 LTV normally goes. Since the seller is out of the picture, the 20% value the bank isn't financing is in the worth of the property now it's rehabbed. You created it by relieving the distress to the property. So, you don't need to pay the bank $200 to get $800. They give you $800 because there's an additional $200 market value in the house beyond what they're lending you.

Also, LTV doesn't mean the Bank gets the remainder of the value. In a purchase, that $200 would go to the seller to make up the full value (selling cost). Your down payment in most sales doesn't go to the bank, it goes to the seller. Since you bought it distressed and created the value (the growth in appraised worth from $700 to $1000), you generated the "sweat equity" you need from bringing the home up to snuff in a way the original owner didn't. If he had done the rehab himself and went to a realtor and put it on the MLS, he'd be pocketing the $200-300 at the closing table by a retail buyer coming and purchasing the home to live in. So, by doing the rehab yourself when you get that $700 loan at refinance to pay down the acquisition loan and rehab costs, the additional value you created in the home is still there in the property, but you're walking away with all the liquidity freed up for the next purchase even though this one is (hopefully) cashflowing and generating passive income.

Way to go Jason.  Hope to be in touch with Corridor soon when I can find my own deal.

Hello Ken.  I sent you a colleague request.  Fellow new investor here on the Lackland side.  Would love to network and/or partner, even to hold each other accountable.  Best wishes!

Hello. I've been happily reading through tons of material on BP as I start out my REI journey. When it comes to lending to business entities, I've seen two separate discussions: 1) business credit and 2) commercial mortgages for LLC-held properties. The discussions on business credit talk about D&B PAYDEX scores and Experian/ Equifax commercial scores and how those can be used to open trade lines or credit cards, typically to finance rehab.

When I see talks about commercial mortgages, it tends to be about avoiding Fannie Mae requirements to hold title in personal name, how the amortization, balloon and rates vary compared to conventional loans and how they tend to lend based on the financials of the deal.

My question is whether a business credit score is relevant to commercial mortgage terms / underwriting and whether payment against commercial mortgages affects business credit? It seems the two are talked about separately here on BP and I don't know if there's intersection. Will a new LLC with no credit history have a harder time qualifying for commercial mortgages? Will building up a good D&B or Experian profile for the LLC make it easier to get better terms? Or do bank underwriters and business cc companies look at different factors? Thanks for any insight.