All Forum Posts by: David Wolf

weve got an an Airbnb in mystic Connecticut we are looking to get a HELOC for. We have an 800k 1st and looking for recommendations to pickup a 400-500k HELOC. It's a cash flowing property that does very well. Anyone who knows a good financing source for connecticut please let me know

Update 8/31/2018 my project got derailed here. We had a slew of off-market deals that just took my time away from looking for MLS deals. I do plan on continuing this project in the near future.

Back to the drawing board. My $15,000 seller concession was rejected by the seller. This isn't surprising.  With my current offer price of $65,000 I would be at 83.5% of value after repairs if nothing goes wrong (Something always goes wrong on a rehab this size). For my estimated $119,500 market value when rented for $895/month, the est. $34,850 in deferred maintenance is far too much maintenance in comparison to the home value to go through the process. Back to the drawing board. 

Update on 4/7 - We got the property under contract for $65,000. And the property manager we discussed working with gave us a rent expectation of $895/month. They also did a property managers inspection and came up with a punch list about $34,851 long! This place needs some serious repairs. The great part about this is that the property manager didn't bill for inspection. I doubt they would do more than one or two of these if I am not adding rentals to their management portfolio, but it awesome that they were willing to do this for an investor. 

My goal here is to get a rental property in an appreciating area (Winter Garden, FL is exploding) with the following criteria:

• Either a  11% cap rate on gross rents or better  with no deferred maintenance or a 13% cap rate after deferred maintenance costs are substracted from sale price. 
• Rent of $700/month or higher otherwise buying a toilet or water heater is just to much of annual gross rent
• Only deferred maintenance I can hire a top tier property management firm to do (I.e. no structural repairs)

In this area you can pretty much sell a rental property in under week at 9% cap rate to gross rents if it meets these criteria, has professional management, no deferred maintenance, and vetted tenants. 

With these criteria I am capping what I can pay for this deal at $82,615 with no maintenance. Unfortunately, this one has $34,851 in maintenance which means my highest net offer is now. $47,764. I already replied I think my concession request was a little over that number at $52,000 so I didn't stick entirely to my guns, but it's close enough for my test diary. 

I got some bad news when inquiring about future land use as a duplex or new construction. Winter Garden is unlikely to give me a variance to split the lots as I am missing about 3,000 sq/ft to meet their minimum lot requirements. Their future land use plan also calls for changing the zoning from R2 to R1 so the R2 designation is pretty much worthless since There is not currently multiple buildings on the property. I could always try to buy 3,000sq/ft from a neighbor but that is something I haven't done before and I am just to busy to learn any additional new tricks at the moment. Hopefully, this one works out or I will be back on the hunt for an MLS acquired property that meets my criteria. So far I only have about 2 hours into this effort. If they accept my terms, I would be shocked at how easy it was to get a property that met my criteria with all the naysayers out there saying how hard it is to find a deal.

Well that all happened faster than I expected. I found a property on Roofstock that I felt was overpriced for this case study at $92,000 in winter garden getting $900/month for a 2/1. I used it as a great benchmark. I did a radius search in the MLS to see what was available and happened across a 2/1 one on a huge lot that had a motivated seller. The lot is large enough to split into two lots eventually. I called the Realtor who was excited to work with a pro vs a novice (always try to sound like you know what you are doing) I am placing an offer $5000 below ask and will get my realtor commission to boot. I will use those saving to get the current property cleaned up after purchase using a prospective property manager I found off RoofStock. Hampton & Hampton (Fee structure for them at the bottom of this post. I haven't used them before so this should be fun). They are full service and do property cleanups with their list of go-to subs at a 10% management on renovations. That's a 10% discount to the normal GC fee. Still plenty of Due Diligence but it's time to get this under contract. We are less than 24hours into this and falling forward

So far I am 3 hours into this process and have a place I believe I can rent for $800 (Very low for the area) as a 2/1 that I have huge upside potential as the lot is big enough to be split. Technically I am getting this property at a price that allows me to split the lots and be shovel ready at approx. $35,000/lot. For affordable housing, new builds selling at $150+ they are just above the 20% rule for shovel-ready lots if I went that way. Not a bad worst case exit strategy. The goal here is to make sure the place is really in great shape so we can get a great tenant that will take care of the property and not be a hassle. I'd rather have a longer 1st vacancy or more upfront than a turnover/eviction that kills the cash flow of the property. I could also consider putting an ad

 Fee Structure:

7% of monthly rent collected

50% of one month's rent, which includes Free Eviction Protection, a 30-Day Rent Guarantee and a Quality Tenant Guarantee

2% of annual gross renewal rent

Billed at invoice cost plus 10% administrative mark-up

None

None

10% of project costs above $5,000

Hey Jay, what was your experience compared to a normal MLS sale price wise and other details.

