All Forum Posts by: Derrick Lloyd

@Blake Edwards here is my write up on the property.

@Shavar G. Good question.  I talked to a few real estate agents in St Louis before I picked the one I'm working with.  The reason I chose him was because he has the ability to go into the properties and estimate the work done and the cost.  He was pretty close overall minus some unexpected sewer repairs, which nobody could have known about.  The company he works for has a construction company as well, so they are experienced with rehabs.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $19,000
Cash invested: $33,100

SFR home bought in St Louis with intent of using BRRR method. House is a 3 bed/2 bath about 930 sq ft. House needs significant renovations, but mostly cosmetic. Purchase and rehab funded using a HELOC.

What made you interested in investing in this type of deal?

I have been targeting deals that work with the BRRR method, and my criteria is the following:
- Purchase and rehab must be less than HELOC credit of $65000.
- 75% of ARV of property must be greater than purchase, closing costs and rehab. This is so I can refinance to a 30 year loan and pay off the entire HELOC.
- Properties must cash flow at least $50 a month after refinance using conservative numbers for expenses.
- Property located in a C or greater neighborhood

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

I have an agent in St Louis who understands my criteria and sends me properties he thinks will work. This was a REO that we got for well under their asking. Not much negotiation, we just put in a low offer that was accepted. We asked for a $3500 price reduction after the sewer inspection due to sewer repairs, but we only got $1000. Anything is better than nothing in my book!

How did you finance this deal?

HELOC

How did you add value to the deal?

REHAB!!! Major rehab working including new floors everywhere, new paint interior and exterior, updated bathrooms, new appliances, etc.

What was the outcome?

TBD, this project is still in work! Hopefully I can give a successful update instead of a "don't do what Derrick did"

Lessons learned? Challenges?

Always get a sewer inspection! Would not have known sewer needed repairs.

I agree with Chace, it depends on how you define a successful house hack. For me, I did more of a condo hack, purchasing a 2/2 condo with intent of renting out the spare room. With a roommate, I pay less than what market rent would be for a master bedroom - this is including the costs of taxes, insurance and HOA dues. Not only do I pay less, I get the tax benefits from deducting interest and prop taxes, and have built equity from mortgage paydown and appreciation.

I recently opened up a HELOC on the property since it has appreciated and I am using the money to buy and rehab properties out of state using the BRRR method.

So overall, I think just saving money and the benefits from owning make a successful house hack, even if you are not cash flowing - and this is VERY possible in San Diego. 

@Andrew Postell Thanks for the write-up, this is exactly the strategy I needed to find to fit my BRRR strategy! I have a good understanding of how it works but have a question on the transfer of funds.

I plan to use a HELOC on my primary residence to purchase and rehab. Instead of paying directly with the HELOC, I will loan myself the HELOC money from my own LLC. My question is, do I need to actually do a transfer of funds for this to be a valid transaction, i.e. transfer HELOC funds to LLC bank account, then transfer LLC loan money from bank account to seller (for purchase) and to myself (for rehab)? Or can I avoid these steps and simply transfer the money straight from the HELOC?

Is this still available?

@Account Closed Do you mind sharing why you avoid the north county, and what specific areas?  I currently have a property there that has been doing well over the last year.  It's a Section 8 and was pretty cheap, so I know that its definitely nothing above a C class.  I've heard to avoid the northern part of St. Louis City, but heard that the county north of there is okay.

I am looking to expand my portfolio in St. Louis, but want to make sure I am not getting into too difficult of a market.

@Kody Fordyce  Can you please explain further how you refi and cash out at 95%?  I recently bought a turnkey and this sounds like I could be an option for me that I wasn't aware of

I have a 2 bedroom/2 bathroom primary residence that I bought with the intention of renting out the extra room.  Originally I had a friend renting from me for about 2 years, and there were MANY lessons learned.

This time around, I plan on having a required deposit, but not sure how much it should be.  I think 1 months rent would be a little overkill since they will just have the room and bathroom (rent will be $900).  Is half a months rent a good number?

@Kevin Fox

Interesting meetup concept.  Unfortunately I cannot make this one, but I subscribed and hope to make it out in the future!