All Forum Posts by: Greg K.

Thanks guys!  The hunt for the next deal is on.  @Michael Noto the condo fee is $120/month and covers lawn care, snow removal, and master insurance.  I'm viewing the rehab as prepaid maintenance as the electrician and plumber got everything up and running and the appliances are all new and under warranty.  The only thing I didn't replace was the hot water heater so I have reserves set aside for that when it goes.  Having worked with a great plumber and electrician, I have them on call and put a lockbox on the condo so they can get in when needed.  

Investment Info:

Single-family residence buy & hold investment in Fitchburg.

Purchase price: $98,000
Cash invested: $1,500
Sale price: $141,000

2 bed, 1.5 bath condo built in 2004. Purchase price: $98k, closing costs: $2k, renovation costs: $7.5k. Total cost: $107.5k.

Cosmetic rehab (paint, carpet, appliances) which I did myself over Christmas vacation. Listed for rent 7 days after purchase. Rented for $1300 after 4 DOM. Tenant pays utilities, condo fee covers maintenance.

Started the refinance process upon lease signing. Condo was purchased with cash using a HELOC at 4.1%, interest only.

Appraised at $141k (my pro forma was $130k so this was a nice surprise). One local bank offered 80% ARV while 9 others were at 75%. $110k mortgage, 5.25%, 30-year fixed. After closing costs, I walked away with a check for $106k leaving a $1.5k cash investment and $31k in equity.

Cash flow is $175/month with another $130/month going into reserves. Cash on cash return is 143% and the payback period is 9 months.
Purchase date: 12/27/2018. Refinance date: 3/13/2019

Couldn't have asked for a better first deal and thanks to BP for the confidence to pull the trigger!

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

I've only lived in condos and I'm comfortable with them. This property is an hour from where I live so I'm happy to pay a condo fee to cover maintenance and not having to use a property manager (for now at least).

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

Listed on HUD Homestore. Listed for $121k, then dropped to $108.9k. Bid was accepted at 90% of list price. My brokerage registered with HUD as a bidder and saved 3%. Purchased as is for cash with a 30-day close per HUD rules.

How did you finance this deal?

Cash purchase using a HELOC on my primary residence. Credit card for most of the rehab with appliances and carpeting purchased from Home Depot.

How did you add value to the deal?

HUD Homes are vacant so I accessed it during my inspection period which allowed me to take measurements, order appliances and determine the scope of rehab so work could begin on closing day. Being able to list it for rent myself and not having to pay 3% buyer's fee saved money.

What was the outcome?

Cashed out all but $1500 and now I have a nice cash flowing property with high-quality tenants.

Lessons learned? Challenges?

The biggest challenge was getting the property inspected. HUD did not let me turn on the water so could only do a pressure check. And had to jump through several hoops to get them to allow me to turn on and test the electricity. The property was vacant for 7 years so the electric meter had been removed. The biggest lesson learned: tell everyone what you're doing. Got so many money saving/money making tips from random people along the way.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, a great local lender who understands investment properties. Message me for the name. Also, Greg H. from BP has great HUD content that helped a ton. And BP podcasts and BRRRR calculator built my confidence.

Rent them a parking spot and let them live in the house for free...

@Doug Danoff   

Have you checked out Stuart St James?  They are a Boston-based firm that might have exactly what you're looking for.  

I might be able to help too. This year I set up my own brokerage for the same three reasons you mentioned - MLS, viewing efficiency, and fee reduction.

The ability to get another broker to call you back quickly, set up showings on ShowingTime, getting lockbox codes texted to you, and writing your own offers is incredibly efficient.  You're on the right track.

@Shekeira Ward Putting my attorney hat on (member of the Massachusetts bar), I interpret "initial investment" as meaning purchase price since "in purchasing the property" immediately follows.   Rehab costs would come after closing while all of the allowable items are paid at closing (closing costs, prepaid fees, and points).  I'm not an underwriter but my best guess is that rehab costs would not be allowed to be rolled into the cash-out refi.

@Payton Law I've found multi-family HUD homes just by eyeballing the bed/bath ratio. I've never seen them listed as multi-family though. The first picture can usually give you a sense if its a multi-family and the property condition report may reference Unit #1 or Unit #2. Zillow and MLS are a good way to verify. For example, here is a 6/4 which is case #251-370198. Clearly a side-by-side two-family but listed on HUD Home Store as a single family home.

@Jimmy Martz 

I've been looking into this myself.  The delayed financing exception is part of  Fannie Mae's Cash-Out Refinance program.  There are several boxes to check with the most important being that you have paid cash and no liens are associated with the property and you can document where every single dollar came from to purchase it.  Also if a gift was used to buy the home, you can't get that portion refinanced.

I've talked to several lenders and they generally aren't aware of this option or have done them rarely.  But here are all the details straight from the horse's mouth: https://www.fanniemae.com/content/guide/selling/b2...

The article you reference mentions rehab costs being included in the refinancing but that's not listed in the Fannie guidelines: "The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan."

@Russell Brazil Fortunately attorney brokers are exempt from CE in the Commonwealth of Massachusetts. E&O is what I meant by liability insurance. I live and work in Boston so don't own a vehicle. Certainly, there are variable costs associated with running the business but for start-up expenses, that's what it cost.

Hi An, 

I just started my brokerage this year and it cost me $3600 for the basics.  I'm an attorney broker as well.  Its a side hustle for me so my primary residence is my office and I've put sweat equity into building my website .    Some of these expenses might be lower if you are a Realtor but I've started from scratch so these are the prices I paid.  

Here is the breakdown:

$500 LLC

$100 salesperson bond and broker bond

$450 salesperson and broker application fees

$450 ZipForms

$500 MLS ($125 billed quarterly)

$300 BiggerPockets

$1200 liability insurance

$50 website and e-mail with Bluehost/Wordpress

$50 logo design on Fivver

I lease by the minute and by the hour.  It costs $10 per hour for the car, insurance, and fuel when I use Zipcar.  Rates can be more expensive when I lease by the minute using Uber, but I also get a professional driver.  Access > ownership.