I did forget to mention that I will be leveraging my Realtor License for MLS access and a slight discount on purchase.

Two of my favorite posts on bigger pockets are the Jscotts new construction diary and the pop top. In general, the more focused and detailed things are the more helpful they become to a novice investor (each time you do something new you are a novice). J was a novice at new construction despite 50 plus renovations. I interview a lot of investors during our wholesaling and hard money adventures and see some really common issues I am going to try and address in this diary. Those issues are:

1. Finding a cash flowing deal on the MLS (People say it can't be done in 2017-18. Let's see if they are right! (hint: I think they are wrong)
2. Finding an area that makes sense for an out of state or out of market person to own a rental in
3. Dealing with the complexity of financing for both hard money & otherwise
4. Setting up 3rd party property management
5. Analysis of the deal
6. Making the offer on the MLS

The people considering buying turn-key or Roofstock homes will find this diary extremely valuable. Infact, I will be using Roofstock as a benchmark for much of this process and show you how you can easily get the deal that is on roofstock, before it got their with the sellers markup.

It will be hyper-specific about one specific end to end process to end up with a cash flowing rental property purchased directly from the MLS using a hard money acquisition and then refinancing into traditional bank financing after seasoning. My goal here is to create a golden thread that a beginner can follow to get to a solid rental investment that puts cashflow in the pocket and with an added element of a little fixing up, the potential to complete cash out and do again with the same money every six months. For that reason, this thread will take at least 6 months to complete, but stay with me. Keep me honest here.

I'm not going to sugarcoat it!!

The reality for me is that I have access to deals that most beginner or part-time investors don't. I am going to purposefully try to make this project work with a not so great, but easily findable deal so that readers feel empowered to use the same roadmap. You won't hear me writing about the property we bought for $100K that is worth $205K from a motivated off-market seller. That will make it too easy to make the numbers work. Instead, I am going to look for a property on the MLS at around 75-80% of ARV NOT including any renovations needed. If the homes needs no renovations then 86% seems to be where rubber meets the road.

Why would I do this? 

I definitely would not use this model for my own personal gain. We try to religiously stay with a max of 70% minus cost of repairs, but most people are having a pretty hard time acquiring such deals these days. The numbers above seem to make you a competitive buyer in the current FL 2018 market so I will actually buy something at that price with a 12% interest hard money loan, get it rented, eat the negative cash flow for during the seasoning period, and ultimately refi through a regular bank down to 5%.

I will list the property address
I will list the bank used for refi
I will put up my deal analysis
My property management search info
My experience as a hard money borrower (Disclosure, I am a partner in the lender I will be using, but for this project, I will pay full freight as if I was a beginning borrower)
I will put up all my expenses on the project

Why should you pay attention to this thread?

I am not an expert in building a rental portfolio. I don't currently own a single rental unit. I have bought and sold over 50 properties in the last year and been a partner to millions in hard money lending, but I don't own a single rental property. This will be my 1st. I have no leg up on having a go-to manager, or discounts you can't get yourself. My goal here is to create an end to end project that any part-time buy n hold investor can use to acquire property. If you have a skill such as being a realtor, finding off-market deals, or doing your own GC work to save money then great! Plug that skill in and it will be even easier. This is about finding a system for building wealth that will work at it's worst that you bolster with added skills. I hope to identify a property and be under contract within 7 days. If I am not, I have a back deal I am willing to use to keep the project moving that we bought for $100K and have listed on MLS for $165K as-is. I am getting offers for $160K from other cash investors so I may start the project by giving that property a $160K cost and starting from here as it meets the requirements, of a deal that could have been bought by anyone off the MLS for $160K on North Port, FL (Not my home market). It needs about 10K worth of work and will have an ARV of $205K. Technically, if I was to buy with hard money, and refi out with a regular bank loan after 6months I should be able to pull $164K back out of the deal leaving me with around $10K in cash in the deal. Stay tuned

I have seen several threads about buying on RoofStock, but has anyone sold on RoofStock? Very interested in hearing insight. 

It's 2018 and I an option to pickup a handful of properties from a retiring landlord with NW addresses and a few SE address that are 4/2 & 3/2's for around $160K/door. Thinking of pulling the trigger here. Any insight on current state of the rental market for a 3/2 and 4/2 block home in these areas would be helpful. My home market is Orlando.