All Forum Posts by: Gus Muller

@David Barnett we did consider a more extensive rehab, including new kitchen, upstairs bathroom, and even finishing off the basement. Some of the higher priced homes in the area ($450K+) are taking a long time to sell. Even the really nice ones that hit the $650K mark are sitting on market. Our goal was to provide a turn key nice property at an affordable price of $350K and give some sweat equity opportunity down the line for the right buyer. 6 showings this weekend so far. It may still sell. I have thought about renting it per room, with rates around $750/room in the area which would equal $3,000/month in rent. There are two pretty small rooms though, and two large ones. Could hang onto it and establish two large bedrooms in the basement pretty easily though with egress windows. Heat already in the basement rooms and some framing up. Lots of options! Thanks for the recommendations! 

@Richard Bonisa thanks for the advise! I'm thinking rent it out (I have renters that can move in mid February) and wait out the 6 month seasoning period for a cash back refinance. I can bank all of the rent and apply it to paying off my private money lender in May when refinancing. If the numbers don't make sense at that time, I can just list it at peak selling time here in MN, which seems to be early June. We had a major cool down for higher priced properties mid-end of June last season.

@Matt Higgins that is my fear...kicking myself for selling it in the future. It is a huge house with lots of room in the basement to add additional square footage down the road. I think if I could cash flow even $400-$500 a month I'd be OK with that along with the equity increase over time. That area Macalester/Groveland in St. Paul is booming and showing no signs of slowing down with a lot of development happing on Snelling Avenue. Similar sized houses are $400K-$650K depending on condition and we are all-in under $300K. We chose a light rehab to see how nice we could make it on a reasonable budget, just in case we wanted to hold it.

Renters Warehouse is pretty weak, but I figured I'd start by having them analyze the rental amounts in the area. My sister and her long term boyfriend are interested in renting the whole place, but that could open up another set of issues...

@Jaron Walling good points for sure. The $20K we sunk into the rehab came from our cash reserves, and we should be able to refi out and get most of that back as long as appraisal goes well. If not, the money will just have to sit in the property. If we sold it now, we'd get the $20K rehab costs back and about a $40K profit from the sale. I've always just sold them for the quick gain as this project took us 6 weeks to complete. But I need to start building a portfolio of rentals and this may be the right one to try out given its stellar and high demand rental location.

@Tyler Gibson yes I've got the PITI at around $1,800 on a $300K loan. I have renters ready to move in mid February at $2,500 they cover all utilities, snow removal, and grass cutting. The house is generally in very good condition mechanically (newer boiler and on demand hot water heater, PEX supply plumbing, new outlets, switches, light fixtures, updated electrical panel with breakers, fresh flooring, fresh paint, etc). It will need a roof in the next 3-5 years and I have a cheap roofing crew that can handle that. Good siding, foundation, concrete walkways, yard, landscaping. We would manage the property and handle repairs, I have all of the right connections in the trades and can fix the minor things myself. I don't think it will be a "cash cow" but it might be the perfect practice round!

Hello BP community. I am a fix and flip investor and am looking for some help in figuring out if I should keep my latest rehab for a long term hold. I don't have any rental property currently, but would like to start this side of my investing.

We are considering keeping our rehab at 1583 Wellesley Avenue, St. Paul, MN 55105 as a rental and I wanted to run the scenario by you for your opinion. Here is a link to the listing: https://matrix.northstarmls.com/DE.asp?ID=22424405419

I've been thinking that we should probably start hanging onto some of our rehabs for long term equity growth, and cash flow monthly.

We are into the Wellesley house for about $280,000 plus $20,000 in rehab, for a total of $300,000 (purchase price, rehab, financing costs, holding costs, etc). It is currently on the market at $350,000 and we would realize around a $40K profit if we sell it at asking price with minimal negotiations. A good profit for sure. We had a full priced offer last weekend, but it was contingent on the sale of buyer's property, so we didn't accept it.

I had renters warehouse come out on Monday and they thought it should fetch between $2,500-$2,700/month in rent.

We purchased the property 11/8/19 and there is a 6 month "seasoning" requirement for refinancing and taking cash back at closing. Once we hit the 6 month mark around May 8th, 2020, we can refinance out to a traditional mortgage and take some of the cash we put into it back out at closing. I think it should appraise for $400,000 at that time. We may have shot ourselves in the foot by listing it at $350,000 as I assume an appraiser will see that. Could take it off the market for a week and relist at $400K if this is going to be a problem.

Assuming a $400,000 appraisal, we would take out a mortgage for $300,000 (banks will give us 75% Loan To Value, LTV) and pay off the private money lender (he is owed $280,000). The $20,000 difference would come back to us, roughly what we have into it on the rehab. The mortgage would be around $1,800/month so there is some decent cash flow if we rent for $2,500-$2,700/month. And, we would have an established $100,000 in equity which can be borrowed against (I think?), or at a minimum, look great on a balance sheet of assets and liabilities.

It will tie up some funds in the meantime, which will hinder our ability to purchase more property should the right deals come our way, but this is a long term play.

The location 3 blocks to Macalester College is ideal. It will always be in demand as there are not many large 4 bedroom houses for rent with that location. It is also near St. Thomas and St. Kates. And that area seems to increase in value over time faster than other areas.

A few other things to consider. If it does not appraise for $400,000 it could appraise for more, or for less. Then we wouldn't get the $20K back at closing. Or, we could get more than $20K back at closing. That is a gamble. We can always put the house back on the market at peak summer selling time with renters in place to another investor if we think we made the wrong move. Kind of a parachute as we can always just sell it. 

