All Forum Posts by: Daniel D.

I asked them for 2 weeks to do due diligence. In the mean time i will get a plumber, electrician and the GC to get some estimates to see if my #'s are correct.

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It's me again, with my urgent advice needed threads. For some reason these deals always creep up on me!

I found a property in New Providence, NJ last night. I saw it this morning @ 10 AM, i put in an offer at 1 PM, 7 PM the offer was accepted.

Whats next?

All of my properties are fix and hold for rental purpose. I have never done a flip... but it was a good deal and hard to pass on.

Purchase Price: 305K

Repairs: 80K

ARV: 560K

I have the financing figured out with a hard money lender which i guess is the most important process to start.

But now whats next?

I would like to do due diligence, what type of letter do i need to send to them to get things moving etc? I do want to make some changes inside the house, knocking down a wall etc. Im assuming i need an architect to get this done and get the permits taken out? What items should i be looking at, checking for in my due diligence before closing?

This might have been a big leap forward but im sure I can do this with the help of all the BP members!

Just to clarify, finding a crew to get all of the things done is the easy part for me. I am in the construction industry, i have renovated a few properties so that's not the issue. Its everything else in between!

Help?

Please.

Thanks

Dan

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Hey Everyone,

I need some advice again. Last thread went extremely well, i learned a lot.

Looking at a property in Paterson, NJ.

Property Cost: 58K

Renovation Cost: 100K (a little on the high side, but better safe than sorry)

So far im in 158K. Im figuring closing costs, and other unexpected fees, vacancy factors i will be in this property for about 200k when im done with renovation @ everything else.

I am paying and buying this property in cash. All the renovation will be in cash.

After all said and done, the house will be worth about 260K on the conservative side.

Im planning to do cash out refi, which will get me about 70% of what the house is worth after all the renovations are complete.

Now the fun #'s.

Property taxes $420/month

Mortgage $1000/month

Regular Insurance $100/month

FLOOD INSURANCE: $660/month

Total monthly cost: $2200/month (approx).

I understand there are management fees and some vacancy fees, but at the moment those are very low for me.

The house will be bringing me in about $4300/month in gross rent.

So all said and done i will probably be profiting about 2k a month from this property.

Now there is a high risk that the area will be flooded at some point. But im covered if anything does happen. I am also covered for loss of rental income during the renovations if the house gets flooded and destroyed. Only the basement gets flooded.

I think this will be a good deal, there will probably be headaches down the road when there are floods, but i will be profiting 2k a month from this property and i will be covered for any damage that may occur.

What do you guys think?

THANKS!

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Originally posted by @Sasha Mohammed:

@Daniel D. it would probably be more appealing to your investor if YOU put the down. That way you have some skin in the game.

I'm still a little confused as to what your question is here, but if you're looking to rehab properties without utilizing your own funds, I would GUESS (unless you're experienced or have an experienced rehab team) that 2-3 months is probably not a long enough window to complete the project, let alone get a cash-out refi and pay off your "investor".

** If the project completed with a cash-out refi would not profit enough to pay back your investor, then it probably isn't worth moving forward with that project, and i would look into another property with higher returns. Don't get stuck on one property, run the numbers and make sure the juice is worth the squeeze. **

There are plenty of lenders out there that specialize in such rehab projects, and will lend you not only funds for acquisition, but also rehab funds. and they'll give you the time needed to finish the project (12 months, or longer). Plus, that's what they specialize in, so you have a bit of a safety net in that you're not jimmy-rigging a deal together with an individual investor.

Hope this helps!

Sasha,

Thanks for the very informative post.

I do not want to rehab and flip. I am want to rehab it and keep it for rental purposes. I am not looking to flip.

So i have the private money available, but i guess there is no way to do this without putting in any of your own money which is what i was trying to avoid.

2-3 months is more than enough time to renovate (for me at least), i do have the team to do this.

So for me to use somebody else's money at 100% i would have to find a really cheap deal and then cash out refi?

