All Forum Posts by: Ehab Shoukry

@Charles Chiu to answer your question this does not make any sense at all. You've completely missed the intent of BRRRR investing which is to buy and renovate a property and then refinance so that you can cash out and have as little money invested as possible.

The whole point of doing the rehab and being a value add investor is to get rewarded at the end with a property that has a lot of equity and little cash tied up. 

You are not going to have either. So no this is a terrible deal and wayyyyy too extensive for a newbie based on your rehab budget. 

Ehab

Agreed that you will be losing money on this deal. The numbers don’t work. 

As far as financing options you will probably be able to borrow 70% of the ARV for the purchase and rehab if you use a hard money lender. That's $245k. If your purchase and rehab adds up to $290k for example, then your lender will ask you to bring the difference to closing. So that's $45k you will be bringing plus all of the other closing costs.

And you will be doing all that just to lose money at the end. 

Ehab

I think the answer is it depends. If the $500 extra a month is going to prevent you from investing in real estate then absolutely not. Essentially you will be postponing starting your investing career for 15 years until your house is paid off or until you somehow manage to save up to start buying real estate. 

On the other hand, if the the $500 extra still leaves you with plenty of cash to invest then it’s not a problem. Either way you want to start investing as soon as you are financially able. If your goal is financial freedom you will need to own multiple properties so start buying as soon as you can. 

Good luck!

Ehab

When I was doing More LTRs (I do mostly STR now) I would use a realtor to find my tenants. The advice that I was given was that buyers who are sophisticated enough to go online and who use a realtor to find a rental, tend to be better renters than someone off Craigslist for example.

The other reason is that I didn’t want to be meeting potential renters at my property to do showings. I wanted to work ON my business not in it so I would rather pay the first months rent to the realtors so they could do the legwork of finding, screening, calling the previous landlord, asking for paystubs, and all the things that a good realtor should do. 

Last bit of advice I was given was to walk with the potential renters to their car and see how they take care of their car. If it’s a disaster with crap thrown all over the seats and floorboard then chances are they’ll treat your home the same way. 

Good luck!

Ehab

@Mario Cuartas I started my investing career buying 8 homes in low income areas. Many of the tenants were section 8 which in my experience have a high propensity for neglecting the home. After all, when people get anything for free they tend to not appreciate it like when they pay for it. 

I did however take the time to fix up the houses and put better tenants in there but it still is not profitable as it may look on paper. 

I will say that if you are really interested these are critical principles to keep in mind. 

1. If you are buying in low income areas at least pick an area that is up and coming so that you can benefit from appreciation

2. take the time to make sure your houses are nice because you will at least be able to get better quality blue collar type tenants

3. If you can find dual income tenants that’s better because you will have a better chance of rent being paid every month. 

I started in low income areas so I can’t knock it but fortunately the $50k houses I bought I was able to sell for $100k in three years. Also I used that money to buy better properties in nicer areas so trading up is a good strategy. 

Good luck!

Ehab

@Mark Zermeno The problem may be the condition of the homes you are looking at. If you are looking at homes in decent shape then you are competing with homeowners that are considering buying that home to move into and live in. They will always outbid you because they don't care about profit. You have to target homes that are REALLY distressed and that your average homeowner will not buy. Those will be your best shot at buying homes off the MLS. Otherwise network your butt off with wholesalers and see if they can bring you a deal. Good luck!

I invest heavily in that area and there's no doubt it will.  For me Houston real estate investing is very easy to figure out.  On one side of 288 where you mentioned is museum district which is extremely expensive and somewhat overpriced.  On the other side of 288 is third ward which is full of fixer uppers and opportunities to buy.  It's only a matter of time and actually already happening that people who don't want to pay $750k+ to live in museum district or montrose are happy to pay $400k or $500k+ to live in third ward which is also a convenient location but several years behind.  

Just look at the RICE innovation center which took over the old Sears and Fiesta near midtown.  It's all changing.

Hi @Jamal Fontenot. Congrats on your first property! As mentioned above, FHA loans are for you to live in the property. They are not investment loans, so we should all just assume you lived in the property for a little bit otherwise you may have committed loan fraud. :)

So the question becomes how is the right way to buy property so that you can continue to grow and scale and not run out of money. My approach is to buy with hard money at 70% of ARV, finish the rehab and then cash out refi at 75% of the newly appraised value. This approach works well because if you do end up coming out of pocket some on the purchase and rehab, you can recoup that on the refinance. The banks I use do not have a seasoning period on the refinance and I've even done this strategy earlier this year and cashed out over $70k.

Good luck!

Thanks @Stephanie Pulido. I'm trying to get them to come to Houston. :) I made it to full time real estate investing in 5 years. My criteria to quit my job were high. I had to make over $200k profit in real estate before I would quit. Since quitting my job in October 2019, I'll actually make $200K in the month of August alone! And I just started teaching investors how to BRRRR like I do so they can have similar results.

Best of luck!

Purchased a rundown 6-plex in Houston for $235k near downtown and the TX medical center.  Spent $300k fixing it up and did a cash out refinance to pull my money out.  We use it as a Short Term Rental (Airbnb):

Current mortgage PITI: $5100

Total monthly expenses (cleaning, utilities, etc): $2,000

Gross Rent: $13,000 to $15,000 (seasonal)

With no money invested I'm netting $5k to $7k a month.  Before Covid my gross monthly rent was $15k to $18k so I was netting $7k to $10k a month on just this one property. Dang you Covid!

Ehab