All Forum Posts by: David Chappell

Hi Everyone! I am getting close to my first completed deal, so I thought I would post some details here to share my story.
After lurking on the forums here for about a year I finally decided to start taking some action and putting my name out there. I am currently living in Austin, TX investing in SFH rentals in Birmingham, AL. I received a call from a wholesaler one day, I guess I had submitted a form on their website to add me to their list. Anyways, I explained to him what I was trying to do and told him the parts of town i was looking at. I had just taken out a HELOC on my primary residence and had $$ available to spend. He called me about an hour later and told me about a property he was about to send out to his list. It was just what I was looking for and in the right part of town too. I had recently had a call with a realtor in the area and I paid him to go take a look at the property and to give me a rundown of ARV and estimated rehab budget. I had run the numbers 20 different ways and they all seemed to work, but I was still worried. I was tired of being in the analysis paralysis phase so I decided to go under contract with the wholesaler a few days later, I figured worst case scenario I could sell it for a loss and learn a lesson. Over the next few weeks, I worked with my new property manager to help get bids and start the rehab. A month or so later it was on the market and then a month after that, a tenant was in place!

Here is how the numbers played out:
Purchase Price (cash from HELOC on primary residence) - $74,500
Rehab - $14,300
Holding Costs - $1,200
ALL IN COSTS - $90,000
Appraisal - $123,650
75% LTV Loan minus Closing Costs - $90,037

So after the 30 yr refi (conventional 30yr fannie/freddie rate term 3.37%), I have invested $0 of my own money in this property and its cash flowing $330/month.

Somehow my first BRRRR strategy worked out to the T and I have zero of my own money into this property which is awesome. I got a little excited and made 2 more acquisitions pretty quickly after this, so I am hoping those workout the same.

I would like to say I am 10000% confident I would not have had the courage to make a move like this without the kind souls on this forum. The contributors to this forum are truly willing to help others and I cant thank you enough for that. Everyone has helped me more than they know, and I am so excited to start this journey to help my family gain financial independence through real estate investing. Thank you SO much. 

Depending on where the $$ is coming from that is pretty tough. A common part they leave out about the BRRRR process is the 6 month seasoning period required to get a loan based on the ARV. The delayed financing option will let you get your purchase/rehab $$ back if done correctly before the 6 month seasoning period, but nothing extra. Not to mention the 60-90 day wait time most banks have for refinances. After your DTI is maxed out, or your 10 fannie/freddie loans you have to look into commercial lending which changes the dynamics of the financing and it may not be as lucrative as with traditional financing.

I personally took out a HELOC on my primary residence, purchased 3 properties in 6 months using the cash from that and am hoping to refinance all 3 and get 95% of my money back within 9 months, and I even feel like Im moving a little too fast.

Forgot a little part of the detail. If the ARV is $150k and you can get purchase and rehab done for less than $112k, you would most likely only have to come out of pocket for the $3,375 in origination fees plus another ~$1k in additional closing costs...which is a little better than the 20% you would have to put down on a traditional loan.

Depending on who it is, but some hard money lenders will lend 75% of the ARV and up to 100% of purchase price and 100% rehab price. So say, you want to buy a property that has an ARV of $150k. They would loan up to 75% or $112,500. But thats not accounting for any points. For example they may charge a 4% origination fee, that you would have to pay for upfront. So they may loan you $112,500 but you have to pay (3%) $3,375 out of pocket for the origination fee to the HML. There are also other costs such as appraisal fees, title insurance, etc that you will have to pay up front. Once that is taken care of, most HML set you up on 6/9/12 month interest only loans, and those usually start at 10% interest rates. So on a $112k loan, you would pay $933 in interest only payments for 6 months and then at the end of that 6 months, you would owe the original $112k that you borrowed. You can always ask for an extension, but sometimes they will charge another point or so for that. Hope this helps!

Jimmy, if you want to PM me the address I can run a report in neighborhood scout for you and let you know what I find.

@Richard V. Ive only been doing this for 6 months, but it seems as if the Birmingham inventory has tightened up a little bit. Im not seeing a lot on the MLS and my list of wholesalers doesnt have much available in my target zips either. Welcome to Birmingham and good luck!

@Richard V. what parts of town are you looking in? I have 3 in Bham, 2 purchased from wholesalers and 1 from the MLS with Rob. I was able to get my first one in pleasant grove rented out in less than 30 days, the hueytown one is going up on the market this week and then I am closing on one in Midfield in a few weeks that I am hoping to get rented out before the new year also.

@Lee Ripma and @Whitney Hutten thanks for the advice! Im going to send it to my lender and ask that they use the one I have, and it may even save me $650 too!

Hi Lee! This is a normal rate/term refi through Fannie/Freddie so Im sure there wont be as much flexibility on the appraisal part. I may try to offer up the appraisal to the lender and see what they say, and maybe get the property manager to meet up with them on the property. I was happy with the appraisal because, for whatever reason, they offered about $20/sqft more than the average of the 3 comps they listed, so I was happy with that!

I recently (2 months ago) financed one of my BRRRR properties with a 15yr HE Loan through Regions and got a good appraisal that time around. I have an application in for a 30 yr rate/term refi, what are some tips to try to get the lender to use my previous appraisal? I dont want to risk the chance of another appraiser coming in lower and having my $$ stuck in the deal. Has anyone done this before?

Thanks!