The basement on the house is huge, clean, and dry. There is a side entrance door, and establishing another unit in the basement with 2 bedrooms, bathroom, living room, small kitchen is easily possible, and would skyrocket the rent amount. We could consider this after a few years of owning it.

There is just something about that house that is screaming, "don't sell me, rent me!".

Comments? Recommendations? Is there anything I seem to be missing? Should we just sell it, or should we rent it and refinance?

Thanks in advance!!!

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $260,000
Cash invested: $30,000

Investment #13 fix and flip, or may end up being a buy and hold. Large, 4 bedroom 2 bathroom home in a great area. Rough estimates on light rehab are $30-$40K profit. We could heavy rehab over winter and clear $60-$80K if the market holds. May also make sense as a buy and hold as rents in the area are $2,300-$2,500. We have a lot of options here.

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

Location is fantastic, price was good, large house with new boiler and updated mechanicals.

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

Found this deal on our local MNREIA site. Seller wanted $280K and negotiated him down to $260K.

How did you finance this deal?

Cash funds from a private lender we have worked with in the past.

How did you add value to the deal?

We are going to do a light rehab of walls/ceiling repair, remove wall paneling, hardwood floor refinishing, wallpaper removal, etc. Our goal is to make it rent ready and see how the numbers work out. We will most likely simultaneously list it for sale and for rent after light rehab. If those options don't make financial sense, we will do a full rehab over the winter including kitchens, bathrooms, basement finishing and offer it publicly on the MLS.

What was the outcome?

So far, so good. Not too many surprises we can't handle.

Lessons learned? Challenges?

Before purchasing, I noticed the old field stone foundation was completely missing and replaced with a block foundation and addition sometime in the 1950's. After purchase, I talked to the neighbor and he said that the house was moved from another location. There are some settling issues and lots of cracks in the plaster. Not sure if this happened during the move of the house and was covered up with the paneling, or the house settled in onto the new foundation. Very interesting history.

Investment Info:

Large multi-family (5+ units) wholesale investment in Saint Paul.

Purchase price: $275,000
Sale price: $282,000

Found a motivated seller for a 5-plex that needed rehab. Original plan was to buy and hold, but decided to wholesale our contract position instead for a $7K assignment fee.

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

The building was in good shape and needed rehab of 2 units. We tend to stick to single family, so we ultimately wholesaled the deal. It was really cheap at $50/sqft at 5,500 sqft.

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

Found it on Craigslist. Negotiated with seller and asked him directly what his bottom dollar was. Took it under contract at $275K.

How did you finance this deal?

Did not finance. Wholesaled it.

How did you add value to the deal?

Took professional photos, marketed the property, did multiple showings to many investors.

Lessons learned? Challenges?

I learned that wholesaling is full of shady characters versus traditional MLS sales. Learned what a "double wholesale" is and got many emails with my property under contract listed by others much, much higher. I discussed my purchase price with the investor that bought it, and he fought hard to lower my assignment fee. The world of wholesaling surely is not transparent, and seller/buyer are still fighting over issues with tenants and the building itself. Dicey deal glad to be done with it.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $190,000
Cash invested: $73,428
Sale price: $329,900

Fix and Flip #10 off market deal. House needed substantial rehab including kitchen, baths, electrical, plumbing, furnace, AC, windows, interior and exterior paint, concrete work, etc.

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

Solid original owner rambler that had good size, large lot, and in a good area. Needed substantial rehab, but timing of purchase was good as we were able to tackle it over the winter.

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

Off market through a real estate agent. Negotiated to $190K with sellers.

How did you finance this deal?

Purchased in cash using our HELOC.

How did you add value to the deal?

Complete rehab including mechanicals.

What was the outcome?

Good return of about $38K plus $11K listing commission, for a total income of about $49K.

Lessons learned? Challenges?

Learned that we listed it a little too high off the bat, and this led to longer hold time. Also, the house lacked the "charm" of the older houses in the area and was pretty plain for most buyers. Will keep this in mind in the future.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $210,000
Cash invested: $25,027
Sale price: $285,000

Fix and Flip #11 purchased off market. Medium rehab. Drain tiled the basement, new appliances, new kitchen flooring, new basement carpeting, upgrades to plumbing system and gas appliance lines, buff and coated hardwood floors. Ended up roofing it with an insurance claim we had for a hail storm. Purchased the home with two investors backing the purchase and we covered the holding and remodeling costs and did a 3 way split of the profits. Kept it original as it was untouched from the 1950's.

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

This was an untouched 1950's rambler that was in fantastic shape. We decided on a light rehab and offering it affordably. And as a second option, we could have gutted the kitchen and bathroom and listed higher.

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

Found this deal off market on Craigslist. Negotiated it to $210,000 cash.

How did you finance this deal?

I used two private investors, each contributing $105,000 and they made an 8% return on their money in a relatively short amount of time. We covered holding costs and remodeling costs.

How did you add value to the deal?

Updated kitchen flooring, drain tiled the basement, new appliances, new light fixtures, rebuilt sauna in basement, new carpeting, light landscaping, new roof (insurance claim for hail storm), and lots of personal item cleanout and cleaning.

What was the outcome?

Good. We made a decent profit of around $26K with our investors making $8,500 each.

Lessons learned? Challenges?

Don't ever trust anyone working on an original house that you don't want messed with. The drain tile company I hired hacked the knotty pine wood walls in the basement and destroyed the sauna and sauna benches in the basement. I had hired them before with great results, and even met the owner at the project to go over the plan. Came back two days later to a destroyed basement that had to be rebuilt. I didn't pay for the drain tile work, but it took weeks to restore the damage.