All Forum Posts by: Christopher Derr

Most of our small town banks in Iowa will do commercial loans for small amounts mine range from $12k-68k.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $51,500
Cash invested: $31,000
Sale price: $118,900

Turned a listed 2-1 with unfinished non-conforming basement into a 4-2 with a finished basement. Close to close was 4.5 months and was listed 20 days before we got an accepted offer. Sale price was 125,500 with a 6% closing commission which ended up around 118,900

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

It was going to be the first flip we attempted, it was a standard ranch that one of my agents actually showed me the day he got the listing from Fannie Mae and because you could see through the exterior wall in the basement walk out I knew that it was going to scare away a lot of potential buyers.

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

One of my realtors brought it to me as his listing for Fannie Mae. It started at 69,900 I immediately bid on it the day it opened to investors past the owner occupant stage. I bid 50,000 they did not counter offer. I waited 30 days they dropped it to $63,900 so I offered $50,000 again and they countered at $62,500. I countered at $51,000 they didn't respond to my counter offer. Waited another 30 days rinse and repeat, on the 4th drop to $53,900 we went back and forth until $51,500.

How did you finance this deal?

I got a commercial loan for for $59,000 based off a BPO of $73,000. I funded the rehab between my cash and a 0% store credit card. Upon completion it appraised for $125,000 I refinanced for $90,000 paid of everything I owed and took the additional $7,500 and put it down on another house. When it sold after all fees we walked away with another $17,900 or $25,400 total.

How did you add value to the deal?

We did the gut of the property ourselves and I worked it out with the contractor to do some of the work to keep him rolling on bigger items. This was the most we have used someone else to work on our properties and it was awesome to get to see how important it is to shift that workload to someone else to be able to scale. Building a good relationship with this contractor now. Working on a 2nd house now.

What was the outcome?

$25,300 profit, increased relationships with contractor, carpet installation, and realtor. Also a big win for financing and that relationship with the bank as more deals put some validation behind your proposals.

Lessons learned? Challenges?

That everything is scarier until you start to do it. Great things happen when you push your comfort zone. Making a little less money but having less of your personal time invested is the only try way to scale a business.

It doesn't show real nice, lots of yard clean up, fix falling facia, new surrounds and fixutres in bathrooms new counter tops in kitchens and fresh paint my realtor/property manager thinks it'll will appraise close to $80k she sells a lot of small multis in the area from her owners.  

Assessment shot up from $55k to $68k when the city did a full property assessment this year with a team of assessors. Most properties are selling well above assessment so its just kind of an educated guess based off her thoughts and the assessment. Won't know until the appraisal but I've bought 5 SFR in the last yr and everyone has been at or above my ARV in my calcs... Just new to the small multi game

View report

*This link comes directly from our calculators, based on information input by the member who posted.

I am looking at this property, currently going back and forth with the seller on it.  They bought it 2 years ago for $55k and put 2 brand new furnaces in, other than that I can't tell that they have done much of anything, over all the properties are in pretty decent condition.  With some fresh paint new counter, and a new bathtub and surround in one of them I think they will get $575/mo each side all day long.  Currently rented at $530 3 mo into a year lease and $510 mo on a month to month.   There is a crappy 2 stall garage out back no one is using with no power currently run to it, could potentially add monthly storage fee or rent it out to 1 of the tenants for x/mo.   All utilities are separate I would only be responsible for mowing/snow removal.  I budgeted $40/mo because my hope was to get 1 of the tenants to do it and apply that credit to their rent as our PM has done that with other multi's in the past. It does have old single pane windows that I have thought about upgrading depending on the appraisal, which I think will help justify the increase in rent easily with savings in energy cost.  both have their own laundry.  

Just wanted some other eyes on it, seems like all the #'s are great but I currently only have SFH's no multi's and those SFH's have been more BRRR than this would be with multiple exit strategies.

My SFH's i do 10% for Maint/Capex i upped it to 15% and i do 5% vacancy that I increased to 7%.

This helps reminds me why I have a property manager.

With that said.... train your tenant.... if you allow it she will continue it.   Change the precedence like @James Wise said.  You tell her when they will be there for repairs etc.  I'm quite sure the law has a time frame for repairs not specific time that's convenient for the tenant.   If she wants that convenience she can buy a house.

I do BRRR with 25 year commercial loans from a smaller portfolio lender here, no seasoning they will re-write the loan whenever I want for the doc fee, and half the time I just do a "subject to" appraisal up front and they front load me the rehab cost upto 80% of the value of the subject to appraisal so its a front load Buy, Finance the Rehab, Rehab, Rent, Repeat. I still get $150/mo after PITI, Vacancy, Repair, Management. On 25year loans and sometimes even get that on 15 year loans. It just means I have to find deals that make the numbers work on 25 instead of 30 but RE is cheaper here in the Midwest than most places. My appreciation will probably barely keep pace with inflation.

 The beauty of commercial mortgages from smaller local banks is some have no seasoning.  Downfall is usually 20 to 25yr mortgages.  My closing cost on my houses are cheap to, like $800 and refinance is $125 processing fee is all.

I wish, I was paying 5.5% on commercial 5 year ARMs with 25yr Amm and 1% cap.   My lender just capped all 1-4 unit properties at 15yr amortizations.  - Goodbye cashflow

Is this a commercial or a traditional.   I'd love those rates on a 30yr loan!

Definitely looking for a new lender

 .....but if you let the banks in on those profits, maybe your profits would be triple what they are?  Just a thought..... 80% of 5 deals might be worth more than 100% of 1 or 2....

I have 4 rentals in Mason City, you can find cash flow here if that is your goal. You wont get the appreciation you would in the cities, but the cost of entry is also much lower also. We have a local landlord meeting every 2nd tuesday of the month. We dont have a REI group per say but you can always connect with the local guys. Runde is the property management company I use in Mason City and once you get over 3 units the property management is 6% and no placement fee, all of my units have been rented with in a week or prior to me finishing them. Our properties tend to sit on the market awhile longer here so there is more room for negotiation and the growth isn't what it is in a metro but we have a large tenant pool and there are plenty of successful rural market landlords just ask Brandon Turner