All Forum Posts by: David Olson

@Marc Middleton thanks and that is good to know!!

Hello BP,

I need some pointers or lessons learned from anyone who can help me answer some of these questions. I live in Houston and currently have a property I am about to make an offer on to try and implement the BRRRR strategy with. This will be my first rental should things move forward. There is a $500 earnest required which is no big deal but it turns out the house is a bank owned foreclosure and therefore has no option period. IF I make an offer and it is accepted, am I legally bound to the property no matter what? What if my offer is accepted and after I run through the house with an inspector and a GC it turns out there are some underlying issues that would result in me not pursuing the deal? In this case would I only be out the $500 or am I stuck with the house?

I tried looking online for a real estate lawyer in my area but have come up short mainly because I cannot tell which ones are solid and which are not. Hard to find those that work with real estate investors. This plans to be the first of many rentals so finding a good lawyer I can consult with is much needed as well. 

Thanks!!!

Amber Koontz I too am looking for multi-family deals in Houston but have found that they are hard to find. That’s not to say they don’t exist but I have been working with some wholesalers in addition to my own research and so far it’s been slim but I still think it’s doable.

@Nghi Le How would I pull money out without a cash-out refi? Lets say I have a property worth $100k. Bank allows a loan of 75k (75%ARV) and I owe the hard money lender $65k. I would need to do a cash-out refi to get the other $10k correct? If not a cash-out, then wouldn't the bank only lend me the $65k as a rate term to pay of the HML?

This will be my first property. 

@Justin Fox I will definitely send a PM and thanks for jumping in the post!!

@Brian Garrett I think that is where I am confused. If it is a Fannie/Freddie loan there is no getting around the 6 month seasoning whereas a commercial/portfolio loan might allow it but depends upon the bank. I thought these types of loans were for commercial investments only.

Also, would you happen to know how the seasoning works? Is it 6 months from the day I purchase the property with my HML or 6 months after the rehab is complete? Or is it 6 months with a tenant before I can cash-out refi?

@John Leavelle thanks for responding!! I have the responses to your questions below. To the best of my current knowledge that is.

1) No this does not include holding costs. That's one thing I wish I could find, was a BRRRR calculator that included all the holding costs not just the loan payments. However, When I click on the "Rehab Period" Tab the following numbers are provided:

$5,151.40 HOLDING COSTS

$40,244.40 TOTAL CASH OUTLAY

$979.18 INTEREST

$73.00 MONTHLY INSURANCE

$32,100.00 REPAIRS

4 months REHAB TIME

$198.67MONTHLY TAXES

2) The Acquisition Loan Amount is 70% of the ARV which I have pegged at 140,000. The HML I am using is giving me 70% ARV and there is no % down requirement. The surplus, I believe, is the Loan Amount (98,000) minus the Purchase Price (70,000). I believe the surplus is technically the funds available for the rehab but I could be wrong.

3) Best I can calculate the Total Cash Needed of $10,033.00 is this: Total Project Cost ( $105,093) – Loan Amount ($98,000) + Loan Points and Fees ($2,940.00).

4) To be honest with you I have no idea how the BRRRR Calculator comes up with a Total Cash Invested of $6,033. This calculator frustrates me sometimes but I'm trying to figure it out.

I have a newbie question regarding the BRRRR Calculator. When I refinance, is the BRRRR calculator assuming I am doing a cash-out refi or just a refi? For example, If I have a home with an ARV of $100k, and the bank will refi me at 75% or $75,000 after the rehab is complete in 4 months but I only have $60k total into the deal, I don't get that $15k difference do I? If I wanted the $15k I would have to wait the 6 months seasoning and do a true "Cash"-out refi right?

The numbers below are for a property I am considering and I am not sure if the refinance is assuming a cash-out  refi or just a refi? I assume a cash-out refi because my Total Cash Needed at Purchase is greater than my Total Cash Invested at the end telling me I am getting a portion back.

$70,000 PURCHASE PRICE

Purchase Closing Costs$2,993.00

Estimated Repairs$32,100.00

Total Project Cost$105,093.00

After Repair Value$140,000.00

Acquisition

Down Payment$0 ($28000 surplus)

Loan Amount$98,000.00

Loan Points/Fees$2,940.00

Loan Interest Rate11.990%

Monthly Interest$979.18

Total Cash Needed At Purchase$10,033.00

Refinance

Loan Amount$105,000.00

Loan Fees$3,000.00

Amortized Over30 years

Loan Interest Rate4.250%

Monthly P&I$516.54

Total Cash Invested$6,033.00

@Jorge De Jesus and @Johnathan Mark I will be there as well and looking forward to it!

I also would like to follow your project! Definitely keep us posted @Kevin Roberts

@Jeff Smith checked out your profile for the pics of the rehab. Very nice man!! Your info says your new to REI but you sure don't seem like it and I mean that in a good way. You seem to have gained some quality exp in your latest flip. Was this your first flip? Or do you have other rentals? If so, were those rehab to rent?

I have been torn between doing a flip or a rehab and rent on a first time Harvey flooded home. I have been analyzing deals daily and am ready to make offers once I start finding deals worth making an offer on.