All Forum Posts by: Dave Vona

@Lance Lamberton I'm not familiar with the Birmingham market, but I've been using the ...research/data section on zillow to do initial analysis on my out-of-state market.  I can run a report showing a home value index down to the zip code or even neighborhood.  I don't consider this an absolute "price", but more of a relative number.  This can inform me when deciding which areas of town to look at.

If I combine this with the rental data on the same zillow page, I can also come up with a relative rent/price ratio.  Also, remember that you'll want to purchase at a discount, so the home values you see in the report are just a starting point.

@James Fischer You can use a business LOC at a local bank to invest in BRRRR properties out of state. I opened a business checking account for my LLC, and then applied for an LOC. This LOC can then be used to invest in whatever I'd like using that LLC. I've used it for local flips, and I'm currently starting to use it for out of state BRRRR's.

The bank used my W2 income to determine whether I qualify for the LOC, up to a maximum of $50K. If you want to go over $50K, they then start to look at your business income. Also, it's a $50K maximum per LLC, so I have more than one LLC bank account with an LOC.

I'm still looking for properties to BRRRR. The issue I'm finding is not the ARV, but that the high interest rate is making it difficult to obtain positive cash flow. The payments on the mortgage (PITI), and accounting for property managment and reserves, are leaving most deals with negative cash flow.

I don't like the idea of buying a property with negative, or $0, cash flow.  Some markets did see rent prices decrease during the last recession, so I prefer to have some cushion in the event rents drop (or even remain static).

Hi @Andrew Diamond, that's a question I've been trying to solve myself as I start to do out-of-state BRRRR's. I start by looking at the rent, asking price, and ARV. This will help me filter out properties that don't have a chance of cash flowing after a refinance. If it's a potential deal based on that information, I then have to get some idea of the rehab costs.

I start with photos and also have my real estate agent visit the property at this point. This can start give me some indication of the level of rehab needed - if it's 10K, 30K, or 50K. I start to plug these numbers into the BP BRRRR calculator to see where I'm at. If it still looks reasonable, I then contact a couple of contractors, and even a inspector. The contractors can provide feedback on the photos and also visit the property to provide an estimate. On the last property I made an offer on, the inspector was able to provide a "risk assessment" for about $250. He looked at major systems and mechanicals - roof, foundation, AC, furnace, electrical, etc. This provided additional information that I was able to use to make an offer.

I've heard of some people using price per square foot numbers, based on the condition of the property.  I'm not familiar enough yet with the rehab numbers to be able to use this approach, so I have to get other people involved that are a little more experienced than I am.

Hi @Maxwell MacVeety, I live in Denver, but I'm attempting to invest in Omaha. I purchased my first BRRRR property last year, and I'm looking for additional properties now. I think it is a strong market and has seen population growth of around 1% per year, for the last few years. Let me know if I can provide any other information.

@Jeffrey Dorman You may want consult with a property manager as well.  They can give you some input on what the rent would be for different levels of rehab.  

I made the mistake of not vetting my contractor on a recent out of state BRRRR. It wasn't a very large rehab and I was getting inpatient due to other delays, so I quickly decided to use this guy. The contractor would sending me a couple of photos, but not of everything I asked. Finally, I flew out there and found he had only completed about 25% of the work, when he had been paid 75%.

I plan to continue with a few smaller projects until I find  good contractor and feel that I have good systems in place.  

Since you've already purchased the property that requires a major rehab, I would ensure you have the PMC checking on them regularly, have the contractor send as many photos as possible, and schedule a few trips of your own to visit the site.

Hi @Billy Farley, a bank will determine whether you qualify for an LOC, but there isn't any reason you can't use a business LOC to invest in BRRRR's. I have my own, single-member, LLC with an LOC, and I have a partnership LLC that also has an LOC. I've used both of these LOC's to invest in flips, and I plan to now use them to BRRRR. I completed my first BRRRR earlier this year and had enough cash for the purchase and rehab, but the LOC's are available when I need them.

I'll be performing the BRRRR within the single-member LLC, so that will be my primary LOC. However, I confirmed with my attorney that I can also borrow from the partnership LOC if needed.

@Harshdeep Gupta I completed my first out-of-state BRRRR earlier this year. I purchased the property from a wholesaler, but I was working with a real estate agent who was then given the keys. Even though I had to pay the real estate agent a commission, it helps to have someone there that can coordinate these details. I ended flying out there shortly after close and put the new lockbox on, but that wasn't required.

I could have also had my property manager receive the keys, and I think I'll involve them on the next property so I don't necessarily have to make another trip. Even if you're going to BRRRR it helps to get a property manager involved right away. They can take care of mowing the lawn and shoveling snow in the winter. Mine was also able to meet contractors at the property if needed, although many were able to just use the lockbox. They can also provide input on what rehab you should perform in order to have the place ready to rent.

There's a small monthly fee (mine was $35/mo) for the property management administrative costs prior to renting.  There is also a cost for them to visit the property and do the mowing/shoveling, but you would have to find and pay someone anyway.  My place needed space heaters since the furnace was not working yet, so the property manager placed these in the house.  Mine also handled the final make-ready work and the cleaning, so they can do more than just manage the property after it is rented.  It's really good to have someone providing input on what rehab/improvements are needed to get the place rented for the most $$, that's what the property manager can do.  

@Khaled Morad Do you offer 80% LTV cash out refi's by holding on to the mortgage, and not selling the loan off. I know Fannie Mae and Freddie Mac have 75% limits on the cash out options for SFR's (70% for 2-4 multi-family). I ask so I can talk to my banks more intelligently next time I do a BRRRR. Thanks.