All Forum Posts by: David Brown

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $413,000
Cash invested: $120,000

This SFR in East Dallas was bought 85% renovated already. The main issue was the back master bedroom was too big and had the only door to the backyard. We moved a wall, put in new flooring, painted and created a full 2nd living, dining and 2nd primary bedroom.

This is a 1950's house so we furnished with a very MCM, comfortable vibe for individuals or families. This house is furnished for mid-term rental, focused on insurance stays and we currently have it leased out for 3 months.

How did you find this deal and how did you negotiate it?

This property was on the MLS for an extended period of time, and came to our attention through our real estate agent.

How did you finance this deal?

Conventional financing, 15% down

How did you add value to the deal?

Converted a large space (25X18 with a 12X8 nook) from a single bedroom/closet into a 2nd primary bedroom (18 X 11), a second living and a full dining space which wasn't there before. This required tearing down a wall, building a new wall, installing a new exterior window and boarding one window up.

In addition it is fully furnished

What was the outcome?

2 weeks after completing furnishing we have our first tenants who are the exact type of tenant we bought and furnished it for. A family who has to leave their house for 2-4 months due to an insurance claim on their primary residence.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Lizi Brown at Keller Williams Allen was instrumental in our search and purchase of the property.

 My family had a similar experience with a separate housing agency.  They helped my family (4 kids + dog) find a place that was way better than staying at a hotel for the several months we needed accommodation after the big freeze in Texas last year.  It's part of what got us to pull the trigger on buying our first rental property and furnishing in a way that would work specifically for families that were in our situation.  

Anyone have experience with agencies other than ALE or going direct to insurance carriers for this kind of tenant? 

Thank you to both @Andrew Postell and @Matthew Crivelli for your replies.  

Andrew - I read your post, also very helpful and lines up with some of the conversations I've been having.  David Greene covered the topic on one of the latest podcasts as well confirming that 6 months is a traditional answer for a lot of lenders, but isn't a hard and fast rule, therefore I need to continue to search.

Your 75% comment is interesting because many of the HML websites I have been on are all marketing their products around a % of purchase price plus rehab, not starting at 75% of ARV which might (ideally will) cover the entire purchase price.

Sounds like I need to continue to searching lenders on both the HML and long-term side.

Thanks again! 

Question on timeline for a BRRRR. Given the following situation: $100K purchase price, $50K Rehab, $200K ARV, and let's say hard money lender at 90% purchase + 100% of Rehab.

I was talking with a local bank and received the following guidelines:

* For commercial (LLC ownership), they won't re-appraise until I've owned the property for 1 year. Until then the baseline for LTV calculations is the purchase price ($100K), so no ability to refinance out cash

* For residential (my name / fannie mae, freddie mac lending), before 6 months they can re-appraise, but the loan can't be a "cash-out", the max loan amount is the financing basis - so if the title work said the 1st lien was $90K, that is max loan, if $140K then that is the max amount.  

* For residential after 6 months then they could do a cash-out refinance up to 75% based on fannie mae / freddie mac guidelines

Are these normal restrictions?  My intent was to execute the rehab within 3 months and get out of the private/hard money lending quickly, but that doesn't seem possible given these limitations.