Thanks

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Originally posted by @Nick C.:

It doesn't sound like this is a situation where they would be partners. If they want a return and get their money back quickly, why not set it up as a loan? Give them a mortgage on the property and a promissory note. Pay them interest while their money is out, then pay them back the loan balance when you refinance the property.

Nick thank you for replying.

Let me rephrase my question, what is the best way to utilize someone's money to purchase properties?

Have them put the money down for the down payment + reno and then refinance to pay them back? Multi family's give very little money when you do a cash out refi it wont be enough to pay the person back.

All im trying to do is not use my own money for the deal and I do have access to the private money.

Thanks

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Hey Everyone,

So far i have purchased a few rental properties with my own money, and renovated them myself and so on.

I want to start scaling a bit quicker, and with your own money its a bit harder since you have to find the properties, renovate, refinance and hopefully get some money out of it and then look for another property.

Currently i have a few places where i can get private money which i want to utilize.

My question is how do you structure a deal with a partner? These partners don't want to be in for the long run, they just want to put the money up front get a good return within 2-3 months and get their money back.

How does this work? Basically im trying to figure out what to offer to the partner... I am not really sure if im asking this question correctly :(

Thanks

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Thanks for all the help guys, greatly appreciated.

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Originally posted by @Andrew Postell:

@Joseph Holliway and @Daniel D. Hi, thanks for mentioned me. To answer the question of "how much can I refinance, this would depend on what your loan balance, property type, and what type of loan you are prequalified with. Since you have a loan amount of $264,000 and the house is currently worth $390,000 then your "Loan to Value" (LTV) = 67%. This is important because that means you can do a "cash out" loan on this property. Fannie Mae or Freddie Mac (if you recognize those loan types) will allow you to do a 75% LTV cash out loan on a single family home. So, $292,500. Minus...I don't know....$5k in closing costs?....means you would receive a check for about $23,000. Somewhere close to there. Fannie/Freddie is just one loan type. We use those because they give us the best rate and terms for our loans.

A different loan type I will call "Portfolio" loans....meaning, money that comes from a bank's own portfolio of funds....so from the bank itself....COULD, MAYBE, MIGHT lend up to 80%. Maybe. The reason I say "maybe" is because there are around 15,000 banks in the US. I can't speak for them all. But since their money is their call...it is possible to find one that goes that high. Your rate and term will be very different though. Most commonly these are 20 year adjustable rate mortgages. Since their are so many banks there will be a lot of options. But the Fannie/Freddie loans will have the most "stable" terms...no prepayment penalties, etc.

Anyway, I hope this helps in some way. Feel free to tag me again with any questions. Thanks!

Greatly appreciate this, it cleared up a ton of things for me. These are the stats of the house, can you please let me know if this changes anything:

Do any of these numbers change because its a 2 family house?

Thanks again!!!

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Originally posted by @Craig Jeppesen:

Congrats on creating $60 k of wealth from $10 k. Maybe you can’t get all the money back in a refi, but you still have the wealth and a pretty good cash on cash return on your investment. I would say that is a success especially in today’s market. Also I didn’t look at all the pics the the few I did looked really nice. Nice work.

Thanks Craig! This BiggerPockets is a wealth of info, learned so much in the past few days.

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Ill see you guys there. Currently reside in Clifton and a local investor. Looking forward to meeting everyone!

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All Forum Posts by: Daniel D.

Daniel D. has started 16 posts and replied 74 times.

Post: URGENT AGAIN: Offer Accepted - NOW WHAT?

Post: URGENT AGAIN: Offer Accepted - NOW WHAT?

Post: URGENT ADVICE NEEDED AGAIN??? Multi Family - Flood Zone - A+ DEAL

Post: I have private money, how do i structure the deal?

Post: I have private money, how do i structure the deal?

Post: I have private money, how do i structure the deal?

Post: 2nd Rental House BEFORE & AFTER

Post: 2nd Rental House BEFORE & AFTER

Post: 2nd Rental House BEFORE & AFTER

Post: NNJ REI Meetup: How to House-Hack in North Jersey w/ Guest #210